‘OPAL’ of Discord. Why the EU supports Gazprom’s anti-Ukrainian plans?

The recent decision of the European Commission allowing Gazprom to use more capacity of the German OPAL pipeline has created a swirl in media. Due to this decision, Russia will be able to supply more gas through the Nord Streampipeline and less through the Ukrainian gas transmission system.

Media equally noted hat thisdecision on antitrust case against Gazprom reveals ambiguous perspectives within the European Commission. Despite the abuse of its position in European gas market, Gazprom will not have to pay a large fine. Is Brussels preparing a treachery thatwill damage Ukraine’s interests? Let’s find out!

A bit of history

In the last decades, Gazprom has been trying to consolidate its own position as the dominant gas supplier to Europe. For a long time, the Russian company succeeded to do so and it still remains the largest supplier of gas to Europe with a share of over 30%.

Share of Gazprom’s gas imports to Europe

 

The struggle continues

 

It would be nevertheless premature to believe that Gazpromwill overplay EU policies by using the inconsistencies within the European community. If the gas war of 2009 was the impetus for the creation of a common EU external energy policy, the hybrid war of Gazprom in 2011-2014 became the key prerequisite for the founding of the Energy Union.

 

TheBrussels‘ ambitious strategy should not be underestimated as it evolvesquite rapidlyin the pace of European bureaucracy. If the Energy Union framework strategy was adopted in 2015, then the European Council agreed in June on the main elements of the draft decision on establishingan information exchange mechanismtargeted on intergovernmental agreements between EU member states and third countries. This document represents one of the cornerstones of the Energy Union: the Commission will assess the intergovernmental agreements on gas suppliers before these agreements are signed.

 

This agreement means that if the decision enters into force by the end of 2016, any agreement on Russian gas supply will require a permission from Brussels. Such permission will be difficult to obtain if the agreement should increaseGazprom’s share in the markets where it dominates; such an action would otherwise lead to distortions in competition and to an impeded market access for other suppliers. Thus, the position of Europe on the Nord Stream 2 becomes more defined and clearer: "the project should be implemented in accordance to European rules."

 

Ukraine and EU officialsare not alone in their fight against Nord Stream 2. At the forefront of the opposition in Eastern and Southern Europe is Poland, which has intervened in the implementation of the project by blocking creation of a joint enterprisebetween Gazprom and five energy companies operating in the EU. Gazprom is therefore obliged to finance its project itself. Regarding the US position, the United States is also opposed to the implementation of the Nord Stream 2. According to aUS statement, the country is deeply concerned about the threat of energy security in Eastern Europe and the Baltic states if the Nord Stream 2 is realised.

 

The front is united

 

As long as there is no final decision of the European Commission antitrust case against Gazprom, one may only predict the likely limits of the EU-Gazpromcompromiseand its consequences for Ukraine. In light of the OPAL decision, observers believethat a large"package" deal between the EU and Russia will be adopted.

 

Considering this situation, Ukraine should think seriously about the development of her energy diplomacy, focusing primarily on energy security at both long and short term perspectives. This focus will help to defend her own interests and to avoid further pressures from Gazprom. Lithuaniacan serve as a successful example for Ukraine: having entered the EU, Lithuania started using all the leverages at her dispositon to combat monopolization of her domestic energy market by Russia. Among several Lithuanianmechanisms to combat Gazprom’s domination, the most important elements are implementation of the Third Energy Package, adoption of diplomatic agreements and initiatives, and a the launch of a new LNG terminal.

 

Further Ukraine’s steps must be concerted and targeted, namely:

 

1) The Government of Ukraine should contribute to the implementation of further reforms in the gas sector. This represents a crucial step in increasing Ukraine‘s investment attractiveness what will allow securing foreign investors' support and consequently increasing Ukraine’s lobbying effectiveness.

 

2) The Commission has shown its ambiguity regarding the integration of Ukraine into the EU: while the EU Deputy Prime Minister for Energy Mr Maroš Šefčovič has affirmed EU‘s great interest to cooperate with Ukraine, the European Commissioner for Competition, Mrs Margrethe Vestager, has opened the back door for the realization of the Nord Stream 2. Therefore, it is advisable to arrange negotiations between Mr Šefčovič, Mrs Vestager and Ukrainian officials in order to clarify any ambiguities of the EU in its relationship to Ukraine and to call together for the strengthening of relations between Ukraine and the EU.

 

3) It is equally important to develop cooperation between the countries of Central Europe (Hungary, Poland, Slovakia) which are also transit countries forRussian gas. Ukraine should support efforts of Poland and ofother countries in blocking the North Stream 2 project, which violates EU efforts to diversify itssources of supply. If needed, Ukraine should express her strong support for the abovementioned countries in their possible appeal against the European Commission at the European Court of Justice.

 

4) Finally, Ukraine should develop a fruitful dialogue with German officials and businessmen in order to raise German interest to invest in the Ukrainian  transit infrastructure what would be more profitable than constructing new pipelines.

 

At the same time, effective coordination of efforts of politicians, diplomats, businessmen and experts in the fieldof gas markets is the key to a concerted and powerful campaign to combat Nord Stream 2 and other projects that conflict with the interests of Ukraine and of the West.

 

Ukrainian version of this article was published on the Evropeiska Pravda website - http://www.eurointegration.com.ua/articles/2016/11/4/7056945/

 

Mariia Melnyk, Junior Expert at DiXi Group, Lukáš Kulich, Intern at DiXi Group,

 

Mariia MelnykSpecialist for European Integration Programs
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