The pipe is half empty

"Northern Stream - 2", most likely, it will not be possible to use full power

On May 8, the Federal Network Agency of Germany should voice the official decision - whether the updated requirements of the European gas directive will be applied to the Northern Stream - 2. The German business newspaper Handelsblatt reports with reference to the document that the Federal Agency decided not to withdraw the Russian gas pipeline from the action of the directive. This means that the Nord Stream 2 loses its support for the main ally in Europe and cannot be used at full power.

New amendments to the European gas directive were approved at the EU level in February last year. Their essence is to apply the rules of the domestic market to all pipelines - land and sea - by which gas enters the EU participants. The same company cannot act as a supplier and gas operator; third parties should be accessed to the pipe.

For the Nord Stream - 2, this means that

The operator company Nord Stream 2 should be independent of Gazprom (which it now belongs to 100%), and 50% of the pipe capacity should be reserved for other suppliers.

In September last year, the Opal gas pipeline - the branch of the Northern Stream - which now works half of its capacities.

The main opponent of the renewal of the gas directive was Germany: it was she who, after the completion of the construction of the Northern Stream - 2, will become a hub, where the gas will come from Russia along the bottom of the Baltic Sea and where it will be distributed to other European countries. As a result, the amendments were still accepted, but the Germans managed to push an important reservation: the country in which the gas pipeline enters has the right to withdraw it from the action of the European Directive. True, for this you need to provide good reasons, and the European Commission can protest this decision.

The position of Germany then gave Gazprom a great reason for optimism. In November, in accordance with the amendments to the European Gas Directive, an amendment was adopted to the German law on energy. Nord Stream 2 has submitted an application for the withdrawal of the North Stream-2 project from the operation of amendments to the federal network agency-the regulator of the German gas market.

According to the Handelsblatt newspaper, the Federal Agency has already decided to refuse Nord Stream 2 and sent its decision to the company's management. The gas pipeline operator has a week for consultations and the answer - after that, May 8, the Federal Agency will voice its final position.

According to the updated German legislation, projects may be deduced from the action of the directive, whose construction was completed at the end of May 2019, when the amendments to the gas directive entered into force. It is this, according to Handelsblatt, that the federal network agency refers - to May Northern Stream 2 was not completed. The Nord Stream 2 is sure that the concept of “completion of construction” should not be interpreted in an extremely narrow sense - at the end of May billions of investments have already been made in the project. The Federal Agency disputes this thesis and writes in its decision that a “structural and technical understanding of the term“ completion ”is assumed, and not“ economic and functional understanding ”.

The press secretary of the Nord Stream 2 Jens Müller said that the company got acquainted with the position of the German regulator and did not agree with it. “We will wait for an official decision and, of course, evaluate it and our further actions to protect our rights,” he said.

Handelsblatt expects Nord Steam 2 to challenge the decision of the Federal Agency in the Supreme Court of Dusseldorf, who can transfer it to the European Court.

If the current solution remains valid, Gazprom will be able to use the power of the gas pipeline half - the rest will be reserved for the third parties. At the same time, the German regulator will control the price of using the gas pipeline by the third parties.

All this complicates the positions of the Northern Stream - 2, which can shake even more in connection with the crisis caused by the epidemic. Gerhard Mangott, professor of international relations at the University of Innsbruck, recalls that after the crisis of 2008-2009, the volume of Russian gas supplies to Europe decreased by 50 billion cubic meters. The current economic crisis risks being even deeper, and the total supply of supplies can decrease even more - especially against the background of the fact that in the summer and autumn of last year many European countries, using low gas prices and fearing the failure of the negotiations of Russia and Ukraine under the transit agreement, thoroughly scored their own gas storages. This calls into question the economic feasibility of the project - at least in the near future.