Germany has suspended the approval process for the Nord Stream 2 Baltic pipeline, suggesting that the pipeline's owner, majority state-owned Russian energy company Gazprom, needs to comply with German law before the pipeline will be certified.
Nord Stream 2 stock image. Credit: Ksanawo / Shutterstock
The controversial Nord Stream 2 pipeline stands to double Russian natural gas exports to Europe. Credit: Ksanawo / Shutterstock
The news has sent energy prices rising by around 17%, only worsening the energy markets following surges attributed to market manipulations felt across Europe at the end of September.
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Since its inception, the pipeline has been controversial in both European and international politics. Critics fear it may make the bloc too dependent on Russia for its energy needs, while proponents consider existing natural gas supplies essential in weaning grids off fossil fuels as part of the energy transition.
Concerns have also been raised over the status of Ukraine, which currently has an energy deal with Russia, over fears it could undermine the nation's independence. The loss of the existing gas lines could cause a significant economic downturn in Ukraine.
"The certification procedure will remain suspended until the main assets and human resources have been transferred to the subsidiary and the Bundesnetzagentur is able to check whether the documentation resubmitted by the subsidiary, as the new applicant, is complete", the German energy watchdog Bundesnetzagentur said in a statement.
"When these requirements have been fulfilled, the Bundesnetzagentur will be able to resume its examination in the remainder of the four-month period set out in law, produce a draft decision and deliver it to the European Commission for an opinion, as provided for in the EU legislation on the internal market", it added.
It is likely that, even if certified by the watchdog, the pipeline will now need approval by the Commission before operation can commence.
The pipeline stands to double Moscow's natural gas exports to Europe and several German businesses have invested heavily in it.
Currently, Europe gets around 40% of its natural gas from Russia.
Angela Merkel has suggested Germany threaten to sanction Russia if they attempt to use Nord Stream 2 as a "geopolitical weapon" against Ukraine.
Fears of dependence on Germany were also the focus of US-backed sanctions on the pipeline, as well as any businesses involved, which were in place during the Trump administration. His successor, Joe Biden, later waived these sanctions, as well as attempting to deal with other disputes between the two parties as part of plans to mend ties with the bloc.
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These sanctions halted the construction of the pipeline for around a year, before construction finally resumed back in February.
The US and EU eventually came to an agreement where both parties agreed to sanction Russia should they attempt to leverage the pipeline against political opponents.
UK Prime Minister Boris Johnson has also given his two cents on the situation, suggesting Brussels has "a choice" between "mainlining ever more Russian hydrocarbons in giant new pipelines and sticking up for Ukraine and championing the cause of peace and stability".
Construction on the pipeline's first line was completed in June, and the full pipeline - currently Europe's largest subsea natural gas pipeline - was certified by Gazprom in September.
This year has seen surging prices in natural gas, which plays a vital role in central heating systems, which have been exacerbated by a cold winter.
There have been concerns raised over potential energy blackouts over the winter period.
"We haven't got enough gas at the moment quite frankly, we're not storing for the winter period. So hence there's a real concern that there's a potential if we have a cold winter that we could have rolling blackouts in Europe," Trafigura CEO Jeremy Wier told the FT's Commodities Asia Summit.
The gas price shocks, alongside international pressure to switch away from fossil fuels, have also sent the price of oil flying, with Wier suggesting there was no simple solution, no situation "where you might just flick the switch and you increase production" to deal with potential energy shortages.
Some MEPs blamed Gazprom for intentionally withholding supply earlier in the year to agitate in favour of faster certification for Nord Stream 2. More than 40 came together in September to call on an EU investigation into the company, once gas prices started to soar.
Ukraine later called for sanctions against the company over the deal it made with Hungary, which would deprive Kyiv of gas supplies and transit fees despite their current contract.
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