Energy Firms' $5.1 Billion Financing for Russia Gas Pipeline Stokes EU Fears -- 2nd Update
April 24 2017 - 2:53PM
Dow Jones News
By Emre Peker
BRUSSELS -- European energy firms pledged Monday to finance half
the cost of a natural-gas link from Russia to Germany, lending
support to a pipeline plan that is fueling tensions within the
European Union.
A consortium of five companies -- Engie SA, OMV AG, Royal Dutch
Shell PLC, Uniper SE and Wintershall Holding GmbH -- said they
would provide up to EUR4.75 billion ($5.1 billion) in long-term
financing to Nord Stream 2 AG, a wholly owned subsidiary of
Russia's state-owned PAO Gazprom.
The move highlights Europe's complicated relationship with
Russia, and comes just days after U.S. President Donald Trump
rejected Exxon Mobil Corp.'s request for a waiver of sanctions so
it could resume an oil venture with a Russian partner.
While European firms seek to protect access to Russia's market
and resources, most EU countries oppose the Kremlin's intervention
in Ukraine and fear its push to project more power across the
world. That dichotomy has pitted EU nations against each other,
with some calling Nord Stream 2 a Trojan horse put forth by Russia
to exploit European disagreements while others, led by Germany, are
championing the project as a key energy initiative.
About a dozen EU countries claim that allowing Gazprom to double
the existing Nord Stream pipeline's capacity would increase
Europe's reliance on Russian gas while enabling Moscow to cut back
on eastern routes through Ukraine and Belarus. That would threaten
the bloc's energy security, while also undermining a key diplomatic
objective for Brussels: supporting Kiev amid its conflict with
Moscow.
"There will need to be a very tough discussion," an EU official
said Monday. "Nord Stream is clearly a divisive project; we'll need
to do some kind of damage control."
EU sanctions against Russia are not an obstacle to the funding
agreement between Gazprom and its European partners, said Nord
Stream 2's representative to Brussels, Sebastian Sass.
Each European firm will provide up to EUR950 million in long-
and short-term loans, according to the deal. The Russian gas giant
will tap more than EUR1.4 billion of the cash this year, and access
the rest as it decides on how to finance the pipeline, the lenders
said.
"The financial commitment by the European companies underscores
the Nord Stream 2 project's strategic importance for the European
gas market," Gazprom, its European partners and the pipeline
company said in a joint statement.
Monday's agreement follows the EU's admission last month that
Brussels cannot legally block the proposed pipeline, which would be
ready by the end of 2019. Nord Stream 2 would add another 55
billion cubic meters to annual gas flows to Germany, about 14% of
the EU's yearly consumption.
Polish competition authorities previously blocked the five
European companies from taking a 50% stake in Nord Stream 2.
Undeterred, the firms continued to support the project. By
guaranteeing half the funds Gazprom needs to bankroll the link,
European firms have signaled their confidence that the project
won't be halted by EU bureaucrats.
In an attempt to find a political solution to the divisive
issue, the European Commission, the bloc's executive arm, said it
will seek a mandate from EU governments to negotiate with Russia on
terms that would govern use of Nord Stream 2.
It remains unclear whether the commission will get a green light
to approach Moscow for an agreement. German Foreign Minister Sigmar
Gabriel had told Russian President Vladimir Putin that Berlin would
strive to prevent EU involvement in Nord Stream 2.
"Nord Stream 2 is a business undertaking that, as usual, we
won't comment on," said German Economy Ministry spokeswoman Tanja
Alemany Sanchez de León on Monday.
Berlin has long argued that the pipeline is a commercial
project, with no room for government interference as long as it
complies with German and EU laws.
"What is certain is that this project is of great importance for
Germany, certainly they will be very much involved in pushing it
through," a European diplomat in Brussels said. "The discussion has
reached a point where all the sides voiced their concerns...I'm not
quite sure what might happen next."
--Zeke Turner contributed to this article.
Write to Emre Peker at emre.peker@wsj.com
(END) Dow Jones Newswires
April 24, 2017 14:38 ET (18:38 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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