In a setback to Gazprom’s plans for energy dominance in Europe, Germany has postponed certifying the Nord Stream 2 pipeline.
The decision comes after increased pressure in Europe and from the U.S to halt production of the controversial project. When and if completed it would vastly increase Europe’s dependence on Gazprom for natural gas.
Bundesnetzagentur, Germany's energy regulator, made the decision on Tuesday. They announced that the group behind the construction of the pipeline would need to form a new company under German law to keep the operation alive.
“A certification for the operation of Nord Stream 2 will only be considered once the operator is organised in a legal shape compliant with German law,” A statement from Bundesnetzagentur said.
Natural gas prices rose by around 17% following the announcement as scarcity throughout winter became more likely.
Gazprom is run by the Russian government and is the biggest supplier of natural gas into the continent. There are fears that should it be completed, Europe will be too reliant on Russia for such a vital commodity, leaving them at risk in the face of international disagreement. Somewhat ironically, Russia was recently accused of purposefully withholding natural gas from Europe amidst the ongoing crisis to place pressure on Germany to approve the Nord Stream 2 pipeline. The Kremlin has of course denied this, but even if it is true, it doesn’t seem to have worked.
Ukraine has also raised concerns that the implementation of the Nord Stream 2 pipeline would leave them significantly out of pocket. Currently, Ukraine makes around £3bn each year from transit fees in ferrying natural gas from Russia to Europe via its own pipe network.
The Nord Stream 2 pipeline goes under the Baltic sea, bypassing Ukraine entirely. While the decision not to pay transit fees could be seen as a purely business decision, this is part of a wider strategy to deliberately weaken Ukraine. Both nations have been involved in military conflict since early 2014.
Boris Johnson put the quandary in stark terms in the commons on Monday. There he said that Europe needed to make a choice between more gas from Russia or ‘sticking up for Ukraine’.
The geopolitical quagmire is particularly tricky because Europe is in the midst of a catastrophic energy crisis due to a lack of natural gas.
Europe’s energy crisis has pushed the wholesale cost of natural gas to unprecedented levels over the past year, leading to several energy suppliers going bust.
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