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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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Russia Pushes Ahead With Controversial Nord Stream 2

Russia is talking up its yet to be built Nord Stream 2 natural gas pipeline that has put the U.S. at odds, not only against Russia, but against many of its EU partners, including pivotal ally Germany.

Dmitry Peskov, a Kremlin spokesman, said on Monday that the pipeline is merely a commercial ambition.

"We know that some countries express their disagreement. But we would like to reiterate that this project is purely commercial, it has no political background. Attempts to somehow disrupt the implementation of this project would certainly be a violation of the principles and norms of free competition," he told reporters in Moscow.

Nord Stream 2 is a 759 mile (1,222 km) natural gas pipeline running on the bed of the Baltic Sea from Russian gas fields to Germany, bypassing existing land routes over Ukraine, Poland and Belarus. It would double the existing Nord Stream pipeline’s current annual capacity of 55 bcm and is expected to become operational by the end of next year.

Peskov’s remarks come as the geopolitically divisive pipeline cleared another hurdle. Gazprom, the major force behind Nord Stream 2, said in a statement that on June 7 it had received the necessary permit to advance construction of the Nord Stream gas pipeline through Swedish waters.

The permit for an approximately 510-kilometer section in the Swedish Exclusive Economic Zone (EEZ) was granted by Sweden’s Ministry of Enterprise and Innovation, which is in charge of the application, Gazprom said. The Russian energy giant, in remarks covered in major Russian media outlets, said that the approval marked an “important milestone” for the project.

With Swedish approval, seabed intervention works, such as the construction of rock berms and concrete mattresses for cable crossings, will commence within months, while pipelaying in the Swedish EEZ is scheduled to start later this year, Gazprom added.

Earlier this year, Nord Stream 2 received necessary permits from Germany and Finland. Denmark now stands in the way, putting the tiny country of some 5.7 million not only under intense pressure but also a regional even global spot light as it considers permits for the project.

Waning resistance

Upping the geopolitical ante even more, late last year Denmark passed legislation that could block the project being built in its coastal waters due to security concerns. However, thought the proposed Nord Stream 2 route goes through Danish waters, the pipeline consortium is investigating an alternative route north of the Danish island Bornholm which would run in international waters and therefore not be impacted by a potential Danish ban.

Ukraine, which has argued that it will lose revenue since the Nord Stream 2 project would bypass it, is pressing ahead to form a consortium of EU-based companies to stop the new pipeline.

Related: Uncertainty Looms Large Over Latin American Oil

In words diametrically opposed to the Kremlin’s recent remarks, Ukrainian President Petro Poroshenko said this week that “Nord Stream-2 is an absolutely political project against Ukraine, which has no economic component, trying to take away almost $3 billion away from the Ukrainian budget.”

“That is why we are now creating a group in the European Union, which should stop the Nord Stream-2. That is why we are actively negotiating with Germany. We invite them to create an international consortium for the management of the gas transportation system of Ukraine,” he added.

Going forward, however, it’s likely that Nord Stream 2 will be completed, even without Danish permission, a prospect that will not only help Russia protect its decades long monopoly over European gas markets but also continue to give the Kremlin uneasy geopolitical power over EU members.

U.S.-based LNG producers offer the continent gas alternatives, but that option is not only more expensive than Russian pipeline gas but also faces headwinds amid claims that President Donald Trump is meddling in European affairs and also pushing his America First agenda by promulgating the use of U.S.-LNG.

By Tim Daiss for Oilprice.com

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  • Mamdouh G Salameh on June 21 2018 said:
    With Germany starting to build its portion of the Nord Stream 2 in its Baltic Sea port of Lubin and with the necessary permits from Germany, Sweden and Finland to start construction of the gas pipeline in their Exclusive Economic Zones (EEZs), the project is unstoppable.

    Only Denmark has not yet gives its permit. Denmark passed legislation that could block the project being built in its coastal waters due to security concerns. However, though the proposed Nord Stream 2 route goes through Danish waters, the pipeline consortium is investigating an alternative route which would run in international waters and therefore not be impacted by a potential Danish ban. Still, Nord Stream 2 will be completed, even without Danish permission.

    The United States has always been opposed to Nord Stream 2 partly because it will tighten Russia’s grip on Europe’s energy supplies but mostly because of self-interest.

    Some in the EU are claiming that the US wants to displace Russia as a gas supplier to Europe. While US-based LNG producers offer Europe gas alternatives, that option is far more expensive than Russian pipeline gas.

    The project is first and foremost purely commercial. Once completed by the end of 2019, Nord Stream 2 along with its twin Nord Stream 1 will eventually provide a total of 110 billion cubic metres per year (bcm/y) of Russian gas supplies to Germany and the North-West European gas market. Gazprom also envisages building a Nord Stream 3 if there is more European demand for Russian gas.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Jake Mt on June 26 2018 said:
    Dear Salami,

    You sound exactly like someone who works at the Internet Research Agency. Say hello to Putin for me, will ya?
  • Andrew on July 04 2018 said:
    The zionists are failing.
  • Franco DeCelis on July 25 2018 said:
    Nord Stream II won't be stopped. Its benefits are so obvious. Only Ukraine, Poland and Lithuania are prepared to pay 25% to 30% for American LNG. These three countries must be very rich. Germany, Scandinavia, Holland etc can't afford to pay so much.

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