European Commission Approves Increase in Russian Gas Deliveries to Europe

On Tuesday October 25, the European Commission signaled that it would permit Gazprom to transport increased levels of natural gas through the Opal pipeline in Germany, which had previously restricted Russia to only 50% of its capacity (or 36 billion cubic meters annually) due to terms in place per the bloc’s energy security regulations.

The existing Nord Stream pipeline connecting Russian gas fields to Germany (and bypassing Ukraine and Central and Eastern Europe) has a capacity of 55 bcm that has, thus far, not been fully exploited.  Needless to say, if Nord Stream 2 is approved and completed, that capacity would double, putting further pressure on Opal and other pipelines to take more Russian gas.  Accordingly, Germany has seen this ruling as vital to the future of its Nord Stream 2 project.

The Opal pipeline connects Nord Stream to the Central and Eastern European market, linking Brandov on the Baltic Sea to a crossing at the Czech-German border.  Each of these two results emanating from this decision (i.e., the expanded access to the European market provided to Nord Stream 1 and the groundwork being laid for Nord Stream 2) is viewed as highly objectionable by certain Central and Eastern European states who view these pipelines as geopolitically-driven by Moscow.

The European Commission is also ruling on an antitrust suit against Gazprom for overcharging customers in Central and Eastern Europe.  Under the ruling Gazprom will end its practice of barring some customers from exporting gas to other countries and will address concerns that it has set unfair prices in the Baltic states and East European nations.   The deal being made by the EC is seen by many Central and Eastern European states as a failure of these institutions to stand up to Moscow.  Part of the Commission’s rational for not taking a tougher stance with Gazprom is its desire to secure guarantees from Gazprom that it will retain Ukraine as a transit route for its natural gas — an effort the EC is actively undermining with its approval of increased Gazprom supplies through the Opal pipeline.

In response, the Polish state-owned energy company PGNiG is preparing to sue the EC for breaching EU treaties.  Poland has been joined by the Baltic states in deriding the ineffectual manner in which the EU and EC have addressed the issue of Gazprom’s power projection within the European energy market.  Both Poland and the Baltic states have accused Gazprom of using its gas supplies and pricing schemes as a strategic tool.