The freezing of the certification of the gas pipeline raises questions about the fate of the project, the supply of Europe, the losses of Gazprom and its partners.
A direct consequence of Russia’s recognition of the independence of the so-called “DNR” and “LNR” was the freezing by Germany of the process of certification of the Russian gas pipeline Nord Stream-2.
New political assessment
Without certification, the head of the German government stressed during a press conference in Berlin, the gas pipeline cannot be put into operation. However, its freezing does not mean the final refusal of Germany from the Nord Stream – 2. This also follows from the formulations chosen by Olaf Scholz. But it is quite obvious that very weighty arguments will be required to resume this process, especially since the number of decisive opponents of the project, already significant, will now increase even more.
So we can proceed from the fact that the gas pipeline, which is completely ready for operation, is now doomed to at least a long period of inactivity. Olaf Scholz, in an interview with the ARD television company, said that in the current situation he does not advise anyone to bet on the renewal of certification: “So far, we are very far from this.”
Purely technically, the freezing of certification, which was carried out by the Federal Grid Agency (Bundesnetzagentur, BNetzA), took place within the framework of a procedure prescribed in German administrative law. It can be briefly described as follows: the chancellor instructed the German Ministry of Economy and Climate Protection to withdraw from this agency a document that assessed the gas pipeline from the point of view of Germany’s energy security. On the basis of this ministerial opinion, BNetzA, as a market regulator, had to make a conclusion about the compliance of the project with the legislation of the Federal Republic of Germany, in particular, the antimonopoly one.
Thus, the agency, in the course of considering the application of the Gazprom company Nord Stream 2 AG for recognition as an independent operator of the transport infrastructure, was guided by legal considerations. Now, the ministry will give a political assessment of the project during the re-examination of the issue.
But due to radically changed circumstances, it can turn out to be negative. In any case, the head of the ministry and Vice-Chancellor of Germany, Robert Habek, one of the leaders of the Green Party, stressed in an interview with ARD: “It would be smarter not to build Nord Stream 2 at all.”
Existing gas pipelines are sufficient to supply Germany
The very fact of the suspension of Nord Stream 2 certification will not affect the current supply of Russian gas to Germany and other EU countries. The gas pipeline was not built to supply Europe with additional volumes of fuel, its task is to become, along with the Turkish Stream, an alternative route for delivering gas to European consumers bypassing Ukraine.
The current gas transmission infrastructure is sufficient not only for Gazprom to fulfill all its obligations under long-term contracts with customers in the EU, but also for a significant increase in supplies to the European spot market, which, however, the Russian state-owned company is not currently doing.
Let’s take Germany specifically. It consumes approximately 100 billion cubic meters of natural gas per year, Gazprom supplies approximately 55 billion cubic meters. For this, theoretically, one first Nord Stream, which has been operating for more than ten years, is enough: it has just such a capacity, and in 2021, even 59 billion cubic meters were managed to pump through its two lines.
But there is still the Yamal-Europe gas pipeline with a capacity of 33 billion cubic meters laid to Germany through Belarus and Poland. m. per year, as well as the Megal gas pipeline running from the Czech Republic to the south of Germany and further to France with a capacity of 22 billion cubic meters. m. Thus, the available transport capacity with a margin would be enough to completely meet the current needs of Germany in natural gas supplies from Russia.
Dmitry Medvedev’s forecast on prices of 2,000 euros per thousand cubic meters
Blue fuel from the Russian Federation enters the Czech Republic through Ukraine, Slovakia and Austria, from where it is also sent to other EU countries, primarily to Italy. Gazprom, according to the agreement valid until the end of 2024, is annually obliged to pump 40 billion cubic meters through the Ukrainian gas transmission system, however, its throughput in the direction of Europe is over 140 billion cubic meters, so the Russian company always has the opportunity to reserve additional volumes of supplies.
Against the background of these numerous transport options, it is not clear what exactly the former President of Russia, and now Deputy Chairman of the Security Council of the Russian Federation, Dmitry Medvedev, had in mind when he commented on the suspension of the Nord Stream 2 certification on Twitter as follows: “Well, welcome to the new world , in which Europeans will soon pay 2,000 euros for a thousand cubic meters of gas!
Such a scenario is only likely if Russia completely cuts off or drastically cuts gas supplies to Europe, but that’s another topic. Before the pandemic, Gazprom had been successfully operating in its most important export market for many years under conditions of mutually beneficial moderate prices without Nord Stream 2.
How Gazprom pays off five European SP2 financiers?
As for the possible financial losses of the participants in the frozen project, in any case, the statement about “German losses” that is often found in social networks is erroneous. The German government did not invest in the construction of the Nord Stream – 2 taxpayers’ money.
From the German side, the project was financed by two private energy companies – Wintershall Dea and Uniper. Together with them, Austrian OMV, French Engie and British-Dutch Shell provided funds. All of them acted as financial investors, in other words, creditors of the Russian state concern Gazprom, which is a 100% owner of the gas pipeline and its operator, the Swiss company Nord Stream 2.
Under what specific conditions the five European firms took over the financing of half of the cost of laying a gas pipeline under the Baltic Sea, which is usually estimated at 9-9.5 billion euros, is unknown. However, Reuters quoted Alfred Stern, head of OMV, as saying recently that loan servicing began last year and the company received the first money. This suggests that Gazprom has undertaken to repay the borrowed money, regardless of the commissioning of the gas pipeline.
In any case, a spokesman for OMV said on February 22 that the company sees no point in writing off the money invested at the moment. The head of Uniper, Klaus-Dieter Maubach, in turn, said on February 23 that the company is now studying whether write-offs will be required. The company thought about them a year and a half ago.
It is noteworthy that both companies talk about write-offs and do not mention a word about the possibility or intention to demand compensation from the German government (and did not do this before). It seems that under the scheme of freezing certification described above, it will be especially difficult to challenge what happened in court, since this is not a legal decision of the regulator, but a change in the political assessment of the ministry.
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