Our World in 2018

ENERGY & CLIMATE
…diversification of suppliers is not
a guarantee of gas availability, let
alone lower gas prices, and the new
European gas market arrangement
has evident weaknesses.
reasons, to give permission to set up
the Nord Stream 2 AG joint venture.
The project partners signed an
agreement in April 2017 in which
they made the commitment to
of the total cost of the project which
is estimated at €9.5 billion now. The
contribution of each of the European
companies will be up to €950 million.
In May last year the partners
signed an agreement on providing
Nord Stream2 a bridge loan for up to
6.65 billion euros (inclusive of interest)
is organised. A deficit financing
agreement was signed in June in case
.
The partners provided Gazprom
with mezzanine financing. This is
usually an unsecured loan that
gives the lender the right to buy a
certain number of shares or bonds
period or involves the use of another
mechanism giving the lender the right
to participate in the future success
of the project. The project will not
require funding in 2017 and project
2018.
All financing decisions were
passed and structured as US Congress
was actively discussing the bill on
expanding sanctions against Russia,
proposed by American senators in
early 2017. It was clear already that
in both houses the bill would be
passed by an overwhelming majority
that prevented Trump from using his
right of veto.
The new US President, Donald
Trump, introduced a new law in
August 2017 that directly states the
US intention to resist the construction
of the Nord Stream 2 gas pipeline that
is said to act against the interests of
Ukraine because it will strip it of its
status as a transit country for Russian
gas going to Europe.
After Congress had passed the law,
there began rumblings of discontent
in Europe. Even Jean-Claude
Juncker, President of the European
Commission, said that imposing
sanctions on European companies
was unacceptable and would cause the
European Union to respond. German
Foreign Minister Sigmar Gabriel and
Austrian Chancellor Christian Kern
issued a joint statement criticising
the US interference in the European
energy policy. The politicians said the
US action was intended to support its
own energy industry and American
LNG export at the cost of worsening
the position of the European economy
and European gas users. Even German
Chancellor Angela Merkel, an active
critic of Russia’s foreign policy, made
a public statement in support of Nord
Stream-2. Much will be determined
for Turkish Stream in 2018 too. The
failed coup attempt in Turkey which
Erdogan fairly reasonably suspects
his NATO partners to have supported
made the Turkish leader accelerate
the normalisation of relations with
Russia.
The potential for pressure on
Ankara was considerably reduced
for Washington and Brussels
thereafter, which had a positive
effect on the speed of the Turkish
Stream construction. There is a high
probability that as soon as next year
Turkey will start receiving gas along
the new route and the second run
of the gas pipeline may be launched
in 2019 that will enable supplying
Russian gas through Turkish territory
to the neighbouring countries,
primarily Bulgaria and Greece. The
infrastructure for that is already being
actively built with the support of the
European Union that has for a decade
considered the Southern Gas Corridor
through Turkey an important route
for diversifying its gas portfolio. At the
same time, the new sources of supply
are meagre enough.
The situation at the beginning
of 2018 looks quite positive for
Gazprom in the sphere of struggle
for the northern part of the European
market – statistical results are good,
and Germany continues to provide
political support to the pipeline
project. The Nord Stream 2 looks
economically substantiated on the
background of permanent attempts
of Ukraine to raise transit fees. Yet,
it does mean political risks of the
Nord Stream 2 are fully removed.
Therefore, the struggle will continue.
The situation will depend also on the
US stance and a political situation in
the European Union.
100 2018 | OUR WORLD