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5th Jul 2022

German court: Russia must split up Nord Stream 2

  • The Nord Stream 2 gas pipeline is almost complete (Photo: nordstream2.com)
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Russia will have to split up control of its new gas pipeline to Germany under EU anti-trust rules, in a court ruling seen as a victory by Ukraine.

Gazprom, the Russian state gas-supplier which owns the pipeline, will have to cede day-to-day running of its operations to an independent third party under EU laws designed to limit energy monopolies, a German court in Düsseldorf said on Wednesday (25 August).

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It will also have to auction half of its capacity to be used by competitors in Europe, the court said.

The EU energy-monopoly laws, which came into force in 2019, exempted existing pipelines.

And the Gazprom-owned Nord Stream 2 consortium had argued its pipeline was 'complete' because the €10bn funding for it was already in place by then.

But with some 15km of the 1,230km pipeline still to be put in place in the Baltic Sea, the Düsseldorf court rejected its case.

"The pipeline was not completely built and therefore not completed in accordance with the law," the court said in a statement on Wednesday.

"Based on the applicable legal framework at that time, the company had made investments worth billions of euros long before the European Commission announced its plan to amend [the EU energy laws]," Nord Stream 2 said.

And the Düsseldorf ruling "demonstrates the discriminatory impact of the amended EU gas directive," it added.

Germany's federal energy regulator, the Bundesnetzagentur, also rejected Nord Stream 2's arguments last year.

But Gazprom can still appeal the Düsseldorf verdict in Germany's Supreme Court.

Wednesday's decision saw gas market prices go up amid expectations Nord Stream 2 operations will be delayed as it seeks to comply with the EU legislation, the Bloomberg news agency reported.

The Russian government washed its hands of the dispute, calling it a "corporate issue".

"We can only reiterate ... that Nord Stream 2 is a purely commercial project" which was "aimed at significantly strengthening European energy security," Kremlin spokesman Dmitry Peskov said.

But some in Ukraine, which sees the pipeline as a strategic threat because it enables the Kremlin to cut off its gas for political reasons, reacted with glee.

"Our strategy is to play by the same rules that the West lives by, and it pays off," Yuriy Vitrenko, the CEO of Ukraine's gas-pipeline operator, Nafotgaz, wrote on his Facebook page.

"It will be a hard battle. The Kremlin has been blackmailing Europe with gas shortages in the winter period. Some Western government officials don't want to realise or pretend they don't realise what European rules actually mean," he added.

"Battle on and you'll win," Vitrenko also said, quoting Ukrainian poet Taras Shevchenko.

Ukraine and Russia's current deal on EU gas transit expires in 2024 and Russian president Vladimir Putin has already threatened to cut Ukraine's gas over its war with covert Russian forces in eastern Ukraine.

But German chancellor Angela Merkel, who visited Kyiv on Sunday, said Berlin would press for extra EU sanctions on Russia if it ever used Nord Stream 2 as a "geopolitical weapon".

US factor

Nord Stream 2 construction has also been delayed by previous US sanctions.

US president Joe Biden, in a recent U-turn, said construction should go ahead because it was almost complete anyway.

But the US Congress is said to be watching how Russia uses the pipe in future.

"Even if gas starts flowing [through Nord Stream 2], Congress can impose sanctions that would make the pipeline inoperable," a US source told EUobserver.

"As soon as the Russians misbehave and leverage their newfound coercive capacity resulting from Nord Stream 2, which isn't a question of 'if' but 'when', Congress will adopt new Nord-Stream 2 sanctions, this time with no wiggle room," the US source said.

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