The European Commission’s effort to reduce Europe’s dependence on Russian gas is clashing with commercial and national interests, which are causing problems for Brussels’ gas diversification plans.
Gazprom’s recent partnership with five West European companies to expand the Nord Stream pipeline — running under the Baltic Sea from Russia to Germany — is pitting EU countries against each other and is highlighting the challenges of implementing the energy union, a Commission signature project.
The problem is that Russia hopes to use the pipeline to avoid shipping gas across Ukraine, while the Commission is keen to continue using Ukraine as a transit country, offering a significant revenue source for the cash-strapped nation. Central European countries are also wary about Nord Stream, worrying it could leave them at the mercy of Gazprom because the Russians would be able to cut off pipelines serving the region without losing access to the lucrative West European market.
The original idea for the energy union when spelled out last year by Donald Tusk, then Poland’s prime minister and now European Council president, was to use the power of the EU to prevent Gazprom from intimidating smaller Central European countries.
“If constructed, [Nord Stream 2] would not only increase Europe’s dependence on one supplier, but it will also increase Europe’s dependence on one route,” Miguel Arias Cañete, climate action and energy commissioner, told the European Parliament last week.
Arias Cañete has been vocal in recent weeks that the pipeline plan did not fit with Brussels’ gas diversification plans. Officials say the commercial decision was taken without consulting the Commission.
MEPs wanted to discuss the pipeline project, worried that it undermines EU unity in energy matters, undercuts Ukraine, hurts the energy security and economic interests of Central Europe and benefits countries such as Germany at the expense of others.
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Commission officials have long warned that besides shopping for new gas suppliers and building new infrastructure, revived energy security plans require EU countries to cooperate and show solidarity with their neighbors.
German Chancellor Angela Merkel, speaking to MEPs from the European People’s Party in a closed-door meeting, warned that fighting over pipelines is not the way to go.
“We have to be a bit careful that we don’t start quarreling with each other,” Merkel said. “But if we get Russian gas, and we fight in front of Putin’s eyes about who will benefit from that gas, then that’s not very logical. It could lead the Russian president to think, ‘On the face of it they say they don’t want Russian gas, but then they fight over who gets it’.”
Her comments come after East European leaders reacted with outrage to the Nord Stream 2 project in September. Slovak Prime Minister Robert Fico called it a “betrayal” that would cost his country and Ukraine billions. Polish President Andrezj Duda called it an example of “national egoism, which completely ignores the interests of other countries.”
Elmar Brok, an EPP MEP and chair of the Parliament’s foreign affairs committee, also said that “I should defend it as a German, but I don’t.”
Business interests vs policy
The main question in the debate, Brok said, is how to reconcile commercial interests with wider EU energy security policies.
The Nord Stream 2 project isn’t the only Russian pipeline scheme to cause turbulence for the EU’s energy union strategy. The other is Turkish Stream — meant to bring Russian gas into Greece through Turkey.
“Ministers had different views regarding new projects aiming to link Russia to the EU, with some opposing them on strategic grounds … while others supported them on either commercial grounds or on energy security considerations,” according to leaked minutes of a Foreign Affairs Council meeting this summer.
Maroš Šefčovič, the Commission vice-president for energy union, said at the meeting that the EU must show Russia it is looking at other gas sources, such as liquefied natural gas, and urged “European companies to align themselves to the EU policy,” according to the notes.
But, as POLITICO reported, Brussels’ effort to reduce dependency on Russian gas by boosting LNG gas imports faces resistance from the powerful gas industry, which fears the plan could prompt unprofitable investments in new infrastructure projects.
Most LNG terminals are located in Spain, Portugal, France and the United Kingdom, while the countries that most want extra capacity to undercut Russia’s market power are in the east of the bloc.
For example, Spain is well equipped with terminals that can receive plenty of LNG, but it does not have enough interconnections with France to send the gas to other countries. Businesses have not shown interest in building the necessary pipeline, so the concern is that French and Spanish consumers may have to pitch in for a project that would mostly benefit other countries.
Adding to industry’s arguments, Finnish gas company Gasum announced in early October that it had abandoned plans for an LNG import terminal and interconnector with Estonia because they are not commercially viable.
That clash between the financial interests of private companies, the Commission’s broader strategic goals of decreasing its reliance on Russian gas, the differing views of EU member states, and Russia’s continuing efforts to ensure that its gas remains one of the bloc’s dominant fuels, means that the vision of an energy union when it comes to gas is still along way off.