(Bloomberg) — In a major boost for Russia’s effort to tighten its grip over natural gas supplies to western Europe, Denmark said it will allow the controversial Nord Stream 2 pipeline to pass through its territory.
The decision removes a major hurdle for the $11 billion project slated for commissioning by the end of this year to bring even more gas from Siberia into Germany. The link has drawn sanctions threats from U.S. President, who wants Europe to buy his country’s liquefied natural gas and risks reigniting the summer feud between Trump and Danish lawmakers.
The green light gives Gazprom PJSC, Russia’s gas export champion and already Europe’s biggest supplier, yet another route to one of the world’s most liquid gas markets. While Trump has accused Russia of using its natural gas as a political weapon, it’s ultimately a commercial deal over which Washington has little influence, according to Raffaello Pantucci, Director of Security Studies at the Royal United Services Institute in London.
“It’s frankly too far advanced,” Pantucci said. “who are they going to sanction?”
The approval also gives Russia more clout in the ongoing talks with Ukraine on a new gas transit deal, increasing the risk of a disruption from Jan. 1. The uncertainty on whether the two nations can agree on time has been weighing on forward prices in Europe and sending incentives for traders to stockpile gas in storage sites ahead of winter to cushion any disruption.
“If Gazprom are confident in Nord Stream 2’s imminent completion it may encourage a tougher negotiating stance on any new Ukrainian transit deal,” said John Twomey, a gas analyst at BloombergNEF in London. “If anything, the risks of a disruption on Jan. 1 have gone up as a result of this.”
The pipeline has divided EU governments, with nations led by Poland concerned about the bloc’s increasing dependence on Russian gas.
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Denmark said on Wednesday it will allow the pipeline to pass southeast of the island of Bornholm in the Baltic Sea. The company behind the pipeline submitted the route plan in April. Denmark had been conducting a security and environmental review of the project.
Trump had objected to the link, instead urging the European Union to diversify the sources of its energy and dilute Russian President Vladimir Putin’s economic influence over the region. U.S. officials have also warned that project partners are at an elevated risk of U.S. sanctions.
The approval is another snub of Trump by the Nordic country after it ruled out his proposal to buy Greenland this summer. The president responded by canceling a state visit to Denmark.
The Danish approval covers 147 kilometers (91 miles) of the project. Nord Stream 2 said in its statement that it has already completed 87%, or 2,100 kilometers, of the pipeline in Russian, Finnish and Swedish waters as well as most of the German part. Dan Jorgensen, Denmark’s minister for climate, energy and utilities, declined to comment on Wednesday.
Nord Stream 2 said it will continue its “constructive cooperation with the Danish authorities to complete the pipeline.”
Six Weeks
Gazprom has previously maintained the pipeline would be completed by the end of the year. Officials have said it would take around five to six weeks to complete the pipe section once approval from Denmark was granted.
The permit can not be used for the next four weeks, as all involved parties have four weeks to complain according to Danish law.
Nord Stream 2 said Wednesday the actual start of the construction depends on a number of legal, technical and environmental factors, which will “take a few weeks” and the project aims for completion “in the coming months.”
“It’s unlikely that Nord Stream 2 is online in time for Jan. 1, so Ukrainian transit disruption risks remains,” said Twomey.
While Gazprom owns the pipeline, half the financing of the 8 billion-euro capital cost comes from five European companies: Uniper SE and Wintershall of Germany, OMV AG of Austria, Engie SA of France and Royal Dutch Shell Plc.
Dutch gas for the first quarter declined to the lowest since at least 2017 as the region is oversupplied with the fuel, storage sites across Europe are full, and LNG imports surge.
(Updates with analyst comment in fourth paragraph.)
–With assistance from Dina Khrennikova and Vanessa Dezem.
To contact the reporters on this story: Morten Buttler in Copenhagen at [email protected];William Wilkes in Frankfurt at [email protected];Anna Shiryaevskaya in London at [email protected]
To contact the editors responsible for this story: Christian Wienberg at [email protected], ;Tasneem Hanfi Brögger at [email protected], ;Nick Rigillo at [email protected], Lars Paulsson, Andrew Reierson
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