COVID-19 or no COVID-19, the controversy over the Nord Stream 2 pipeline shows no sign of going away after Poland’s competition watchdog UOKiK this week fined Russia’s state-controlled gas giant Gazprom €6.5bn for going ahead with the construction of the pipeline without securing its approval. UOKiK also imposed penalties of more than $60m on the five western companies — Engie, Uniper, OMV, Shell and Wintershall — that are co-financing the project.
On completion, the 1,200km pipeline will run along the bed of the Baltic Sea and is scheduled to double the amount of gas Germany can import from Russia. At its most recent peak in 2017, Germany burnt through 53 billion cubic meters of Russian gas, or about 40% percent of the country’s total gas consumption. Nord Stream 2’s delivery system is designed to carry up to a further 55 billion cubic meters on a yearly basis.The project is crucial to Russia’s plans to scale down its the use of the Ukrainian transit corridor to supply Europe.
Widely welcomed by German industry as a potentially reliable source of energy, Nord Stream 2 has always been fiercely opposed by Poland and other central European states that argue it will increase the EU’s energy dependence on Russia. Washington has also been a vociferous opponent of the project and in July warned that it would toughen its sanctions regime for companies helping Russia complete the pipeline
“As far as energy security is concerned, the undertaking splits Europe into two parts,” said UOKiK President Tomasz Chrostny this week. “It is astounding that western corporations fail to understand that, and participate in an undertaking that not only disturbs competition on the market but also poses a threat to Europe’s energy security.” Mr Chrostny ordered the companies to terminate financing contracts linked to the project within 30 days.
Both Gazprom and its Western partners in Nord Stream 2 say they intend to fight UOKiK’s decision. The Kremlin said that Gazprom would take the necessary legal countermeasures, while OMV said it would analyse the decision but was “of the clear opinion that it had complied with all applicable laws”. The capital markets were equally sanguine. “To us it seems engineered more to generate headlines than in any expectation of Gazprom ever actually paying such a fine,” said Ron Smith, executive director at BCS Global Markets in Moscow. “We wouldn’t expect a final decision for many years.” As recently as this summer, Gazprom was publicly expressing confidence that NordStream 2 could be operational by the end of the year or some time in early 2021.