Just ahead of Monday's announcement that the Nord Stream 2 Russia to Germany natural gas pipeline has begun filling with gas in the first line while awaiting approval from Germany regulators before it goes fully online and the taps are turned on, Russia's Deputy Foreign Minister Alexander Grushko in weekend statements had warned that political opponents are ready to exploit "legal squiggles" to prevent it from finally going operational.
"I will stress once again: all the necessary steps, including in the legal field, have been taken and we firmly hope that this project will be implemented," Grushko explained, while warning of the "rather complicated" process for receiving legal certification on the European side. Crucially signs of a final inter-EU political fight have already emerged, as Bloomberg details, European lawmakers "who supervised the European Parliament’s work on EU gas market legislation, said NS2 doesn’t meet the conditions for German certification because it fails to meet the unbundling criteria (which ensures as gas provider is prevented from simultaneously controlling the transmission side of the business).
"The structure of the company does not guarantee its independence as an operator in relation to Gazprom, a prominent gas supplier to the EU and a dominant supplier in the CEE," European Parliament officials who oversee the body's work on EU gas market legislation wrote in a recent letter. It was in response to Nord Stream 2's efforts to be recognized as an independent transmission system operator. The lawmakers refused to authorize this status as it "puts at risk the security of energy supply within the EU," they said - which has been a persistent argument of Washington in seeking to block completion of the pipeline.
Ultimately the final hurdle before NS2 will actually transit gas from Russia into northeast Germany via the Baltic Sea from the St. Petersburg region will be the moment German regulators issue authorization to turn on the taps for the gas to start flowing - but this is where the final political showdown is expected. Last month Ukraine said it will pursue all revenues of action against NS2 "even after the gas is turned on" - yet it's been met with little more than a shrug in Europe, also amid recent US sanctions targeting companies involved in the construction. Ukraine stands to lose an estimated 1 billion euros ($1.2 billion) annually in transit fees from Russia as NS2 has effectively cut Kiev out as the "middle man".
But it's no secret that time is running out ahead of frigid winter temperatures, as many have noted the obvious that new pipeline provides an immediate relief from Europe's gas crisis and dwindling supply, which has seen some prices in parts of Western Europe rise by some 250% amid persisting reserve shortages in a matter of weeks.
Gas prices have increased 600% over the last 12 months.— Three Seas Initiative (@ThreeSeas24) October 3, 2021
S&P Global has prepared this infographic on gas prices in Europe ahead of this winter.
Russia's unwillingness to transit more gas via Ukraine is likely to maintain the price at a very high level for the foreseeable future pic.twitter.com/56VOzhGGQs
According to a quick survey of the worsening situation in Bloomberg:
Global shortages of gas and coal are pushing energy prices higher, disrupting markets from the UK to China, as economies emerge from the pandemic. Surging costs are threatening to raise inflation and starting to weigh on industrial production, with some companies in Europe forced to cut output.
"The fiercely nervous sentiment on the market continues due to fears of reduced supply during the winter," trader Energi Danmark wrote in a note Tuesday. "Everything looks set for another week of price climbs."
Europe’s gas stockpiles are at their lowest seasonal level in more than a decade, while supplies from top seller Russia are limited and global competition for liquefied natural gas continue to be intense.
Also commenting on the record-setting supply crunch, an industry insider - Catherine Newman, chief executive officer of Limejump Ltd. told a conference on Tuesday: "If we have a cold start to the winter and we’re withdrawing gas, we’re not going to have any gas left by the time cold winter hits."
2021 kicked off with European gas reserves already plummeting...
Meanwhile on Tuesday European natural gas contracts jumped to an unprecedented 111.70 euros per megawatt-hour, after last February being at a mere 15.49 euros.
The NS2 operator is at the same time seeking to assure that "Nord Stream 2 will contribute to meeting the long-term needs of the European energy market for gas imports, improving supply security and reliability, and providing gas under sensible economic conditions," according to a company statement.