“Make whole” the opponents of Nord Steam-2 – EURACTIV.com

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Poland and Ukraine have long opposed the Nord Stream 2 pipeline and both claim their financial and political losses should be made good. But in fact, they were already “made whole,” writes Danila Bochkarev.

Danila Bochkarev is an associate researcher Institute of Political Studies Louvain-Europe. TThe opinions expressed here are solely those of the author and do not represent the views of his organization.

The pipeline is already the subject of negotiations between Germany and the United States. The project was discussed at the recent meeting between Chancellor Merkel and Secretary Blinken in Berlin and will be debated during the Biden-Merkel talks at the White House on July 15. Previously in a audience in the United States House of Representatives, Secretary Blinken confirmed that the United States was “actively engaged with [Berlin] to… ensure that the transit charges that Ukraine at some point in the future could lose due to this pipeline…[is] made whole ”. The parties have not provided specific details, but a potential aid package could include German investments in Ukraine’s renewable energy or hydrogen industry. Berlin too insisted Ukraine must remain a transit country.

The Ukrainian side also presented rather maximalist demands, a common practice in the negotiation process when the parties correct their initial positions in order to find a compromise. Ukrainian Minister of Foreign Affairs stress that the condition for the launch of the gas pipeline be the “disengagement of our territories”. Vitrenko, new CEO of Naftogaz appointed de facto requests to extend EU law to Russian territory. The negotiations are likely to be long and we should not expect a breakthrough before the Biden-Merkel and Biden-Zelenskiy meetings, but the chances of reaching an agreement are high. Just a note: the Ukrainian side should not forget that “rebuilding Ukraine again” does not necessarily equate to “rebuilding all of Naftogaz” and that the aid program could take the form of aid to the development and not a compensatory payment. Nonetheless, Ukraine’s interests are now at the center of discussions between Berlin and Washington.

Poland, on the other hand, also redoubled its efforts to delay the launch of Nord Stream-2 once it became clear that Washington was not going to further sanction European companies involved in the project. Prime Minister Morawiecki was critical the 180-degree turn of the Biden administration on the pipeline, and the Polish government claims Nord Stream 2 is a threat to energy security. In April, a group of Polish MPs tried to force a plenary vote on the pipeline and in June, the Polish Sejm adopted a resolution calling on the EU and NATO to stop the construction of Nord Stream-2.

Polish politicians have consistently cited the pipeline as an example of German-Russian collusion on the interests of Central and Eastern European states. In addition, Poland’s national security strategy affirms that blocking the creation of gas transport infrastructure from Russia to Europe is its energy security objective.

However, it is unclear how the project could negatively affect Poland’s energy market or its energy security. Several impact analyzes have shown that Nord Stream-2 will have positive effects on the European gas market. A study by Frontier Economics / Institute of Energy Economics stress that gas prices in Europe in the case of Nord Stream 2 are 0.77 EUR / MWh lower than in the case without. This could benefit Polish consumers if Warsaw rolls back the gas storage regulations that partially shielded the Polish gas market from competition.

A study by the Oxford Institute of Energy Studies also mentionned that the new Russian gas arriving in Germany could be the best option to compensate for any possible shortage of supply from alternative sources. It should be noted that Poland is already independent of physical gas imports from Russia. All of its import demand could be supplied with LNG (5 mcma) and via counter-current pipelines from Germany (9 mcma). In addition, the launch of Nord Stream-2 would not necessarily reduce the flow of Russian gas through Poland. The transport of gas via the “Polish route” is governed by the EU’s capacity allocation mechanisms and the Polish TSO will just have to compete with other routes – including Ukraine – by offering attractive conditions.

The fixation on “ideological physicality” in gas supplies (a term used by Prof. Jonathan Stern) was behind Warsaw’s quest for new supply routes such as the Baltic Pipe and the expansion of the Świnoujście LNG terminal. By 2022, this new infrastructure will add 12.5 bcm of import capacity, which should make the issue of dependence on Russia completely irrelevant.

Warsaw’s quest for “ideological physicality” is co-funded by European taxpayers. The import pipeline and LNG infrastructure (Świnoujście LNG terminal and Baltic Pipe) were supported by EU grants amounting to € 669 million. In addition, Poland is the largest net recipient of European financial aid. In 2014-2020, the country received over 86 billion euros from Brussels. Network infrastructure in transport and energy received 23.6 billion euros, the low-carbon economy – almost 10 billion euros, environmental protection and resource efficiency – 8.25 billion euros and adaptation to climate change – 1.23 billion euros. Therefore, in a sense, Poland has been “restored” several times, long before Nord Stream 2 was operational.

At this point, it is purely political. According to Warsaw, Nord Stream-2 breaks European solidarity. But conveniently, this argument is often made to deflect Europe’s demands from Poland in other areas, such as migration, rule of law and energy transition.

As long as Germany and other Western European states apply Nord Stream 2, Polish politicians feel no need to account for broader European policies or the concerns of their neighbors. This strategy is, however, a double-edged sword, especially in Poland’s relations with Germany. Warsaw has included nuclear power as well as offshore wind power as key strategic projects that will help the country decarbonize its power system. Supporting financial and political support for Polish nuclear power could be difficult for the German government, which has already made a firm commitment to phase out nuclear power by 2020. This support will be difficult, if not impossible, in case the Greens would join the next coalition government. In this context, Poland could come under increased pressure to review the timetable for its phasing out of coal.

Nord Stream 2 is in the final stages of finalization. This realization guided the policy change in Washington and opened the door to a political debate aimed at improving Ukraine’s energy security. Secretary Blinken also recognized that “the physical completion of the project… (is) a fait accompli”. It goes without saying that Poland should take inspiration from Washington’s book and also bury the hatchet.

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