“Discriminatory effect of the document”: Germany refused to release Nord Stream 2 from the EU directive

Germany rejected the Nord Stream - 2 operator Nord Stream 2 AG's request for exempting the construction of the pipeline from the requirements of the EU Gas Directive, Germany said in the Federal Network Agency (FSA).

“On May 15, 2020, Collegium No. 7 (FSA. - RT ) rejected the Nord Stream 2 AG petition for exemption from regulation of the part of Nord Stream-2 that lies on the territory of Germany,” the statement said.

Recall that the revised EU Gas Directive entered into force in May 2019. The essence of the changes is the extension of the norms of the third EU energy package to pipelines passing in the maritime economic zone of the countries of the "united Europe" - they oblige the operator to reserve up to 50% of the gas trunk capacity for pumping fuel from alternative suppliers.

Also, according to the rules of the Third Energy Package, the gas pipeline operator should be a company independent from Gazprom, and the current construction operator Nord Stream 2 AG, owned by Gazprom, is not suitable for this. 

“The exemption in accordance with paragraph 28b of the law on the energy economy suggests that the construction of the gas pipeline should have been completed before May 23, 2019. “Nord Stream 2 does not meet this condition,” the Federal Network Agency of Germany explained.

At the same time, Nord Stream 2 AG insists that by this date the pipeline was completed in terms of economic functionality.

“Based on the legal framework in force at the time, the company made an irrevocable investment of billions of euros long before the EC announced its plan to amend the Gas Directive. International legal experts have confirmed that narrowing the definition of “completion of a project” to a conclusion on the physical construction of a gas pipeline would violate the protection of legitimate expectations and other fundamental rights in EU law. It would also be contrary to the constitutional guarantees of the German Basic Law, ”RIA Novosti quoted the company as saying.

Nord Stream 2 AG said that the rejection of the application for the release of the German section of the gas pipeline from the requirements of the directive shows "the discriminatory effect of the amended EU Gas Directive." They also recalled that last year they filed a lawsuit to repeal the amendments to the directive to the European Court of General Jurisdiction, as well as that they are conducting arbitration proceedings under the Energy Charter Treaty.

Nord Stream 2 is a project that has received “all necessary permits” and is being implemented in accordance with international law, the operator added.

“We expect a formal decision, and then we will evaluate it and consider further actions to protect our rights, including appealing this decision in German courts,” the company added.

• Reuters
• © Maxim Shemetov

Igor Yushkov, an expert at the Financial University under the Government of Russia, a leading analyst at the National Energy Security Fund, in a conversation with RT explained that the European Commission had accepted the extension of the Gas Directive to offshore pipelines and demanded "pretty quickly do all this from national regulators."

“Germany resisted for a long time and set a date: if Nord Stream 2 is completed before May 23, it will not fall under this regulation,” he said.

He also expressed confidence that Nord Stream 2 AG will try to challenge this decision through the courts.

“Even if he fails to obtain the right to be excluded from the Third Energy Package, he will try to fit into the rules of the game,” the analyst concluded.

Director of the Energy Development Fund Sergey Pikin expressed the view that the regulator announced a refusal on formal legal grounds (the project was not built until May 23 last year) to make an exception to the Third Antimonopoly Package.

“That is, you cannot own gas and transport gas. Therefore, now the operator of the Nord Stream 2 AG project will sue to appeal this decision. As an extreme option: to create an independent gas operator that will operate Nord Stream 2, and Gazprom will already sell gas directly, ”he added.

The expert explained that this situation is not a serious problem.

“The main thing is to complete the project. All this we will face only at the end of this year or at the beginning of next ... Either the court (we have a year to sue), or the creation of an independent operator that would meet the European antitrust requirement, ”Pikin concluded.

Nord Stream 2 is a gas trunk pipeline under construction with a total capacity of two lines of 55 billion cubic meters per year, which goes from Russia to Germany via the Baltic Sea. It passes through exclusive economic zones and territorial waters of five countries - Germany, Denmark, Russia, Finland and Sweden. The construction is opposed by a number of European countries, in particular Poland, Lithuania and Latvia. In addition, Ukraine needs to stop the project, fearing a loss of revenue from transit of Russian gas, and the United States promoting its liquefied natural gas in the EU.

Opponents of the construction claim that the pipeline allegedly threatens Europe’s energy security, while Russia has repeatedly explained that Nord Stream 2 is an exclusively commercial and not a political project.