Germany Seeks to Calm Polish Concerns over Nord Stream II

Reuters

WARSAW/BRUSSELS, Jan 29 (Reuters) - A new pipeline to double Russian gas flows to Germany will only go ahead if Russia does not cut off Ukraine and eastern European gas flows, German Vice Chancellor Sigmar Gabriel told the Polish government on Friday.

Germany says the Nord Stream-2 project will mitigate declining European gas production and the possible disruption of supplies piped via conflict-ravaged Ukraine.

But the plan has bitterly divided the European Union since an outline agreement with Russian gas export monopoly Gazprom was signed in September last year.

Poland has been particularly hostile and the issue has stoked tensions with Germany, already cool since Poland's Eurosceptic Law and Justice (PiS) party won elections last October.

During a day-long visit to Poland, Gabriel sought to calm Polish fears, saying he had told Moscow that Nord Stream-2 could only proceed if gas flows through Ukraine continued after its transit contract with Russia -- worth about $2 billion per year -- expires in 2019.

Shipments to eastern Europe via the Yamal pipeline from Russia to Poland, Belarus and Germany would also be guaranteed, he said.

Russia and Ukraine have been in conflict since street protests forced out Ukraine's Moscow-backed president in 2014. Russia annexed Ukraine's Crimea region and supported separatists in the east of the country, triggering EU sanctions and increasing anxiety among eastern European nations like Poland.

Gabriel said the pipeline was "a business issue for Germany and a political issue for Poland."

But Polish Deputy Prime Minister Mateusz Morawiecki said it was risky to increase reliance on gas from Russia, which provides roughly one third of EU oil and gas.

"We have a problem ... there is a war in Ukraine, while our main trade partner is conducting talks about increasing the bandwith via Nord Stream-2," Morawiecki said.

EU regulators have yet to rule on Nord Stream-2.

Already the European Commission is investigating whether Gazprom overcharged customers in Eastern Europe, where it supplies nearly 100 percent of some states' needs.

Next month, the EU executive will continue efforts to reduce reliance on Russian gas by proposing to increase its oversight of gas deals and improve coordination between states to counter disruption.

The Commission wants access to "key security of supply gas contracts" -- defined but not restricted to those which provide more than 40 percent of annual supplies in a member state, according to an early draft of the plan seen by Reuters.

Gazprom's agreements for Nord Stream-2 with E.ON, BASF/Wintershall, Royal Dutch Shell, OMV and Engie would likely fall under the provision.

Brussels also wants to vet bilateral energy deals with non-EU countries, a move opposed by some states.

Poland supports giving the Commission such powers, but Germany and some private companies, worried about commercial secrets, oppose the plan.

The draft document, which will require approval from member states and the European Parliament, says it seeks to redress the EU nations' approach that "remains almost purely national" and is "not very effective in case of a severe disruption."

The plan estimates Europe's gas dependency will remain stable or grow as production within the 28-member bloc declines over the next two decades. It seeks a more interconnected energy union to let power and gas flow freely.

"In the current geo-political context, such as the situation in Ukraine, the EU gas system remains vulnerable to external shocks," the document says.

(Additional reporting by Marcin Goclowski and Agnieszka Barteczko in Warsaw; Writing by Alissa de Carbonnel; Editing by Katharine Houreld)

Copyright 2016 Thomson Reuters. Click for Restrictions.

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