Setback for Nord Stream 2 pipeline as Germany suspends certification

Berlin (dpa) – The controversial underwater pipeline designed to bring Russian gas to Germany and Europe, Nord Stream 2, suffered another setback on Tuesday when German authorities suspended the certification procedure for the project.

Although the construction of Nord Stream 2 has been completed and it has been filled with gas, the actual delivery of the gas depends on Nord Stream receiving the correct approvals from regulators.

The lack of approval so far, with winter approaching and gas demand set to rise, is a source of increasing tension between Moscow and Berlin.

The latest hurdle in the Nord Stream 2 saga – following protests by environmentalists and sanctions by the US government – is the EU Gas Directive. It requires the separation of pipeline operation and gas sales.

The sole shareholder in Nord Stream 2 AG is formally the Russian gas group Gazprom. Nord Stream 2 AG, based in Zug, Switzerland, had applied to the German Federal Network Agency for certification as an independent operator.

But on Tuesday, the agency said “it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organized in a legal form under German law.”

It explained that a subsidiary set up to govern the German part of the pipeline “must then fulfil the requirements of an independent transmission operator.”

Until “the main assets and human resources have been transferred to the subsidiary” and this step has been verified, the certification procedure would be suspended, the agency concluded.

The Swiss-based international consortium behind the pipeline said it was taking steps to meet the German concerns.

The German subsidiary would “ensure compliance with applicable rules and regulations,” said Nord Stream AG, according to state news agency TASS.

Germany’s Economy Ministry said it was correct that the pipeline should only be allowed to operate if it is on a proper legal basis. “This must now be put into practice,” said a ministry spokesperson.

The Federal Network Agency approval is not the last step however: After it has examined the certification, it still needs to send a report to the European Commission for an opinion according to EU legislation.

Four months remain for this to happen, the agency said.

The construction phase of Nord Stream 2 was dogged by accusations – notably from Washington, but also from countries in Eastern Europe – that it would mean letting Russia have too much power in the European gas market.

It would also bypass an existing land pipeline through Ukraine, and risk reducing Ukraine’s leverage in its multiple disputes with Moscow.

Ukrainian state gas firm Naftogaz welcomed the decision to suspend the certification as “good news.”

Naftogaz boss Yuriy Vitrenko also dismissed the establishment of a German subsidiary as a valid solution. It has made a “mockery” of European legislation, he said.

Political opinion in Germany is split. The Greens, which are expected to join government as part of a new coalition, have been sceptical of the project all along and welcomed the suspension on Tuesday.

Angela Merkel’s outgoing conservative-led government has refused to intervene on the pipeline, arguing that it is a business project and not a political issue.

The Economy Ministry in Berlin has previously said that it believes the pipeline does not endanger gas supplies to Germany or Europe.

For its part, campaigners at Environmental Action Germany (DUH) welcomed the agency’s decision to block the pipeline for now.

However, the group was unsuccessful with a legal complaint that sought to ensure checks on any emissions of the greenhouse gas methane in connection with the pipeline, referring in particular to possible leakages during the gas transport and production in Russia.

The higher administration court in Greifswald pointed on Tuesday to checks already carried out by the German jurisdiction.