You're reading: Ukraine sets its sights on blocking Nord Stream 2

In September 2015, at the Eastern Economic Forum in Vladivostok, Russia, Kremlin-run Gazprom signed an agreement with a consortium of European energy companies that would greatly increase Germany’s role as the continent’s gas distribution hub.

Gazprom and its Western European partners – Germany’s Uniper and Wintershall, the United Kingdom’s Royal Dutch Shell, Austria’s OMV and France’s Engie — argue Nord Stream 2 is a vital economic investment to boost energy security and competitiveness.

But a number of European Union member states, including Poland, Czech Republic and Slovakia, aren’t buying the arguments. They say the project is geopolitical tool that will increase Europe’s dependency on Russian gas and, by doing so, actually undermine its energy security.

Yet Germany, the driving force in Europe behind the deal, is pushing ahead with the project.
The plan is to construct a 1,200 kilometer pipeline, parallel to Nord Stream 1 under the Baltic Sea. By 2020, it will have the capacity to transport 55 billion cubic meters of gas from Russia to Germany and subsequently the European market.

Russia already supplies around 30 percent of Europe’s gas; the Nord Stream 2 project envisions doubling the capacity.

The second Nord Stream, like its predecessor, will bypass Ukraine, stripping it of an estimated $2 billion in annual transit fees and putting its future as a gas transport route in question.

Ukraine’s state-owned Naftogaz has called on the EU to block the project and others are protesting, butit’s far from certain they will prevail.

EU support

Yuriy Vitrenko, group chief commercial officer of Naftogaz, said Germany’s cooperation with Russia on Nord Stream 2 brings into question the sincerity of its support for Ukraine.

“We do believe that a lot of German politicians at the top want to support Ukraine and they do stand behind European values,” Vitrenko said. “But this also shows that Germany is fragmented and there are some politicians in Germany who are driven by some crony interests, or some questionable economic interests instead of promoting the rule of law and some core values.”

Helping push Russian President Vladimir Putin interests are former German Chancellor Gerhard Schroeder, now a Gazprom lobbyist, and Foreign Minister Sigmar Gabriel, who as economy minister pushed for easing economic sanctions against Russia.

Meanwhile, Germany’s center-right Christian Democrats United, led by Chancellor Angela Merkel, and the left-leaning Greens oppose construction of the pipeline.

Vitrenko said the project is simply illegal “because it’s not consistent with competition law in Europe and if you close eyes on these obvious breaches of competition law in Europe, that’s against the fundamental principle of Europe.”

The EU has been investigating Gazprom for antitrust violations that hinder the gas market in Europe, but is seeking a settlement that some in Europe, including Poland, are challenging.

European network

Kremlin-run Gazprom has been a simmering pot of Soviet-era corruption only partly concealed by a web of subsidiaries. One of those, Centrex Group, was established in 2003. Putin has strengthened his grip on Europe in his 17 years in power.
Ex-Stasi officer Matthias Warnig, whose ties with ex-KGB agent Putin are said to have dated back to Soviet times, chairs a Centex project board of directors and is chief executive officer of the Nord Stream 2.

What’s the goal?

In addition to amassing stakes in European gas sector, Gazprom has also inserted itself into such European institution as FIFA, the football governing body, and NHS, England’s state medical provider.
Gazprom and its fellow Nord Stream 2 shareholders are also sponsors of the Oxford Institute for Energy Studies. The institute told the Kyiv Post that sponsors do not influence the content of the institute’s research.

“In return for sponsorship they, and all our benefactors, get access to our research output, which is all made available to the wider public, and access to a number of events and seminars which we run,” Oxford Institute for Energy Studies natural gas program director James Henderson said.

Last year, Nord Stream 2 shareholders Shell, OMV, Wintershall, Uniper and Engie also funded a report by King’s College London faculties, including its Russia Institute, on the pipeline.  Director of the Russian Institute Sam Greene said they undertook the project on condition of independence.

Cooling down?

But as the EU overflows with gas supplies and makes strides towards renewable energy, some experts, including Judy Dempsey, a nonresident senior fellow at Carnegie Europe, say Russia’s gas influence is on the decline.

“As a geopolitical tool, I think it’s weakening actually. But Nord Stream keeps that instrument there,” she said. “I think Russian energy influence is slowly declining in Europe as Europe changes its energy mix.”