Russia is aiming to increase its gas flows to Europe by building the Nord Stream 2 pipeline under the Baltic Sea. However, the project has triggered concerns about Moscow’s growing dominance in the region’s energy market. The US has slapped sanctions on some companies involved in the project and threatened to impose even more, while Poland recently fined project leader Gazprom on antitrust grounds, leaving the project in limbo and heating up political tensions.
The 1,230-kilometer pipeline will double the capacity of the existing Nord Stream 1 which opened in 2011. Gazprom leads the project, with European companies such as Uniper, BASF, Wintershall, Shell, OMV, and Engie providing half of the $11.2-billion funding. The new pipeline is important for Russia to reduce gas transit through Ukraine, with which it has troubled relations.
The pipeline is initially expected to start up in 2019, but US sanctions forced Swiss contractor Allseas Group SA to pull out its pipe-laying vessels from the project. The operator is now looking for a new way to complete the final 6% of the pipeline, which includes construction in Danish waters. Denmark issued permits for pipe-laying activities in August. A Russian pipe-laying vessel and assisting ships have reportedly arrived at the project’s logistical hub at the German port of Mukran. However, no actual construction work has been done. In June, Gazprom said it aimed at completing the project by early 2021. However, US sanction threats may put such a timetable in doubt.
Washington has said that the pipeline would make its European NATO allies heavily dependent on Russian gas supplies. It is also apparent that the US is trying to increase its LNG sales to Europe. Congress members have proposed the sanctions to be expanded to the project’s insurers, certifiers, and other companies.
Meanwhile, Poland’s anti-monopoly watchdog (UOKiK) on Wednesday said it had slapped Gazprom with more than 29 billion zlotys ($7.6 billion) fine for constructing the pipeline project without Warsaw’s consent. UOKiK also said that it had fined a total 234 million zlotys to other companies backing the project. Poland has been vocal against the Nord Stream 2, arguing it will deepen Europe’s reliance on Russia and threaten stability in Ukraine.
While Gazprom’s sales to Europe are set to increase through the new pipeline, the company’s share of the European market was about 35.5% in 2019. However, not all European countries are equally dependent on Russia. Gazprom still dominates gas supplies in Latvia, Belarus, Finland, and the Balkan countries. On the other hand, western European countries are building LNG import terminals allowing them to secure the fuel from a wider range of sources such as the US, Qatar, and African nations.
