EU stalls Russian gas pipeline, but probably won't stop it

Fri Mar 24, 2017 5:47pm EDT
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By Alissa de Carbonnel and Vera Eckert

BRUSSELS/FRANKFURT (Reuters) - Russia has the European Union in a bind.

The bloc is divided between eastern European and Baltic Sea countries that see a new pipeline carrying Russian gas across the Baltic making the EU a hostage to Moscow - and those in northern Europe, most especially the main beneficiary Germany, for whom the economic benefits take priority.

The result, EU sources say, is that the EU executive, the Commission, sensing that there may ultimately be no legal basis to block approval of Nord Stream 2, is delaying it as long as possible, hoping to get past 2019 - the date when Russia must renegotiate a gas transit deal with Ukraine.

"There's a difference between not supporting the project and having a legal basis to stop it," said one EU diplomat, adding that the aim for now was "a break to avoid the project going anywhere in 2019".

And for now, that means doing nothing, to the intense frustration of members such as Denmark, whose prime minister challenged the Commission at a summit of EU leaders this month to make good on strong words criticizing the pipeline.

Last summer, seven eastern member states, all formerly dominated by Moscow and at the center of an EU antitrust case accusing Gazprom of abusing its market dominance, sent a letter of protest to Commission President Jean-Claude Juncker. They too are still waiting for a clear response.

EU sources say the Commission is in fact cultivating uncertainty by hinting that the pipeline may fall foul of EU rules, in the hope of scaring off Western investors, for a time at least.

And in fact, last July, Gazprom's Western partners - Uniper (EONGn.DE: Quote), Wintershall (BASFn.DE: Quote), Shell (RDSa.L: Quote), OMV (OMVV.VI: Quote) and Engie (ENGIE.PA: Quote) - did withdraw from pledges to provide 1.2 billion euros of equity for the pipeline, a twin to Nord Stream 1, which began pumping in 2011.   Continued...

A handout by Nord Stream 2 claims to show the first pipes for the Nord Stream 2 pipeline being delivered by rail to the German logistics hub Mukran on the island of Rugen, Germany, in this undated photo provided to Reuters on March 23, 2017. Axel Schmidt/Courtesy of Nord Stream 2/Handout via REUTERS