Kyiv wants EU to reject approval for gas pipeline which would deprive it of transit fees


Roman Olearchyk, Max Seddon and David Sheppard

November 1, 2021



Europe risks giving in to Russia if Germany approves the Nord Stream 2 pipeline as a condition for more gas supplies from Moscow, the head of Ukraine’s state energy company has said.

Yuriy Vitrenko, chief executive of Naftogaz, said in an interview with the Financial Times that Russian president Vladimir Putin was using gas as a “geopolitical weapon” by insisting any extra supplies go via the $10bn pipeline, which bypasses Ukraine to supply Germany directly via the Baltic Sea. “If anyone has any doubts about it, then Putin is telling everyone to their face: ‘You allow NS2 to become operational or you won’t get any more gas’,” Vitrenko said. “He wants to reverse the clock and go back to the situation that we had 10, 20, 30 years ago . . . to negotiate special conditions with politicians of different countries.”

As gas prices have soared to record highs in the past two months, markets have moved frequently in response to comments from Moscow in the hope that Gazprom, Russia’s state-run gas monopoly, will increase supplies to Europe.

Gas futures linked to TTF, Europe’s wholesale gas price, fell last week after Putin ordered Gazprom to top up low storage levels at its sites in Germany and Austria. But Moscow has so far not booked additional volumes through Ukraine’s huge gas transit pipeline system.

Russia is concerned that Nord Stream 2 could be a victim of coalition negotiations over a new German government — likely to include the Greens, a strident opponent of the pipeline — and wants to ensure its swift launch by refusing to increase supply volumes through existing routes, according to current and former officials.

Vitrenko is leading Ukraine’s last-minute push to stop Nord Stream 2 by trying to force the US and EU to admit that Russia is using it to weaken Ukraine by depriving Kyiv of valuable transit revenue and increasing Europe’s dependence on Moscow’s gas.

As part of a bilateral agreement on Nord Stream 2 reached in July, Washington and Berlin vowed to impose sanctions on Russia if its energy policies endangered Ukraine and other allies in Europe.

In Rome at the weekend US president Joe Biden discussed with German chancellor Angela Merkel efforts “to ensure that Russia cannot manipulate natural gas flows for harmful political purposes”, the White House said.  Gazprom and Russia have denied using Nord Stream 2 to apply pressure.

Vitrenko said Russia was already weaponising Nord Stream 2 and gas supplies by choking gas supplies to Europe in past months. But the pipeline recently cleared a bureaucratic hurdle when Germany’s economy ministry said its certification would not threaten Europe’s gas supply.

Ukraine is worried the push to approve Nord Stream 2 signifies a lack of determination in Europe to back Kyiv’s pro-western aspirations.

Vitrenko repeated concerns in Kyiv that Nord Stream 2 would make Ukraine more vulnerable to a full-scale Russian invasion by removing a deterrent for Moscow not to act. “[If] there will be no physical transit going through Ukraine, it increases the chances of a full-scale war between Russia and Ukraine, with all the consequences of it,” he said.

Putin’s demands to Germany and a parallel push for political concessions in negotiations over a new gas contract with a pro-EU government in Moldova were already grounds for triggering sanctions deep enough to stop the Nord Stream 2 project, he added.

Were supplies via Nord Stream 2 to begin, Vitrenko added, “Putin will probably send some gas through it, but he will say, ‘Look, if you want to have any more, I need long-term contracts.’ It’s like having hostages: we can release one or two, but until the list of our requirements is satisfied, we will still keep some other hostages.”

Vitrenko said Germany had a vested interest in the Nord Stream 2 deal “and that’s why it’s difficult for them to recognise that it was a mistake”.