European Central: Nord Stream II Pipeline Falls Under EU Rules
Bernd Wuestneck/Associated Press
There is now hope for Ukraine as the Nord Stream II pipeline has hit a major hurdle. A German regional court ruled that the Nord Stream II pipeline will have to abide by EU gas market regulations. This can become a victory for Ukraine as it reduces the profitability of the Nord Stream II pipeline significantly.
Gazprom, the Russian state-owned energy company is the primary supporter of the Nord Stream II pipeline only committed to using the pipeline through Ukraine through 2024. However, due to the profitability potentially being greatly reduced of exporting gas directly to Germany rather than through Ukraine, Gazprom may continue to use the Ukraine pipeline. This would be very beneficial for Ukraine which earns one billion dollars annually from transportation fees for gas transported through the country. This is particularly crucial for Ukraine which has been fighting Russia since 2014 over the annexation of Crimea and can partially explain why Russia would be interested in abandoning the pipeline in Ukraine in favor of the Nord Stream II pipeline. Without revenue from gas transportation fees, this would hurt Ukraine economically and make it harder to fight Russia.
The German regional court’s ruling is based on the EU’s Gas Directive, which was revised in 2019, and experts feel the revision was to target the Nord Stream II pipeline due to the Directive becoming applicable to pipelines importing gas from outside the European Union. The Directive dictates that the company that produces the gas has to be a separate company from the one operating the pipeline. As it stands Gazprom would have been producing the gas as well as operating the pipeline. The European Union believes that this increases competition in the market.
Gazprom has attempted to say the Nord Stream II pipeline does not fall under the EU’s Gas Directive due to an exemption which stated pipelines that existed in 2019 did not fall under the regulations of the directive. The problem with this argument is that in 2021 the pipeline is still not fully constructed and is not yet operational, which would not make it exempt from the Gas Directive. Gazprom can appeal the decision to Germany’s Supreme Court so this ruling may not be final.
Several nations have expressed their dissatisfaction with the Nord Stream II pipeline and felt that Germany and the European Union did not negotiate enough with Russia. Some countries have gone as far as saying that the pipeline threatens the energy security of Europe. This is a rational sentiment as Russia has turned off the pipeline running through Ukraine in the past during the winters of 2006 and 2009, which deprived Europeans of gas during the most crucial part of the year.
Looking directly at the reaction towards the pipeline within Germany, it is clear that the project has partially influenced polls for the next national election. The Green Party pledged to ending the pipeline project. This is because the political party views the pipeline as potentially having a very negative impact on Ukraine in relation to Russia. This is in contrast with Angela Merkel’s party, the Christian Democrats, which supports the Nord Stream II pipeline. The Christian Democrats do not appear to be concerned with a potential overreliance on Russia for energy. The Social Democrats would continue the pipeline as well. These contrasting views add additional challenges to an already important election since Germany will have a new chancellor after Merkel has ruled for 16 years. However, it does seem that the German government would likely support continuing the completion of the pipeline. The Green Party enjoyed strong support earlier in 2021 but has fallen dramatically in polls to the lowest levels of support since September 2018. This is not because of the stance of the party on the Nord Stream II pipeline but because Annalena Baerbock has faced scandals as a result of a book she published along with her resume. In regard to her book, Baerbock allegedly plagiarized portions of her book. She took information from various sources without properly citing it. Her lawyer defended her claiming that the portions she was accused of plagiarizing are not actually copied from sources because they are commonly known facts. Turning to her resume, Baerbock allegedly added false information to her resume. This primarily consists of Baerbock claiming membership to several organizations such as UNHCR rather than assisting with projects directed by these organizations. This is an issue because some of these organizations such as the UNHCR do not have members making it impossible for Baerbock to have a membership as she claimed.
This complex issue is far from over and the final fate of the pipeline is unknown. Completion of construction appears likely due to construction the pipeline being very close to being finished. The impact on Ukraine however depends on whether Gazprom appeals the decision and how the Supreme Court of Germany would rule. For now, there appears to be more hope for Ukraine that it will continue to receive transportation fees of gas from Russia.
