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May 23, 2024

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Nord Stream 2.
Shareholders More and More Irritated

(September 26 2017) Today, among the biggest obstacles to the Nord Stream 2 project, one can distinguish sanctions adopted by the American Congress, the growing opposition of Brussels and the actions of such countries as Poland. The situation has already become extremely serious, especially with regard to the financial complicity of European corporations, which has been condemned by the Prime Minister of Russia. Dmitry Medvedev attacked Washington and criticized the European Commission for their attitude towards the gas pipeline. What seems to be significant, he did it the same day that Polish President Andrzej Duda talked at West Point Academy about the Moscow’s threat to Poland’s energy security and he expressed his hope for further strengthening the country’s cooperation with the United States as a key ally whose main aim will be to limit the dominant position of Russia.

On September 19, Russia’s Prime Minister met with his Finnish counterpart Juha Sipilae. At the press conference which was held after the talks on Nord Stream 2 (Finland does not object to the construction), Dmitry Medvedev accused the Americans of “burying” the project of the Nord Stream 2 gas pipeline because they seek to dump Russia from the EU gas supply market. He also criticized the European Commission for their position which is not as “pragmatic”, “constructive”, “commercial”, and “apolitical” as the Finnish one. Russian Prime Minister warned that Moscow could not accept any proposal to sign a separate agreement on Nord Stream 2 with Brussels. This is a reaction to the prolonged internal findings of the EC regarding the position on this project. More recently, criticism of the Nord Stream 2 pipeline has become stronger, for instance as it has been shown by the debate in the European Parliament.

However, it seems that the attitude of the United States is a major problem for the shareholders of the consortium seeking to put the next few lines of the gas pipeline linking Russia and Germany through the Baltic Sea. The law on new sanctions against Russia, adopted by Congress in August and then signed by the president, includes funding over some expenses of construction of some of the country’s export pipelines and thus hangs over the project like a sword of Damocles. It is true that the law does not impose any sanctions but it only gives the president an opportunity to apply them; nonetheless, its possible use discourages American and European banks from financing the project. Even the Nord Stream 2 shareholders seem to admit so. Russian press has recently published statements from the CEO of an Austrian concern ÖMV, one of the European companies involved in the project. Rainer Seele admitted that “project participants are unlikely to be able to attract bank financing at planned size”. This is his first public statement that officially acknowledges that new American sanctions may affect the project. The costs of Nord Stream 2 are estimated to be approx. 9.5 billion euro, of which 70% was planned to be covered within the project financing. However, the American sanctions law discourages Western banks from granting credits for this purpose and it may appear to be extremely difficult to collect 6.5 billion euro within the framework of project financing.

Despite this fact, both Seele and Gazprom representatives ensure that the project will be implemented. In order to achieve so, Russia will have to spend more of its own resources as well as to look for loans outside Western countries, mainly in Asia. If Gazprom assumes that it will be able to raise money in this market, European companies may find it difficult since large sums of money are involved, which represents now also a serious political risk. According to the agreement signed in spring this year. Gazprom remains the only shareholder of Nord Stream 2 AG, while Western companies have pledged to provide a total of 4.75 billion euro (950 million euro each). Among them, there are Austrian ÖMV, German BASF-Wintershall and Uniper (separated from E.On), French Engie and British-Dutch Royal Dutch Shell.

Reprinted with permission from The Warsaw Institute Foundation