The Nordic countries on Nord Stream 2: between scepticism and neutrality

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First pipes for NS2 delivered 27 October 2016 to German logistics hub Mukran on the island of Rügen

First pipes for NS2 delivered 27 October 2016 to German logistics hub Mukran on the island of Rügen

Sweden, Finland and Denmark are unlikely to block or slow down the procedures of issuing national approvals for the construction of Nord Stream 2, write Justyna Gotkowska and Piotr Szymaṅski of OSW, the Centre for Eastern Studies, in Poland. But according to the authors the Nordic countries do expect the European Commission to assess the compliance of Nord Stream 2 with the EU’s Third Energy Package. In addition, Stockholm and Copenhagen in particular want the EU to take a common political stance on the project. This is an abbreviated version of their article for OSW.

Sweden, Finland and Denmark have seen a revival of the debate on the Nord Stream 2 project in recent months. As the planned gas pipeline will run through these countries’ exclusive economic zones and/or territorial waters, the governments in Stockholm, Helsinki and Copenhagen will have to take a decision on NS2 construction soon. They find themselves in a difficult situation.

On the one hand, the Russian-Ukrainian war and the deteriorating security situation in the Baltic Sea region have resulted in more distance towards Russian economic projects in these countries. All of them have also come under increasing pressure from the United States, the Central and Eastern European (CEE) countries, and domestic opposition parties, which have been demanding the project’s suspension. On the other hand, neither Stockholm, Helsinki nor Copenhagen wants to use their national laws or the Law of the Sea to block Nord Stream 2, which enjoys support from Germany.

Nord Stream 2’s route through the Nordic countries: the legal aspects

According to the plans, Nord Stream 2 (NS2) would run in parallel to two existing lines of the Nord Stream 1 pipeline (NS1) via the exclusive economic zones (EEZ) of Finland (375 km) and Sweden (500 km), and the EEZ and territorial waters of Denmark (a total of 140 km; see Map).

map NS2

The planned route of the Nord Stream 2 pipeline. The island south of Karlshamn is Bornholm, Denmark (Source: Gazprom Export, Nord Stream and the Nord Stream pipeline scheme, map 2; http://www.gazpromexport.ru/en/projects/ )

In the case of the first two lines of NS1, the Nord Stream company successfully applied for building permits in all three countries. This was granted in 2009, and at that time all the procedures took around three years to complete.

In the case of NS2, the Nord Stream 2 company submitted its first application in Sweden for a permit to lay the underwater pipeline in the Swedish EEZ on 16 September 2016, and announced that it would submit the corresponding applications in Finland and Denmark at the beginning of 2017.

On the basis of the Convention on the Law of the Sea, Denmark can refuse consent for the NS2 gas pipeline to be constructed in its territorial waters to the southeast of the island of Bornholm, where it has the complete freedom to authorise the laying of pipelines. It would become necessary to move the NS2’s route to the EEZs of Denmark or Sweden which would complicate the implementation of the project. 

To the north of Bornholm, a heavily-used shipping route runs through the Danish and Swedish EEZs, which would impede the laying of the gas pipeline. To the south of Bornholm, the Polish and Danish EEZs are not delimited; constructing the gas pipeline in this area would thus be associated with legal controversies, which would extend the entire process. 

Finland and Sweden, on the basis of the Law of the Sea, have practically no freedom to block the construction of the NS2 pipeline in their exclusive economic zones, where the freedom to lay pipelines exists. However, laying out the routes of such pipelines in the EEZs requires the consent of the coastal state. It is granted on the basis of an assessment of the project’s impact on the environment; and so both countries could prolong this process.

The sceptical Swedes: consent from the government, veto from the EU?

The debate on the NS2 project in Sweden accelerated at the end of August 2016 due to the visit of US Vice-President Joe Biden, who urged the Swedish government to adopt a negative stance towards the project. Before the visit, representatives of the left-wing government of PM Stefan Löfven (who heads a coalition of Social Democrats and Greens) were reluctant and cautious in speaking out on this issue. The debate was shaped by the conservative opposition – the Moderates, the Centre Party, Christian Democrats and Liberals – who took advantage of the subject to criticise the government and call for the Swedish Foreign Ministry to take strong action to block the project.

Biden’s visit led to the Swedish government adopting a more sceptical position. This changed attitude was clearly visible in the statements by Foreign Minister Margot Wallström during discussions in the Swedish parliament on 6 September this year. The Swedish government’s overall sceptical position towards the project is also reinforced by the fact that demand for natural gas in Sweden is very low (around 4% of domestic consumption); 20% of this demand is covered by domestic production, with the remaining 80% being covered by imports from Denmark. Sweden has no business ties with Gazprom.

Stockholm expects the European Commission to assess NS2’s compliance with the Third Energy Package. It also wants a political discussion and decision on NS2 to be taken at the level of the Council of the EU or the European Council

The Swedish debate on NS2 gives reason to conclude that the government will permit the gas pipeline route to run through the Swedish EEZ and will not use environmental procedures to delay the construction. Ensuring that relations between states are based on international law is in the vital interest of Sweden, which is a relatively small country with considerable regional and global ties, and moreover remains outside military alliances. Sweden’s reasoning is that, since Stockholm urges Russia to comply with international law, Sweden itself should do the same.

However, the Swedish government is sceptical about the construction of the NS2 gas pipeline, which it perceives as a geopolitical project, intended to increase the EU’s dependence on gas from Russia, and thus on political pressure from the Kremlin. Sweden is also afraid that Russia could use the pipeline as an excuse to intensify its military operations in the Baltic Sea to protect the gas infrastructure. As it sees no legal possibility of blocking the pipeline’s construction on the national level, Sweden favours stopping the project in the EU.

Stockholm expects the European Commission to assess NS2’s compliance with the Third Energy Package. It also wants a political discussion and decision on NS2 to be taken at the level of the Council of the EU or the European Council, based on the assessment of the project’s conformity with the objectives of EU energy and climate policy, as well as the EU’s security interests. Swedish Foreign Minister has thus declared Swedish readiness to cooperate with the Baltic Sea states in order to counteract the project on a political level within the EU. However, Sweden will not actively engage in blocking NS2, if it considers the likelihood of success to be too small.

(…)

The first pipes for the Nord Stream 2 pipeline were delivered by rail on 27 October 2016 to Mukran on the island of Rügen in Germany (photo Nord Stream 2)

The first pipes for the Nord Stream 2 pipeline were delivered by rail on 27 October 2016 to Mukran on the island of Rügen in Germany (photo Nord Stream 2)

The neutral Finns: unwillingness to politicise the project

In Finland, a wider discussion on the NS2 project may be expected after the Nord Stream 2 company submits its application for a construction permit (probably by February 2017). As yet, the NS2 project has not sparked a political debate in Finland. Representatives of the centre-right government of PM Juha Sipilä (made up of the Centre Party, the Finns Party and the National Coalition Party) have hardly said a word on the subject, until the government was forced to take an official position in response to a parliamentary question in September 2016.

The public discussion about NS2 was also revived by the echoes of Joe Biden’s visit to Sweden, as well as a report on Russia published by the Finnish think-tank FIIA (30 August; the report was commissioned by the government). The FIIA report refers to the NS2 gas pipeline as a geo-economic project, which will marginalise the importance of Ukraine as a gas transit country; create a gas dependency with Germany that will increase Russia’s ability to exert political and economic pressure on Berlin; and undermine the EU’s energy policy. It recommends that Finnish decision-makers engage in efforts to develop a joint EU position on the political level, while at the same time discouraging them from raising environmental issues in the Finnish EEZ in order to block the project.

Finland does not see any risks in energy cooperation with Russia. It imports 100% of its gas from Russia and considers Gazprom a reliable partner

However, the report is unlikely to affect the government’s neutral position on the NS2. The Finnish government will not use the environmental impact assessment procedure in order to delay implementation of the project, and will allow the gas pipeline to be laid in the Finnish exclusive economic zone. Helsinki is treating the planned gas pipeline as a business initiative, as it did in the case of NS1, and has adopted a neutral stance towards the project, not seeing any interest in either promoting or blocking it.

At the same time, Finland is waiting for the European Commission’s assessment on whether NS2 complies with the Third Energy Package. In contrast to Stockholm, Helsinki is against using political arguments to block the planned gas pipeline in the EU. Finland does not want to politicise the project for two reasons. Like Sweden, it attaches great importance to compliance with international law. Furthermore, it does not want to politicise environmental issues in relations with Russia since protection of the Baltic Sea basin is an important objective of Finland’s regional policy, with Russia being largely responsible for the pollution of the waters of the Gulf of Finland. At the same time, Finland is committed to economic cooperation with Russia, and is seeking to develop it in those areas not covered by sanctions.

(…)

Finland does not see any risks in energy cooperation with Russia. It imports 100% of its gas from Russia and considers Gazprom a reliable partner, because – in contrast to the CEE countries – it has not experienced any politically motivated interruptions in the supply of Russian gas. Until recently, Gazprom also held a 25% stake in Gasum, the operator of the Finnish gas transmission network, until the Third Energy Package came into force, when the Finnish government bought its shares. In addition, natural gas is of little importance in domestic energy consumption, amounting to no more than around 7% in 2015. Finland does not have a well-developed transmission network (it is only found in the south of the country), and recognises the problem of being dependent on a single gas connection with Russia (Imatra-Tampere), and so it is investing in the construction of small LNG terminals and a pipeline connection with Estonia.

(…)

The ‘wait-and-see’ Danes: between Germany and the US

The real debate on the project in Denmark will begin only when the Nord Stream 2 company applies for a permit to construct the gas pipeline in the Danish EEZ and territorial waters at the beginning of 2017. So far, discussions on the matter have been sporadic and superficial, and the statements by representatives of the minority government of PM Lars Løkke Rasmussen (who heads the liberal Venstre party) have been very restrained.

The debate was briefly revived in July thanks to an appeal by the Polish, Lithuanian and Estonian foreign ministers to the Danish government to block the pipeline’s construction. The construction of the NS2 is backed by the nationalist Danish People’s Party, which supports the Venstre party’s government; meanwhile some opposition leftist politicians, mainly from the Social Liberals (a small party) and the Social Democrats (the largest party in Parliament), oppose the construction of NS2.

(…)

Denmark will not block or delay the project on the basis of national law or the Law of the Sea. Copenhagen may be expected to agree to the delineation of the NS2’s route in their EEZ and territorial waters. Currently, however, the Danish government has adopted a wait-and-see attitude, announcing that it will not undertake any analyses, and will not adopt a position before the Nord Stream company’s application for a building permit has been submitted.

The Danes are aware of the geopolitical dimension of the NS2 project. However, they attach great importance to compliance with the Law of the Sea

The Danish government has adopted this attitude for several reasons. Denmark wants to avoid a situation in which it would have to unambiguously back either the supporters of the pipeline project (mainly Germany, its most important economic partner) or its opponents (primarily the US, its key ally in security policy, as well as the CEE countries).

The Danes are aware of the geopolitical dimension of the NS2 project. However, they attach great importance to compliance with the Law of the Sea, and the Danish interpretation of it obliges the state to agree to the construction of the pipelines in its territorial waters. In addition, the Convention on the Law of the Sea plays a key role in Danish policy in the Arctic, as it provides the basis for resolving the issue of overlapping Danish and Russian claims to the continental shelf.

Denmark is therefore counting on the EU to take the responsibility for the fate of the project. Copenhagen’s hope is that the European Commission will adopt a formal position on the project’s compatibility with the Third Energy Package, and that the political discussions on the project will be held in the European Council.

(…)

Editor’s Note

This is a shortened version of an article that was published by OSW/Centre for Eastern Studies on 12 October 2016. See here for the full annotated article. Republished with permission.

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