The European Union's energy policy chief has hit out against Russia's natural-gas pipeline expansion plans into Germany, suggesting the "politically sensitive" project undermines energy security in the 28-nation bloc.
"For us as a primary goal in securing energy security in Europe is diversification -- diversification of sources, of routes and of suppliers," European Commission Vice-President for Energy Union Maros Sefcovic, told The Deal in a video interview. "This project doesn't fall into that area, so I cannot imagine that this project would be funded by the EU."
While EU funding for the commercial venture led by Gazprom (OGZPY) and backed by the German government was never anticipated, there have been growing calls for Brussels to intervene.
The concerns come amid an ongoing antitrust case into the gas giant's pricing practices led by EU Competition Commissioner Margrethe Vestager, who will reportedly host Russian Prime Minister and Gazprom deputy CEO Dmitry Medvedev in a closed-door meeting later this month.
The twin-pipeline project, known as Nord Stream 2, is due to be completed in 2019. It would be the second natural-gas link connecting Germany and Russia, bypassing Ukraine transit routes.
Gazprom owns 50% of the Zug, Switzerland-based Nordstream 2 joint venture, with Germany's E.ON (EONGY) and BASF (BASFY) /Wintershall Holding; Anglo-Dutch company Royal Dutch Shell (RDS.A) ; Austria's OMV (OMVKY) ; and France's Engie (ENGIY) (formerly GDF Suez SA) each holding 10% stakes.
The project has an estimated preliminary budget of around €8 billion ($8.5 billion), and the companies argue that adding new gas routes will make the EU's gas supply more robust during peak demand and boost energy security.
But several European countries, mainly in central and eastern Europe, are worried about being at the mercy of arbitrary Gazprom gas-supply cutoffs.
Ukraine, whose relationship with its large neighbor to the east has deteriorated during its near-two-year-old civil war, also risks losing an estimated $2 billion in annual transit charges if the new pipeline is built. The consortium is still studying different possible routes.
In the meantime, several EU governments have expressed their concerns about implications for energy security in writing to Sefcovic and to European Council President Donald Tusk, a former Polish prime minister, and are calling for a summit-level debate of EU leaders.
Sefcovic confirmed that he received letters from several EU member states this week, saying that "it's quite clear" that a debate is needed between the EC and the German regulator on both the energy security aspects as well as whether the project is based on "full and correct application of the EU law."
"For such a project, it's quite clear that if they're built in Europe, they must fully respect the EU law - public procurement, all the laws regarding the operation of the big energy companies in Europe, all the environmental legislation and we are assessing the project," he said.
Along with the Capital Markets and Digital Single Markets schemes, Energy Union is one of EC President Jean-Claude Juncker's pet projects for bringing economic growth and jobs back to Europe.
As for other parts of the EC's grand scheme to bring safe, affordable and climate-friendly energy to Europe, Sefcovic has promised a legislative proposal for next autumn on renewable energy, which is to account for more than 20% of the EU's energy needs by 2030. He's also working on an electricity market design reform that would give strengthened enforcement powers to Acer, the Agency for the Cooperation of Energy Regulators.