Madalina Sisu Vicari, PhD Researcher at Center of International Relations Studies (CEFIR) of University of Liège and Editor-in-chief of Vocal Europe
Nord Stream 2 is clearly a highly disputed project, which has been continuing to trigger a wide array of controversies not only within the European Union (EU) but within the Energy Community (EnC) as well. Both geopolitical and economic factors have influenced those controversies, and they will continue to affect the arguments revolving around this pipeline project.
The essential geopolitical factors - which have led to an unprecedented level of securitisation of EU-Russia energy relations, culminating with the creation of the Energy Union - are the annexation of Crimea and the conflict in Eastern Ukraine. These events have had considerable bearing on Russian-Ukrainian gas relations and have led to Russia's aim to disengage its gas supplies to Europe from the Ukrainian gas transit corridor, on one hand, and to Ukraine's efforts in reducing its energy dependency on Russia, on the other hand. Maintaining Ukraine as gas transit country has been not only an important issue for the EU's political agenda since the outbreak of the Ukrainian crisis, but also a contentious issue in EU-Russia energy relations. Thus, the European Commission's involvement as mediator in the negotiations between Ukraine and Russia resulted not only in securing the gas supply to Ukraine through the 2014 and 2015 winter seasons but also in guaranteeing the transit of gas across Ukraine. Furthermore, the EU has manifestly taken an overall negative position towards Nord Stream 2; in this regard, the arguments expressed mainly by the Commission principally touched upon the issues of security of supply, diversification of energy sources and alteration of EU's gas market landscape.
Some of the main economic factors shaping the debate over Nord Stream 2 relate to the geopolitical ones. Russia's disengagement from the Ukrainian transit would significantly decrease the country's revenues generated by gas transit and would significantly reduce the investment opportunities for the modernization of Ukraine's gas system. As Ukraine is a member of EnC, it would hinder the further integration of the EU acquis communautaire in the country's energy sector and the creation of an integrated and liquid gas market within EnC. Secondly, Slovakia may lose important gas transit revenues, but this possibility may be offset by Russia's plans to increase gas exports in Eastern and Southern Europe; thus, recently Moscow assured Bratislava that the gas transit contract with Slovakia will run until its end, in 2028, and it presented the possibility of earning more gas transit revenues if the gas from the Nord Stream 2 would go via Austria to Slovakia, and further to Eastern European markets.
Nevertheless, from the Russian perspective, Nord Stream 2 is driven by sound economic rationale, as the pipeline would allow Gazprom to not only preserve its European market share (158 billion cubic meters of gas exported in 2015, representing 30.9% of the overall European energy consumption) but also to increase its share (for 2016, the company aims at 165 billion cubic meters of exports). Moreover, Nord Stream 2 would expand Gazprom's domination in Germany (currently, the leading market for Russian gas in Europe); it would increase the Russian company's presence in the Northern and Western European gas markets (for instance, since the beginning of the year, Italy has become the second leading European market for Russian gas exports), and it would allow Gazprom to maintain, and even increase its dominant position in the Central and Eastern European gas markets. Ultimately, it would allow and facilitate a fast raise of gas exports to Europe from Russia, in the case of increasing EU demand. Finally, Gazprom argues that as its production is moving to the Yamal resource base, the pipeline would enable the company to make cost optimization in the Central corridor ( less than 4,300 km of pipes and 62 compressor stations) and, by shortening its supply route to Europe, it would allow the company to save money and to reduce carbon emissions.