Nord Stream 2 official: We see a lot of smokescreens thrown around

Sebastian Sass [Georgi Gotev]

The Third Energy Package does not apply to Nord Stream 2, as it doesn’t apply to any of the existing or future import pipelines into the EU internal market, and the European Commission accepts that, Sebastian Sass told in an exclusive interview.

Sebastian Sass is the EU representative of Nord Stream 2. He was previously the EU representative for Nord Stream.

He spoke to EURACTIV’s Senior Editor, Georgi Gotev.

In the various reports about Nord Stream 2 there is a lot of bias. Certain countries don’t like it because they see geopolitics in it. Other countries realise the project is not in their favour, as they would lose transit fees and other advantages. What do you think are the most unfair narratives against Nord Stream 2?

From our point of view, the commercial case for the project is clear. It’s a continuation of Western European and Russian energy trade that’s been going on for decades, even during Soviet times. It’s a completely logical business. The EU is one of the world’s largest importers of energy while Russia has the largest gas reserves in our immediate neighborhood.

A huge competitive advantage for the EU, considering that global gas demand is expected to rise 25-30% by 2030. It’s in the interest of both EU and Russia to work together and cooperate commercially. Energy and gas is the most logical business to do so. We have a clear business case: in Western Europe, meaning EU and Norway, domestic gas reserves are depleting, while gas consumption is expected to remain at least stable for a number of decades, roughly on today’s level.

This means the EU needs to import more gas if we want to continue substituting for example coal with gas in order to pursue the EU’s climate objectives.

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But Commission Vice-President Maroš Šefčovič, in charge of Energy Union, says there is enough capacity on existing pipelines to bring the Russian gas Nord Stream is expected to transport. So why build expensive new infrastructure?

It’s true that there are very diverse assessments of what the future market will require in terms of gas and in terms of infrastructure. But the whole idea of the liberalisation policies of the energy market, which were successfully driven by the European Commission for years or decades by now, is that commercial investors should assess the demand on the market, invest in infrastructure and also carry the risk of that.

That’s the whole idea – it’s not the policy makers deciding about those investments but it’s the market and it’s legitimate to have a different assessment of how much demand there is. There are also those who see a much larger import demand, even larger than we believe. In the end, in a market economy, it should be the commercial investor who decides and carries the risk of their investment and that’s exactly what our company is interested in.

There is an assumption that since Gazprom is behind the project and the Russians don’t count when they want to achieve a political goal…

Yes, but any pipeline has two ends and nobody will build a pipeline that doesn’t have clients at the other end who take the gas that will be delivered. There are five major European and Western European companies, including Shell, Uniper, BASF/Wintershall, Engie and OMV who have repeatedly expressed their support for the project and believe that it’s necessary.

So the market should decide about market feasibility and about the need for the project. Regulators need to decide about the compliance with the applicable rules, that’s the system we have all committed to: competitive markets and rule-of-law.

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Where do we stand with the regulators? Legal aspects are being scrutinised, and Vice-President Šefčovič warns that these are very complicated issues. The ball is rolling between the regulators, the Commission; it’s not very clear where it is. Can you shed some light on it?

We see at EU level a quite lively discussion; we also see a lot of smokescreens thrown around. For us the regulatory situation is very clear, and I think also for the competent regulators. There is an established framework consisting of international conventions, of EU law, and of the laws of the countries whose jurisdiction applies.

According to all this, it will be decided whether the project will go ahead or not. Full compliance is an absolute prerequisite; otherwise the project couldn’t go ahead. In this process, which involves consultations, public hearings, all legitimate concerns are taken into account.

There are proposals that Nord Stream 2 should be regulated differently from how such import pipelines have been regulated so far. I see a lot of suggestions that the Third Energy Package should be applied to Nord Stream 2. That would require to change the current deal framework.

It’s up to policy makers to make initiatives for changing the applicable rules. But in the current environment we have no choice but to comply with the current framework as it exists. This framework does not foresee application of internal energy market law outside the internal energy market.

Along the pipeline route, we have the jurisdictions of Russia, Finland, Sweden, Denmark and Germany. Their authorities are in charge of applying all the laws that need to be applied, and this also includes EU law. We hear suggestions that there is a legal void. That’s completely wrong.

If you go and ask the authorities in Finland or Sweden, there are tonnes of laws that they need to apply, and that includes EU law, for example the EIA directive, it includes rules on Natura 2000, and so on. But it doesn’t include the Third Energy Package.

It’s not our decision, it’s the law that is written that way, and how regulators apply it. The Legal Services of the European Commission have come to the same conclusion, and also the German regulator, the Bundesnetzagentur.

So if see some people say: look, such import pipelines which are outside the internal market need to be subject to the Third Energy Package, it would require changing the law for all such pipelines.

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Some think that the difference with Nord Stream 1, a project in which you were involved as well, is that it was outside the  package, but Nord Stream 2 falls into it…

That’s another statement which is factually wrong, and I’m happy to have the opportunity to correct that. Look, almost all the pipelines in the EU were built before the third package. This legislation became valid in 2009 and then it had to be implemented in member states. According to the logic you expressed, the Third Energy Package would not apply to any pipeline built before 2009, and indeed 95% of the pipelines were built before 2009.

But the whole idea of the Third Energy Package is to regulate all pipelines, future and existing ones, within the internal market, but not outside. And if you look at the text of the third package, it also makes very clear it’s about the integration of the internal market.

If you wanted to regulate import pipelines which are outside of the internal market, you would need a different legal basis, which is the legal base for external trade. And that is not my invention, that is a direct quote from a legal opinion of the Council Legal Service, at the time the first gas directive was drawn up. And the subsequent second and third gas directives have exactly the same scope of application.

Today we have in Europe six import gas pipelines which lie outside the internal market, and none of them are subject to the Third Energy Package, this includes the Galsi pipeline in the Mediterranean which is expected to come on-stream in 2018. But there is not one reference case of an import pipeline outside the internal market which is subject to the third package.

And by the way the EU countries whose jurisdiction applies, Finland, Sweden, Denmark and Germany, they are among the countries with the best track record in terms of diligent administration and applying laws. So I find it very questionable, those speculations that “for political reasons” some exceptions would be made for Nord Stream 2.

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How did the Commission perform its duties? You will probably give a very diplomatic answer…

From the Commission we saw different types of statements but we have certainly not heard any formal statement that the Third Energy Package must apply. Apparently, the Commission Legal Service came to the opposite conclusion.

You realise that the Commission is under pressure from some member states who wish to push their agendas…

We know that the Commission doesn’t view Nord Stream 2 as a priority project, and we didn’t apply for that status either. In a European system based on rule of law, when you fulfil the legal requirements, you are entitled to get the permissions. All legitimate concerns will be taken up in that process. But we can’t change legally defined procedures only based on political sentiment.

Let’s imagine you get the green light, and then Poland takes you to court.

I don’t see any way that Nord Stream 2 directly could be subject to such court action. We believe that the case of Nord Stream 2 is very strong. But in the interview that was published on Tuesday at EURACTIV there was the suggestion that the European Court of Justice would decide. My response to that is: why don’t we first let the competent authorities evaluate and decide. That is the legal order and due process to which everybody should be committed. These laws were also introduced by EU law makers.

Secondly, there was the suggestion in the interview that the Third Energy Package would apply outside the internal market because it had been applied to Yamal and South Stream. On both accounts that’s wrong.

Of course the Third Energy Package applies to Yamal on that stretch, which is inside the internal market. Similarly, it will apply to the onshore connection lines of Nord Stream 2 inside the internal market. But internal market law doesn’t apply outside the internal market. Then, as far as South Stream is concerned, the third package was never applied to the offshore section of South Stream outside the internal market.

The proceedings of the European Commission in relation to Bulgaria were based on EU procurement law, not the Third Energy Package.

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