New EU rules allows more Russian natural gas into Germany

The European Commission has agreed to a draft law with the European Parliament and the bloc’s 28 member states that would govern all import pipelines, whereas they cannot be directly owned by gas suppliers, applies non-discriminatory tariffs and transparent reporting, and opening at least 10 percent of capacity to third parties. EU countries have nine months to transpose it into national law. However, the EU-wide rules leave enough wriggle room for Germany to approve exceptions, which is likely to include a derogation for the Nord Stream 2 project.

EU Commissioner Arias Canete said that Europe was closing a loophole in its laws as its dependency on natural gas imports increases. “The new rules ensure that EU law will be applied to pipelines bringing gas to Europe and that everyone interested in selling gas to Europe must respect European energy law,” he said.

The Commission said exceptions were “only possible under strict procedures” in which it “plays a decisive role”. It also said it “remains available” to engage in “negotiations on the operating conditions of Nord Stream 2”.

Gazprom’s 746-mile subsea gas pipeline, which will be developed alongside Germany’s Uniper and Wintershall, Paris-based Engie and OMV of Austria, has long courted controversy because it will increase Russian gas flows into Europe while circumventing Ukraine. Critics claim the pipeline will increase Russia’s political clout in Europe and tip the balance of power away from Ukraine, which relies heavily on charging Russia transit fees for gas exports into Europe to prop up its economy.

Just last month, Chancellor Angela Merkel said Germany will not become dependent on Russia for gas due to Russia’s Nord Stream 2 pipeline, stressing that it was crucial to ensure Ukraine remained a transit country for gas. “Do we become dependent on Russia due to this second gas pipeline? I say ‘no’, if we diversify at the same time,” Merkel told a news conference in Bratislava, where she met the leaders of the Visegrad group - Czech Republic, Hungary, Poland and Slovakia.

The draft law could slow but not stop the project, led by Russian state energy firm Gazprom in partnership with five Western firms: Germany’s Uniper and BASF’s Wintershall unit, Anglo-Dutch firm Shell, Austria’s OMV and France’s Engie.

The Russian pipeline already faces uncertainty after Denmark’s potential ban on its planned route through its territorial waters and sanction threats by the United States. Moscow’s military posturing in and around the Baltic Sea has rattled nerves in the Nordic states and Denmark’s Foreign Minister Anders Samuelsen, who has been urging a common European stance, cautioned that a Danish decision on the route would still be based on a broader assessment in relation to its defence, security and foreign policy interests.

Denmark faces a foreign policy quandary as it has to decide whether the pipeline can go through its territorial waters after it passed new legislation on pipelines allowing it to ban Nord Stream 2 on foreign policy and security grounds. In case of a Danish ‘no’, the project would still be likely to go ahead as the consortium has applied for an alternative route avoiding Denmark’s waters. The new draft law removes the opportunity for Denmark, which opposes the project, to veto its route through Danish waters to Germany.

Nord Stream 2 has divided the EU as Eastern European, Nordic and Baltic Sea countries see the 1,225 km (760 mile) pipeline, which is already under construction, as increasing EU reliance on Moscow, while those in northern Europe, especially Germany, prioritize the economic benefits. Nord Stream 2 says the project will “make a positive contribution to the Energy Union goals by securing an additional route of gas supply”.