Nord Stream 2 pipeline and its impact on European gas market

Nord Stream 2 pipeline and its impact on European gas market

What is Nord Stream 2 ?

  Nord Stream 2 is a pipeline project led by Gazprom and five others European companies in the Baltic sea. Gazprom is known for being the gas market leader around the globe, owned at 51 %[1] by the Russian State, and guaranteeing 12 % of the world production[2]. The five associates are Engie (France), Uniper (Germany), Wintershall (Germany), OMW (Austria) and Shell (UK/Netherlands), each possessing a 10 % stake while Gazprom remains the only shareholder. The cost is estimated at 9.5 billion euros, the Western companies contributing to 50 %, which represents 950 million euros for each of them[3]. The other 50 % are funded by Gazprom. Nord Stream 2 is managed by Nord Stream 2 AG, a company owned by Gazprom, especially created to oversee the pipe’s planification, construction and exploitation. Nord Stream 2 AG is based in Zoug, Switzerland. The project was officially announced in June 2015 and the construction began in 2018. Long of 1200 km, the pipe should provide 55 bcm (billion cubic meters) of natural gas, which will double the volume of Nord Stream 1 pipeline. Indeed, Nord Stream 2 will follow the course of its twin, built between 2010 and 2012, to ensure a total of 110 bcm per year of natural gas to Europe[4]. The pipe will connect Russian and German cities of Ust-Luga and Greifswald, facilitating the transit thanks to a direct route.

   However, Nord Stream 2 project could ruin efforts of those who wished to decrease Russia’s influence. The future pipeline will carry gas straight from Russia to Germany, raising some interrogations or contests about this new strategic issue. Indeed, besides economic and energetic matters, the real battle concerns geopolitics. That pipe could change the European diplomatic situation by modifying the balance of power. Nevertheless, the recent Navalny affair could have questioned the finality of Nord Stream 2. Putin’s opponent was poisoned on 20th August 2020, causing the indignation of many Western capitals that suspect the Russian power. Angela Merkel thus stated that the purpose of Nord Stream 2 could be reviewed[5]. Will Berlin dare to confront Moscow, knowing all the related issues ? The final decision remains in the Chancellor’s hands.

Nord Stream 1 and 2 pipelines’ routes

Source : Ouest-France

 To understand what is at stake, the present article will explain what challenges are hidden behind Nord Stream 2 and why it is controversial.

The European gas market

  For decades, energy has been a subject of dispute between States. Essential to any country’s prosperity, its supply has become a source of rivalry, as strategic issues are linked to energetic resources. Indeed, owning, producing and exporting hydrocarbons allow to influence a country in need. Energy should thus be considered as a tool of pressure, which means a power factor. Nonetheless, the drawback of such tactic resides in its reciprocity. If the exporter can threaten the importer by stopping the supply, the buyer can reduce its dependence by developing other partnerships, causing a lack of currencies for the seller.

  Regarding energy resources, gas is the one this article will focus on. Gas is the third world primary energy source, representing 22 % of the world consumption in 2016, while coal reaches 27 % and oil 33 %[6]. The two main producers of gas are the United States (US), with 20 % of the world production, and Russia, that ensures 18 %[7]. In the EU, the natural gas production has felt by 39.4 % between 2007 and 2017, making the EU more and more dependent of gas imports[8]. The EU’s dependence rate was equal to 56 % in 2018, which means that its energy production is far from being sufficient. Among those energy imports, gas represents 24 %, while oil reaches about 66 %[9]. Between 2007 and 2018, the main suppliers of gas to Europe are the following countries :  

  The Russian predominance in the European gas market is thus pretty clear. Too much clear, according to some European leaders who would like to diversify the supply sources in order to reduce EU’s energy dependence vis-à-vis Russia. Indeed, the “gas wars” that opposed Russia and Ukraine in 2005-2006 and 2008-2009 have made EU aware of the need to conclude new energetic partnerships. Due to disagreement on gas prices between Gazprom and Naftogaz, the Ukrainian national gas company, Moscow decided to cut off gas supply to Kiev[10]. The Ukrainian crisis in 2014 and the following war in Donbass caused the same sanction, Moscow closing its valves in 2014[11] and 2015[12]. The EU therefore reacted by diversifying the provenance and promotong the rise of liquefied natural gas. 

Diversifying energy supply

  In order to reach its objective, the EU has supported new corridors gathered in a program called Projects of Common Interest (PCI)[13] :

– The Trans Anatolia Natural Gas Pipeline (TANAP) and the Trans Adriatic Pipeline (TAP)[14]. The TANAP crosses Turkey and links the South Caucasus Pipeline (SCP), that carrying gas from the Caspian Sea through Azerbaijan and Georgia, and the TAP, that goes through Greece and Italy. Started in 2012 and completed in 2018, the TAP was put into service in 2019 and should provide 10 bcm per year, not enough to secure EU supplies though[15].

– The EastMed pipeline : this project was launched on 2nd January 2020 when Greece, Israel and Cyprus signed an agreement destined to create a new pipe through those three countries in order to bring the recently discovered gas in Eastern Mediterranean. Moreover, the EU is supporting EastMed to keep its influence in an area where Turkey is getting more aggressive. The 2000 km pipe will provide about 9 to 11 bcm for an estimated cost of 7 to 9 billion euros[16]. Eastmed project was born in 2015 in order to counter Turkish Stream, the pipe that crosses the Black Sea, wanted by Russia and Turkey to keep a strategical position in energy supply to Europe. Inaugurated in January 2020, that 930 km pipe will provide 31,5 bcm, 11,5 bcm more than TAP and Eastmed gathered[17].

– The Poseidon and IGB projects. The first one will connect Greece and Italy while being linked to Eastmed. The second one will join Greece and Bulgaria by being attached to Poseidon. Poseidon pipeline will bring 12 to 20 bcm per year while IGB’s capacity won’t exceed 5 bcm[18].

  The EU is therefore trying to take the southern road to reduce Russia’s and Turkey’s role. However, some observers underlined that Nord Stream 2 was paradoxical. With this project, Russia will finally be able to deliver gas from the north (Nord Stream 1 and 2 through the Baltic Sea), the centre (Yamal through Belarus, Brotherhood and Soyuz through Ukraine), and the south (Blue Stream and Turkish Stream through Turkey and the Black Sea). To face this contradiction, the EU bets on LNG to increase competition.

  What is LNG ? LNG is natural gas transformed to liquid state by cooling it at -162°C. LNG is useful as it can be carried on longer distances without requiring a pipeline. Indeed, LGN is 600 times less voluminous than natural gas and can therefore be transported by boat. For the EU, bringing LNG from far is another tactic, so it does not depend too much on Russia. Indeed, the main exporter of LNG to the EU in 2019 were Qatar (28 %), followed by Russia (20 %), the US (16 %) and Nigeria (12 %)[19]. However, the US may take the first place in the following years. Between 2018 and 2019, the exports of US LNG to the EU have increased by 181 %[20]. Moreover, the imports from the EU should rise of 20 % by 2040[21]. In this way, the EU has funded many projects to increase its capacity to receive and transform LNG. Evaluated at 656 million euros, those works aim at building LNG terminals. Six have been built between 2013 and 2018 in Italy, Latvia, Greece, France, Malta and Poland ; three are in construction in Spain and Croatia until 2020-2021 ; five are from the PIC’s list, concerning Cyprus, Ireland, Poland, Greece and Sweden for the 2020-2023 period[22].

  This massive outburst of the US-EU LNG trade can be explained by the Trump-Juncker meeting held in Washington on 25th July 2018. Jean-Claude Juncker, president of the European Commission at the time, stated in the declaration following the meeting : “We agreed today to strengthen our strategic cooperation with respect to energy. The European Union wants to import more liquefied natural gas (LNG) from the United States to diversify its energy supply”[23].

  At this point, the main question remains : Why the EU is authorising Nord Stream 2 whereas it has been trying to reduce Russia’s importance in gas supply for years ?

Why Nord Stream 2 ?

   For a few years, Russia has to face two major challenges : the LNG gas concurrency and the Ukrainian crisis. These two elements have been the key to understand Russia’s action on the EU gas market.

  Firstly, Gazprom has been leading a strategy of adaptation to keep a competitive advantage. The aim was to modify the price indexation formula on long-term contracts to lower prices and maintain its market shares[24]. The idea was a success as Russian gas reached the record of 40% of EU’s gas imports in 2018. However, this option had also a bad impact since it compelled Gazprom to increase taxes on mineral resources’ extractions in order to compensate the falling prices. To offset this effect, Gazprom can boost its production and exports, and that is why Nord Stream 2 has become a strategic challenge[25]. The pipe is mainly the answer to the American LGN and the support that Washington gave to the EU in its will to diversify the supply roads. If the Russian gas remains cheaper than its American opponent, Gazprom has also to counter its national concurrent, Novatek. To respect EU rules on furnishers diversification, President Vladimir Putin had to cancel Gazprom’s monopole on gas export. Novatek was then created in the context of the Russian gas market liberalisation and decided to specialise in LNG. Gazprom reacted by developing its LNG skills and sustaining its anchoring in the EU market by building Nord Stream 2[26].

  Secondly, Nord Stream 2 is also aimed at circumventing Ukraine. The repeated crisis of 2006, 2009, 2014 and 2015 led Moscow to consider Ukraine more as a problem than a partner. Hence, the transit through Ukraine decreased considerably for many years. While Ukraine represented 80 % of the transit for Russian gas in 2000, this figure fell to 40 % in 2014[27]. At the beginning of the year 2018, the transit was even lower, with only 34 %, overshot by Nord Stream 1 with 36 %[28]. For the first time, the north became the main supply route at the expense of Kiev. When Nord Stream 2 is operational, the tendency will worsen. Indeed, Nord Stream 1 and 2, associated to Yamal pipe, will exceed the Ukrainian pipes’ capacities, about 143 bcm against 140. Moreover, the Turkish Stream and its 31.5 bcm flow will add another option for Putin to supply the EU without crossing Ukraine. Then, the Ukraine route may become insignificant in the European gas market, carrying only 26 bcm per year[29].

  Lastly, Nord Stream 2 is also defended by Russia that argues that the project is necessary to fill the EU’s demands for three reasons :

– Gazprom says that the Ukrainian transit was too much complicated because the EU couldn’t be sure about the proper functioning of the supply. With a straight route, it will be easier to secure the provide. Moreover, it will be more financially advantageous, about $2.10 per 1000 m3/100 km, 20% cheaper than the Ukrainian road[30].

– The second argument put forward by Gazprom concerns the EU’s needs. As a matter of fact, the decline of EU’s gas production will continue while the demand should rise. According to Gazprom itself, the EU will need 90 bcm more by 2025 and 120 bcm more by 2035[31].  Nonetheless, the International Energy Agency gives lower estimations. It assesses the rise of EU’s demand about 41 bcm by 2025 and 60 bcm by 2035, half of Gazprom’s predictions[32].

– Finally, the Nord Stream 2 project follows the line of EU’s new expectations. From a strategic point of view, the pipe permits the diversification of supply routes ; from an ecological perspective, Gazprom is a “green” company, respecting the ecological transition by favouring gas, which is less polluting than coal ; from an economic perception, five European companies are associated to the project and have therefore, as well as their respective States, interests to achieve it.

  Despite this well-functioning argumentation, many remain against Nord Stream 2.

The opponents to Nord Stream 2

  The main argument for those who wish to tear down the pipe is that it would give Russia a greater predominance than before. They underline the EU’s paradox. Indeed, the will to diversify supply roads in order to reduce EU’s dependence is useless if the supplier remains the same. Russia will thus keep a strategic weapon to wave in case of crisis such as the one that happened in 2014 regarding Crimea. The defenders of Nord Stream 2, headed by Germany, say that the EU is as much dependent on Russia for its supply as Russia is dependent on the EU for its exports. But if Russia is designated as the main issue, Germany has also been criticised.

  The challenge was to decide whether or not Nord Stream 2 was legal. In 2016, following the European Parliament’s demand, the European Commission decided to check if EU’s law should apply to Nord Stream 2. What does the law say ? The European gas market is regulated by the Third Energy Package which is composed of the 2009/73 Gas Market Directive (GMD) of the European Parliament and of the Council of 13 July 2009 [OJEU L 211, 14.8.2009]. The GMD “insists on the unbundling, the decoupling of interests in energy production and interests in energy distribution, on non-discriminatory third-party access to transmission and distribution networks and on regulated and transparent distribution tariffs”[33]. Since Gazprom does not respect all these conditions, GMD could be engaged against Nord Stream 2. Furthermore, the pipe crosses territorial waters of Germany and Denmark, where EU law applies. However, the GMD does not concern pipes coming from a third state, such as Russia. Moreover, Nord Stream 2 is also supposed to go through international waters, where the United Nations convention on the law of the sea applies[34]. In order to put Nord Stream 2 under EU’s law, the GMD was changed in April 2019, following a Commission’s proposal. The amendments mainly include the regulation of pipelines coming from third state[35]. In reaction, Nord Stream AG and Nord Stream 2 AG tried to have recourse to the Court of Justice of the European Union. On 20th May 2020, Nord Stream 2 AG was proven wrong, the Court claiming that “both Nord Stream 2 AG and Nord Stream AG […] [were] not directly concerned by the amending directive”[36].

  Thanks to Nord Stream 1 and Nord Stream 2, Germany will be the main gas hub in Europe, receiving 22 % of EU’s gas consumption and 30 % of EU’s gas imports[37]. This position will allow Berlin to perceive taxes on gas transit. Many countries have been condemning this project for they are circumvented by the pipe. For instance, Ukraine could lose up to $2 billion of revenues per year[38]. Southern Europe countries such as Bulgaria, Greece and Serbia, also denounced the double standards from the European Commission. In 2014, in the context of the Ukrainian crisis, the Commission forced Bulgaria to withdraw from participating in South Stream pipeline, arguing that the GMD was not respected by Sofia[39]. Bulgaria was therefore compelled to give up, leading Russia to abandon the project[40]. The decision deprived those States to collect revenues from the transit that the pipe could have given them. However, Germany is allowed to conduct Nord Stream 2 to the end and become the main gas hub of Europe while being the first economic power already. To be fair, the difference is that South Stream cancellation happened before the amendment on GDM ; hence, it was Bulgaria, not Russia, that was condemned for not having respected EU’s competition rules. Nonetheless, South Stream was surely more severely sanctioned : when Nord Stream 1 was built, it received an exemption regarding the “third-party access” clause[41]. South Stream never had this chance. The question is : on behalf of coherence, will Nord Stream 2 get the same advantage ?

  Although its probable opening, Nord Stream 2 opponents remain active. The Baltic and Eastern European States have been supported by the US. Washington sees the new pipeline as a threat to European energy security, and therefore voted sanctions in December 2019 on some European companies involved in the project. The US wants to keep Gazprom away from EU market in order to increase their LNG exports[42]. Berlin is thus put under pressure by Washington, and the recent Navalny affair has made the Nord Stream case even more complex. Could Angela Merkel change her mind ? If neither sanctions nor abandonment have been pronounced yet, Germany committed to buy more American LNG in the coming years[43]. If Nord Stream 2 is finally finished, the war on gas won’t soon be over though. 

[1] « Projet Nord Stream 2 : l’alliance gazière entre l’Allemagne et la Russie », Le Magazine – Gazprom Energy, 24 juillet 2018

[2] « About Gazprom »,

[3] « The Nord Stream 2 Financing Agreements », OSW Centre for Eastern Studies, 26 avril 2017

[4] Dimitar Lilkov et Roland Freudenstein, « The Case Against Nord Stream 2 », In Focus, Wilfried Martens Centre for European Studies, avril 2018, p. 2

[5] « Affaire Navalny : Berlin fixe un ultimatum de quelques jours à Moscou »,, 6 septembre 2020

[6] « Chiffres clés de l’énergie – Édition 2019 », Commissariat général au développement durable, Septembre 2019, p. 38.

[7] « Gaz naturel, Cours Gaz Naturel NG – Prix, Cotation, Bourse NYMEX – Boursorama »

[8] « Principale origine des importations d’énergie primaire, UE-28, 2007-2017 (en % des importations extra UE-28) » Eurostat

[9] « Shedding light on energy on the EU: From where do we import energy and how dependent are we? », Eurostat

[10] « Principale origine des importations d’énergie primaire, UE-28, 2007-2017 (en % des importations extra UE-28) Eurostat ;  « Shedding light on energy on the EU: From where do we import energy and how dependent are we? », Eurostat

[11] « La crise du gaz entre l’Ukraine et la Russie : un défi majeur pour l’Europe », Fondation Robert Schuman, 26 janvier 2009

[12] « La Russie coupe le gaz à l’Ukraine », Le, 16 juin 2014

[13] « Gaz : Moscou coupe les vivres à l’Ukraine », Le Point, 1 juillet 2015

[14] « Liste des projets d’intérêt commun de l’Union », Commission européenne, 23 novembre 2017

[15] « Diversification of Gas Supply Sources and Routes », European Commission, 31 juillet 2014

[16] « Opportunities TAP will create for host countries »,

[17] Marina Rafenberg, « EastMed, le projet de gazoduc destiné à contrer la Turquie », Le Monde, 4 janvier 2020

[18] « Benefits »,

[19] « IGI Poseidon. Contributing to European security of gas supply. »,

[20] « Liquefied Natural Gas », European Commission, 5 juin 2020

[21] « Déclaration conjointe : Les importations de gaz naturel liquéfié (GNL) américain vers l’Union européenne continuent de croître (hausse de 181 %) », Commission européenne, 8 mars 2019

[22] Ibid.

[23] Ibid.

[24] « Joint U.S.-EU Statement Following President Juncker’s Visit to the White House », European Commission, 25 July 2018

[25] Medhi Abbas, Catherine Locatelli, « Les enjeux de sécurité dans la relation gazière UE-Russie », Revue d’économie industrielle 143, no 3, 2013, pp. 21-22

[26] Ibid.

[27] Céline Marangé, Angélique Palle, Sami Ramdani, « Le Gazoduc Nord Stream 2. Enjeux politiques et stratégiques », Études de l’IRSEM, 62, décembre 2018, pp. 30-31

[28] Ibid. p. 32

[29] Ibid.

[30] « Ukrainian Gas Transit: Still Vital for Russian Gas Supplies to Europe as Other Routes Reach Full Capacity », Oxford Institute for Energy Studies, mai 2018, p. 9

[31] Sylvie Cornot-Gandolphe, « Le gaz dans la transition énergétique européenne : enjeux et opportunités », Etudes de l’Ifri, Ifri, janvier 2018, p. 52

[32] Céline Marangé, Angélique Palle, Sami Ramdani, op.cit., p. 29

[33] Ibid.

[34] Valentin Jeutner, « Amendments, Annexations, Alternatives : Nord Stream 2’s Contemporary Status under EU and International Law », The Journal of World Energy Law & Business 12, no 6, 1 décembre 2019, pp. 503-504

[35] Severin Fischer, « Lost in Regulation: The EU and Nord Stream 2 », Policy Perspectives, Center for Security Studies, Vol. 5/5, November 2017, pp.2-3

[36] « Le Conseil adopte un acte modifiant la directive sur le gaz : extension des règles de l’UE aux gazoducs à destination et en provenance de pays tiers », Conseil de l’Union européenne, 15 Avril 2019 ; Directive (EU) 2019/692 of the European Parliament and of the Council of 17 April 2019 (OJEU L 117, 3.5.2019)

[37] « The General Court of the European Union Declares That the Actions Brought by Nord Stream AG and Nord Stream 2 AG against Directive 2019/692, Which Extends Certain Rules of the Internal Market in Natural Gas to Pipelines from Third Countries, Are Inadmissible », General Court of the European Union, Press Release N°62/20, 20 May 2020

[38] Ibid. pp. 17-18

[39] Anton Antonenko, Roman Nitsovych, Olena Pavlenko, Kristian Takac, « Réformer le secteur énergétique ukrainien : un dossier brûlant inachevé », Carnegie Europe, 6 février 2018, p. 9

[40] « Face aux critiques occidentales, la Bulgarie gèle la construction du gazoduc South Stream », Le, 8 juin 2014. At the time, the GMD did not concern pipe from third country

[41] « South Stream : Poutine renonce à son gazoduc vers l’Europe », Le Point, 2 décembre 2014

[42] Céline Marangé, Angélique Palle, Sami Ramdani, op.cit. p. 43

[43] Andrew E. Kramer, « Pipeline Politics: Why Nord Stream 2 Is Back in the Spotlight », The New York Times, 16 septembre 2020

[44] « Les États-Unis feront tout pour arrêter le projet Nord Stream 2 »,, 13 février 2019

Rayane Ait Haddou

I received a licence in history in Paris Sorbonne Université. Those three years were a great experience where I could improve my knowledge. Then I decided to integrate the international relations master's degree in Lyon 3 university. During my internship in EU-Logos Athena, I am working on European Union's foreign relations, espacially concerning geopolitical issues in the Middle East and eastern Europe.

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