Nord Stream 2 will only make Europe’s gas problem worse

Paweł Majewski is the CEO of the Polish oil and gas company PGNiG.

As gas prices have skyrocketed across Europe over the last few weeks, members of the European Parliament have rightly suspected gas market manipulation and called on the European Commission to investigate the role of Gazprom, Russia’s state-controlled natural gas exporter, amid the ongoing surge. Regrettably, Gazprom has indeed often applied political pressure by using its market power in the past. This time is no different.

Gazprom is using record-high gas prices to create the misleading impression that immediate regulatory concessions are needed to start the operation of the Nord Stream 2 gas pipeline, in order to prevent a gas crisis in the upcoming winter. In truth, however, there is plenty of available capacity to supply Russian gas, and this new pipeline will not provide additional gas volumes — it will only substitute existing supply routes. Given this, there are clear requirements of EU energy law that must be fully implemented when it comes to Nord Stream 2.

The International Energy Agency confirms that gas storage levels in Europe are currently well below their five-year average — but this is mainly the case for Gazprom’s storages. As a main supplier to the European Union, Gazprom has market power and isn’t shy of exercising it. The Russian exporter has been supplying less gas and has not been filling its storages to achieve adequate levels before heating season. It has also limited capacity bookings on the Yamal and Brotherhood pipelines, which have always transported gas from the East, and reduced gas volumes on spot markets.

Kremlin’s spokesperson has openly stated that quick regulatory approval of Nord Stream 2 and its operation would reduce gas prices — the pressure is barely covert. Particularly given that even without Nord Stream 2, there is more available gas transport capacity from Russia to Europe than could ever be needed.

Europe has previously experienced gas crises in 2009 and 2014. And both times, Russia limited gas supplies to politically pressure Ukraine, putting European economies at significant risk. While the EU mainly remembers these two events, however, Poland has experienced seven gas supply disruptions since 2004. We know that Gazprom is not willing to play along with the EU’s gas market rules and has a history of abusing its dominant position.

In 2015, the European Commission had already prepared an extensive Statement of Objections, identifying Gazprom’s breaches of competition rules, which undermined the EU gas market. Regrettably, in practice, the agreed commitments between the Commission and Gazprom did not lead to improvements in the functioning of the market. Since then, however, arbitration tribunals have confirmed the Commission’s findings on the excessiveness of Gazprom’s prices, requiring it to repay $1.5 billion to our Polish oil and gas company PGNiG and $2.9 billion to Ukraine’s Naftogaz.

This clearly shows that non-market pricing had — and still has — an important role in Gazprom’s toolbox. Given its track record and the way the pipeline is being used even before it is operational, Nord Stream 2 will only offer additional instruments to exert pressure. And as rightly stated by Poland’s late President Lech Kaczyński in the beginning of Russian aggression in Georgia in 2008, this will undermine the security of Ukraine, the Baltic states and the whole Europe.

Realistically, no EU rules could fully address all the risks associated with the controversial pipeline. However, the full implementation of EU energy law to Nord Stream 2 could limit supply risks, providing at least minimum necessary guarantees for energy consumers. Consequently, all requirements of the EU Gas Directive should be applied to the entire pipeline, especially ownership unbundling, nondiscriminatory and cost-reflective tariff setting and third-party access.

As stated, not long ago, by European Commission President Ursula von der Leyen, Nord Stream 2 is a highly political project, and all legal means should be used to ensure that EU law is fully implemented. Undermining a level playing field in the energy market counters EU energy policy and goes against the interests of the EU and its member countries. On this, the EU must be united and speak with one voice.

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