(Montel) New US sanctions against Russia will make it more difficult to finance the EUR 4.75bn Nord Stream 2 pipeline, the head of Austria’s OMV – one of the project’s five European partners – said on Thursday.
Although it was not yet clear how the sanctions would directly impact Nord Stream 2, “what you can definitely say is that project financing isn’t getting easier”, OMV CEO Rainer Seele said in a conference call about the firm’s interim results.
Earlier this month, US president Donald Trump signed a bipartisan bill imposing sweeping new sanctions on Russia, which sailed through both houses of Congress with broad support.
Nord Stream 2 supporters have expressed concerns that the expanded sanctions would affect EU infrastructure projects, particularly as Russia seeks to increase gas exports to Germany. Russia’s Gazprom is spearheading the project in partnership with European investors – Engie, OMV, Shell, Uniper and Wintershall.
The OMV CEO also echoed recent concerns by Uniper and the German and Austrian governments in questioning the wider US interest behind the sanctions against Russian oil and gas export activities.
“When you look closely at the law, you can’t shake off the impression that it was written in order to sell American LNG to the European market,” Seele said.
However, Seele said he welcomed efforts by the European Commission to put pressure on the US to water down the sanctions, with the US Congress also inserting a clause ensuring that sanctions could be imposed only in consultation with Washington’s allies.
Europe needs Nord Stream 2
Europe needed the Nord Stream 2 pipeline to help offset a drop in domestic gas production, which “expensive LNG” might not be able to fill, he added.
“If LNG were cheap, we would see it in Europe already,” said the head of OMV’s downstream business, Manfred Leitner, adding that LNG only had a European market share in the lower single digits at present and was strongest where pipeline access was scarcest.
On Tuesday Uniper CEO Klaus Schäfer also dismissed the role of LNG in the European energy mix, noting that LNG exported from the US to Europe was around EUR 5-10/MWh – or roughly 50% – more expensive than reference prices for front-month gas contracts on the Dutch TTF hub.
The 55bcm/year Nord Stream 2 pipeline would run below the Baltic Sea and double the amount of gas shipped directly from Russia to Germany if built, though the project – due to be completed in 2019 – has been dogged by uncertainty.
Yet some commentators see little cause of alarm, despite the prospect of new sanctions, saying the commercial interests of the project were too strong.
“The first argument for this is the crucial interest in Nord Stream 2 of European companies who plan to feed from this source,” former Russian energy minister Igor Yusufov told Montel.
“So now it is the question at which point a clever compromise between authoritative prohibitions contradicting to principles of open markets and economical pragmatism will be reached,” said Yusufov, who served during Vladimir Putin's first term as Russian president.
“I am sure that the… pipeline system… will be built.”