Monday

9th Dec 2019

Interview

Russia pipeline is investment risk, EU commissioner warns

  • Sefcovic (r) with Russian energy minister Novak in Moscow in November (Photo: ec.europa.eu)

Investors should "think twice" about putting money into Nord Stream 2 due to "uncertainties" around the Russian pipeline, the EU energy commissioner told EUobserver.

"I would really think twice, or many more times, simply because there are a lot of uncertainties," Maros Sefcovic said in an interview.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

  • Nord Stream 2 segments being coated in concrete at a yard in Finland (Photo: nord-stream2.com)

"It's the decision of the project promoters if they want to proceed in this atmosphere ... which might lead to legal disputes down the line," he said.

"Knowing how politically sensitive this [pipeline] is for many member states and for many operators [EU energy firms], we have almost a guarantee that it would end up being brought before the European Court of Justice," if it was built on current terms, he added.

Sefcovic spoke amid Russian considerations on how to finance the €9.5 billion project to ship more gas to Germany under the Baltic Sea from 2020.

Five EU energy firms from Austria, Germany, France, the Netherlands, and the UK have already put about €3 billion in the pot.

Gazprom, the Russian firm building the pipeline, aims to spend €1.5 billion of its own money on it in 2018.

It had planned to also seek funds from capital markets in the new year, but it has said it might wait until Denmark, Finland, and Sweden had given permits for the pipe to go through their waters and economic zones.

Sefcovic's "uncertainties" referred to ongoing talks on whether to amend EU gas laws to cover offshore pipelines and whether to give the commission a mandate to negotiate Nord Stream 2's legal model with Russia.

If the commission's gas law proposal goes through and if it gets its mandate, Gazprom could be bound to ensure the pipeline was not used to inflate prices or cut off clients in eastern Europe.

It could also be forced to ensure it did not harm Ukraine's gas transit business, amid EU pledges to protect Ukraine from Russian aggression.

Such restrictions could see Russia walk away from the project, but the commissioner said that was not his intention.

"We're trying to make sure western countries have the gas they need, that central and eastern European countries are treated fairly, and that we help the Ukrainians in this difficult time," he said.

He said market developments should also make investors think twice.

He said the EU would need about 400 billion cubic metres (bcm) of gas a year by 2030, but that if all the pipeline and liquid natural gas projects under discussion went ahead there would be 900 bcm of import capacity.

"We're risking to have stranded assets and overcapacity," he said.

EU deliberations

Sefcovic said 15 EU states, mostly Nordic and eastern European ones, backed his proposals.

But he said Germany, as well as Austria and the Netherlands, whose energy firms were among Nord Stream 2 investors, did not want to put obstacles in its path.

"After some initial enthusiasm … we're now in a disappointing moment because the deliberations are going on and on," he said.

He said the prospect of the centre-left SPD party forming a coalition with chancellor Angela Merkel's centre-right bloc in Germany augured badly.

Sefcovic's talks with SPD top brass showed "they prefer clearly to keep this project in German hands - they're reluctant to engage in discussions on amending the gas directive and on the mandate".

Merkel's chancellery also told him Nord Stream 2 was "a purely commercial project" that did not require EU intervention, but Sefcovic said some of her top MPs and MEPs, some SPD euro-deputies, as well as Germany's Green party were on his side.

"We need such an important country as Germany to play ball with us," he said.

The fact the US, in August, threatened to fine Nord Stream 2 investors in punishment for Russia's interference in American elections has also spooked markets.

Sefcovic said the EU had gone into "diplomatic overdrive" to make sure the US did not fine EU firms without prior "consultations".

But he said US leader Donald Trump was hard to predict.

"It is, at this moment, a matter for the White House because the president has a great deal of discretion on this", the commissioner said.

Trump factor

The Nord Stream 2 consortium, a Gazprom vehicle, reacted bullishly to Sefcovic's warning to "think twice".

"Nord Stream 2 is supported by five major western European energy companies that have each committed up to almost €1 billion to the implementation of the pipeline," the consortium's Sebastian Sass said.

"It shows that there is both market demand and great confidence in … Nord Stream 2," he added.

Stefan Meister, an expert at the German Council on Foreign Relations, a think tank in Berlin, also said Russia had little to worry about from the EU.

"In Germany the overall impression is, that the project will come … Merkel is not against it. That means she supports it," he said.

Meister said the fact Gazprom was prepared to dig into its own pockets meant "the investment risks are limited". He added that energy companies were used to working "in an even more risky environment" in other parts of the world.

"Except the US sanctions, there are no real risks to stop the project," he said.

"The US sanctions are a big question mark, because it could hurt their [EU firms'] business in the US and in other regions," he added.

"But we will see how much will come, and Germany and other big EU member states will lobby Washington not to focus on Nord Stream 2," Meister said.

Russia warns Denmark on gas pipeline

Russia said its Nord Stream 2 gas pipeline might bypass Danish waters, after a new law that increased uncertainty on permits.

New EU law takes aim at Russia pipeline

Proposed law could complicate Russia's plan to build new gas pipeline to Germany, but jurisdictional issues mean project will be decided by Moscow and Berlin.

Opinion

Will EU join new US sanctions on Putin elite?

'Oligarch clause' in new US sanctions on Russia to start life on 29 January - but to what extent will the EU and US coordinate a blacklist of Putin's cronies?

US yet to push on Nord Stream 2 sanctions

Washington would still like to block a planned gas pipeline between Russia and Germany but is not yet considering hitting companies involved in the project.

News in Brief

  1. Greece denies access to fair asylum process, report says
  2. Report: Self-regulation of social media 'not working'
  3. Turkey: Greek expulsion of Libyan envoy 'outrageous'
  4. Merkel coalition may survive, says new SPD co-leader
  5. Von der Leyen Ethiopia visit a 'political statement'
  6. Over 5,500 scientists ask EU to protect freshwater life
  7. Iran defies EU and UN on ballistic missiles
  8. Committee of the Regions: bigger budget for Green Deal

Planned German coal exit boosts case for Nord Stream 2

German commission recommends phasing out coal power over the next 19 years - which will provide additional arguments to build the controversial Nord Stream 2 pipeline from Russia, which both the European Commission and the US have reservations about.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Latest News

  1. Russia makes big promises to Arctic peoples on expansion
  2. UK election plus EU summit in focus This WEEK
  3. Migrants paying to get detained in Libyan centres
  4. Searching for solidarity in EU asylum policy
  5. Will Michel lead on lobbying transparency at Council?
  6. Blood from stone: What did British PR firm do for Malta?
  7. EU Commission defends Eurobarometer methodology
  8. Timmermans warns on cost of inaction on climate

Stakeholders' Highlights

  1. UNESDAUNESDA appoints Nicholas Hodac as Director General
  2. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  3. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  4. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  5. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  6. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues

Join EUobserver

Support quality EU news

Join us