European Commission: Gazprom must sell Nord Stream 2

Gazprom must sell the Nord Stream 2 gas pipeline to comply with European competition standards. This view is shared by the European Commission, reports Frankfurter Allgemeine Zeitung, citing officials in Brussels.

The EU Third Energy Package prohibits the same company from being both a gas supplier and the owner of the pipeline. In the case of Nord Stream 2, Russian gas giant Gazprom may not be able to use more than half of the gas pipeline's capacity.

Having lost the court appeal to exclude Nord Stream from the European regulations, Gazprom is making a new attempt to remove the pipeline from regulations of the EU Third Energy package. Nord Stream 2 AG has applied to the German Federal Network Agency for registration as an independent operator.

And although the Swiss-based Nord Stream 2 AG is a 100 percent subsidiary of Gazprom, the German gas market regulator can certify it as independent at its discretion.

But such an outcome does not satisfy the European Commission, which insists on direct compliance with energy legislation. The EU believes that Gazprom has no choice but to sell the pipeline, FAZ sources say.

The certification of Nord Stream 2 as an "independent company" is not guaranteed. It requires the approval of the German Ministry of Economy, which will have to assess whether the project poses a threat to European energy security. Problems may begin if, following the results of the parliamentary elections, the portfolio of the Federal Ministry for Economic Affairs and Energy goes to the "greens", who strongly oppose the Russian pipeline.

According to the latest Forsa poll, the Greens' have 19% support, while Chancellor Angela Merkel's ruling CDU/CSU bloc has 22% and is behind Germany's Social Democratic Party, which has 23% for the first time in 15 years.

Gazprom started the Nord Stream 2 with an expectation to exploit a loophole in European legislation. Initially, the requirements of the gas directive (disallowing the same company to be a gas supplier and an owner of the pipelines) did not apply to offshore pipelines. In 2017, the European Commission proposed to eliminate this loophole, but the adoption of amendments was blocked by Germany for more than a year. The situation changed dramatically in 2018 after the intervention of France, which announced "strategic problems" that Nord Stream 2 will add to already tense relations between the EU and Russia.

In April 2019, the European Parliament by an overwhelming majority of votes (465 for, 95 against with 68 abstentions) approved changes to the legislation and extended the gas directive to offshore pipelines coming from third countries.

On 10 January 2020, Nord Stream AG submitted an appeal for the project to be exempted from the requirements of the Gas Directive. The company referred to the fact that the project should be considered completed in May 2019, that is, before the amendments came into force. By "completion" Gazprom proposed to consider the end of the investment, and not the physical completion of construction.

But Germany's Federal Network Agency rejected that argument, saying it was basing its decision on a " technical understanding" of the term "project completion."

Nord Stream 2 appealed to the Düsseldorf court but lost the case in August 2021.

  Gazprom, European Commission, EU, Russia