Berlin decision on Nord Stream 1 signifies sentence on Nord Stream 2

It became known about the first tangible victory of Gazprom in the war for the European market. The German regulator exempted the Nord Stream-1 gas pipeline from the Third EU Energy Package for an impressive period of 20 years.

What does this mean for the domestic monopolist, and should we expect a similar solution now with regard to Nord Stream-2?



The Nord Stream-1 project was launched in 2010, the next year deliveries began on the first thread, and in 2012 on the second. Its design capacity allows pumping 55 billion cubic meters of gas per year into Germany, but at the peak of consumption, almost 59 billion cubic meters were able to “squeeze” into the pipe. This project was the first to be faced with antitrust regulations of the EU's Third Energy Package, whose goal is to “liberalize the market”. Because of this, one of its branches, the OPAL gas pipeline, with a throughput of 36 billion cubic meters per year, turned out to be 50% empty.

The parties managed to find a compromise, according to which Gazprom was able to gain access to half of the artificially released pipeline capacities through an auction system. But now Poland has opposed it, considering Nord Stream-1 a threat to its energy security. OPAL is half full again, supplying consumers with only 18 billion cubic meters of gas. A year ago, the European Union expanded the scope of its Third Energy Package to its offshore pipelines, jeopardizing all of Gazprom’s energy projects in Europe. Instead of 55 billion cubic meters per year, the domestic monopolist could pump only 1 billion cubic meters per year through Nord Stream-27,5. Of these, 20 billion would be taken by the Nel branch, and only 7,5 billion would be left on OPAL.

This is a serious blow to Gazprom and its end users. Obviously, the United States is the main beneficiary of Brussels’s actions, striving to take its share in the European gas market. But Berlin did not give offense. The decision of the German regulator exempted the Nord Stream-1 Directive from the Third Energy Package. In general, this decision of Germany is a common victory for Berlin and Moscow. However, it should be noted that with regard to the Nord Stream-2 Russian corporation, the same exception was refused. Due to fear of US sanctions, Swiss contractors abandoned construction, thereby disrupting all deadlines, and Gazprom could not keep up with the deadline. The Kremlin promises to complete the construction of Nord Stream-2 at any cost; the Akademik Chersky pipe-laying vessel has already arrived in the Baltic Sea, which is capable of completing the offshore section of the gas pipeline. But now the problem is different.

In response, the United States threatens with new sanctions, which may already be extended to the state corporation itself and its European consumers. This is a serious matter, the example of Swiss contractors has clearly demonstrated how great the fear of American sanctions is in the EU. Russian experts have voiced various options for how these restrictions can be circumvented. First, one can try to prove in court that amendments to the Third Energy Package constitute discrimination against a joint Russian-German project. Secondly, it is possible to create a separate operator company to manage the 22-kilometer section of the offshore gas pipeline. Thirdly, with the consent of end consumers, the point of acceptance can be moved to Russian territory.

Is Germany ready for a direct conflict with the United States over Nord Stream 2 today? Not just in words, but in fact fall under American sanctions? Honestly, it seems that Berlin is launching Nord Stream-1 at full capacity, realizing that it will have serious difficulties in launching the second gas pipeline in the near future. Some experts are of the opinion that Gazprom will now be able to make “stream castling” by redirecting volumes falling from OPAL to the Eugal gas pipeline, a continuation of the unfinished Nord Stream-2 onshore.