Gazprom’s dreams of doubling the pipeline capacity of its key supply route into Europe via Germany got a big boost this week, as the state-owned Russian company reached a deal with five energy majors—Engie, OMV, Shell, Uniper, and Wintershall—to finance half of the controversial Nord Stream 2 pipeline project.
Polish regulators stymied the pipeline last summer, back when it was billed as a joint venture between Russia’s Gazprom and the aftorementioned European companies. Now, as the FT reports, the EU may be fresh out of legal challenges after Gazprom has decided to retain full ownership of the project:
Despite pressure from Warsaw and other EU capitals, the European Commission has been struggling to find a legal basis to challenge Nord Stream 2. This year its legal services department decided that EU energy laws did not apply to the pipeline. Germany’s network regulator agreed with that assessment. […]
Two people briefed on the new agreement told the Financial Times that the companies involved believe the financing proposal will avoid legal obstacles in the EU because it does not involve equity financing.
Though 50 percent of the proposed pipeline’s costs will be paid for by loans from these five energy companies, Gazprom will still have to pay half of cost of the project up front itself. In the end, this allows the Russian firm to stay the sole investor in the project, but helps defray some of those large up-front capital costs through long-term loans.
Nord Stream 2 is a vitally important project for Russia. It doesn’t just give Gazprom another way to make money off of Europe, but it also helps keep Europe dependent on Russian natural gas supplies, and in so doing gives the Kremlin another geopolitical lever over the continent.
This story is far from over, but the Kremlin has to be pleased by how events have unfolded recently.