Monday

23rd Oct 2017

Opinion

EU opinion on Russia pipeline lacks credibility

  • Nord Stream 2 is being built under the Baltic Sea (Photo: Nord Stream 2 / Axel Schmidt)

Whether it is the legal service of the Quai d'Orsay in France, that of Her Majesty's foreign office in the UK, or that of the German foreign office, all government legal services recognise the need to maintain credibility.

In any opinions they provide to government, they understand they have to effectively address contrary arguments and understand the economic and political context in which they are asked for their input.

  • The Council issued its legal opinion on 27 September (Photo: The Council of the European Union)

The leaked legal opinion of the EU Council's legal service, which examined the European Commission's proposed mandate in respect of Nord Stream 2, filed on 27 September, failed on both these counts.

Precedents

For example, the Council's service makes the argument that the EU's 2009 gas directive (part of the third energy package) cannot apply to export pipelines bringing fossil fuels into Union territory.

The legal service argues that Article 2(17) of the directive limits its application to a "transmission line which crosses … a border between member states for the sole purpose of connecting the national transmission systems of those states".

Whether one agrees or not with that argument, as a matter of fact the 2009 gas directive has been applied to export pipelines bringing natural gas into the Union.

The Commission has insisted that Poland applies the full liberalisation regime envisaged under the 2009 directive to the Yamal Pipeline.

That pipeline, like Nord Stream 2, is not a pipeline that connects two member states. Instead, it flows through two non-member states, Russia and Belarus, and then into Poland.

Equally, the Commission instituted infringement proceedings against Bulgaria for failing to apply the 2009 directive to the South Stream pipeline.

Again, the South Stream pipeline in landing on Bulgarian soil would not have provided a connection with another member state.

Instead it was a pipeline connecting Russia, a non-member state, via its territory and the exclusive economic zones of the Black Sea and into Bulgaria.

To provide a credible legal opinion, the Council's legal service would have to at least distinguish the Yamal and South Stream cases under EU law from Nord Stream 2.

Not only did the legal service fail to do this, neither Yamal nor South Stream are even mentioned in the text.

Recital 36

The Council service also failed to address contrary arguments in respect of the opinion of the Commission's energy department in 2016.

The Commission made a compelling argument that EU law applied to export pipelines.

Its opinion points out that Recital 36 of the EU statute, which provides for "the possibility of temporary derogations … for security of supply reasons, in particular, to new pipelines within the [EU] transporting gas from third countries into the [EU]".

It could, as a consequence of Recital 36, be argued that the EU legislature did not have the intention of excluding export pipelines from the scope of its jurisdiction.

Article 36

On top of this, one of the key arguments deployed by the legal service to deny that the 2009 statute can apply to export pipelines was to focus on Article 36.

Article 36 lists the type of projects that may be exempted from the full burden of the liberalisation regime contained in the statute.

The legal service argued that as export pipelines are not listed as being capable of an exemption, the statute was not intended to apply to them.

But this overlooks the argument made by the Commission's energy department that a number of language versions of the statute indicate that the types of project listed in Article 36 are illustrative only.

That would mean that other projects not explicitly listed in Article 36, such as Nord Stream 2, are capable of exemption.

The Council's legal service did not address this argument at all.

Stunner

For Baltic and central and eastern European (CEE) governments, perhaps the most stunning part of the opinion is contained in paragraph 11 of the EU Council text.

Here, the legal service says that "the assumption that the opening of supplementary routes or capacities [with Nord Stream 2] might increase the Union's dependence on its external energy providers is, at the very least counter-intuitive".

This sentence would have some credibility if was an analysis from 1997, When the EU included only Western European states, not 2017.

In 1997, Western European states in the European Community had never seen their supplies of gas cut off by Russia, even at the height of Cold War tensions.

However, the same was not true of the Baltic countries and CEE states.

There were at least 40 Russian state-inspired and politically-motivated energy cut-offs between 1991 and 2004 targeted at states across the region.

There were even more since they joined the EU - in 2006, 2009, 2014 and 2015.

In this context Baltic and CEE states see the Yamal and Brotherhood pipelines as providing a degree of transit security - one cannot cut of the CEE states without cutting off states in Western Europe.

Nord Stream 2 would remove such transit security.

Transit security

The threat from Nord Stream 2, which the Council's legal service seem to be wholly unaware of, was highlighted by former German foreign minister Sigmar Gabriel's attempts to reassure CEE capitals.

In 2016, he tried to persuade a number of governments that all would be well with Nord Stream 2 because additional pipeline capacity could be built from west to east, with Germany supporting the onward supply of natural gas to the CEE states.

CEE governments pointed out to Berlin that the problem with the generous German offer was that it was an offer the Germans could not actually guarantee.

They pointed to the experience in 2014 and 2015 when Gazprom cut gas supplies to CEE states in an attempt to stop gas being moved from west to east in a reverse flow to support Ukraine.

Berlin was met with the rejoinder: "If they can do it to Kiev, they could do it to us".

Alan Riley is senior fellow at the Institute for Statecraft, a think tank and consultancy in London. In the interests of full disclosure, he is an adviser to Ukrainian gas firm Naftogaz and Polish energy PGNIG.

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