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/ Former USSR / Politics / Energy dialogue /

Nord Stream–2 implementation: Denmark in a brown study

The project continues under the threat of sanctions and uncertainty of Denmark's stance

24.06.2019 11:28 Alexander Pasechnik, head of the Analytical Department at the National Energy Security Fund

Context:

The United State does not reduce the threat of sanctions against the Nord Stream–2 project. On June 13, US Republican Senator John Barrasso introduced a bill to the Congress to sanction entities assisting in Russia's gas pipeline.

At that, the day before US leader Donald Trump allowed for the use of restrictive measures against the energy project's participants. At the same time, Trump has once again criticized Germany for buying Russian gas, pointing to the supposedly better alternative of purchasing American LNG.

Basically, the pool of American "field-specific" bills is being regularly updated, while Nord Stream–2 is still under construction. And Trump is constantly threatening to impose sanctions, even though verbally alone, and shifting the focus to the desired prospects of competition between American LNG and Russian piped gas. The American leader apparently realizes that his sanctions resolution will be simply out-of-date and a priori stillborn given that the project's financial backing has been nearly 90 per cent decided upon, with the real-world pipe laying in the Baltic Sea being 60 per cent close to its implementation. Besides, Gazprom has repeatedly stressed its ability to easily complete the construction single-handedly, if considered necessary.

For the time being the key problem is Denmark after all, which slows the project down with issuing permits. Even the local media are worried that be the construction stalled because of delayed permits for Nord Stream–2, Copenhagen will choke with major lawsuits from the investors complaining that the payback business cycle of the gas pipeline has been disrupted due to counter-actions by the relevant state regulator (the Danish Energy Agency, DEA) against the actually international project aimed to strengthen energy security of the European Union.

Moreover, according to the Jyllands-Posten newspaper, the Social Democratic Party of Denmark which won the parliamentary elections and was previously opposed to the construction of the Nord Stream–2 gas pipeline in the kingdom's economic zone, now softened its position on the issue, considering it necessary to wait until the Foreign Ministry reveals its analysis findings before taking any decision.

Notably, Gazprom is already moving from the standby mode to the mode of intentions. The delay in Denmark's approval of the Nord stream–2 construction may lead to Copenhagen's becoming obliged to compensate for the losses incurred in case of gas pipeline launch delay. This was stated on June 18 at a press conference by Sergey Kuznets, a member of Gazprom's management board. There is a responsibility that may arise after a while, he said, adding that investments have already been made, and delays in coordinating the gas pipeline route may entail damages that will have to be paid some day or other.

DEA responded to Gazprom top manager's message the very next day. Agency press-service head Ture Falbe-Hansen noted that the pipeline resolution may be adopted before the court entertains an appeal by the Nord Stream–2 company (the gas pipeline project operator) challenging the Agency's request on filing the third application for its route.

Falbe-Hansen also hinted that when coordinating the pipeline route, the favorable one may be the south-eastern route (bypassing the island of Bornholm) in view of Copenhagen's emphasis on environment and safety. The Danish Foreign Ministry analyzes all the applications in security terms and will submit its report to the parliament to take the final decision, he concluded. (According to the continental shelf amendment act adopted by the Danish authorities in 2017, the Foreign Ministry can now project influence applications for pipework routing in the kingdom's territorial waters).

These DEA representative's statements bring some clarity, because earlier the Danish regulators had sustained "peace and quiet order", almost without any comments on their future steps as regards Nord Stream–2. Now the fog has melted away a bit, and public hearings on the project that started in Denmark on June 19, will be held in two stages: public hearings until July 10 and consultations with border countries until July 17. After considering the remarks received, DEA's most probable next move will be to specify the deadline for announcing the final resolution on Nord stream–2.

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