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Europe's Nord Stream-2 risks strangling Ukraine -U.S. official

Thu, 05th Nov 2015 13:24

* Could deprive Ukraine of $2 billion annually -official

* Consortium eyes 2019 pipeline start date

* EU's Sefcovic says project must respect EU law

By Tatiana Jancarikova

BRATISLAVA, Nov 5 (Reuters) - A proposed pipeline to boostRussian gas supplies to Germany risks depriving Ukraine of morethan $2 billion in transit fees and runs counter to the EU'sgoal of reducing its energy reliance on Russia, a U.S. officialsaid on Thursday.

The European Union has sought to help Kiev in the wake ofMoscow's annexation of Crimea and has looked to bolster energyties with Ukraine as Russia threatens to stop piping gas via itsneighbour.

"You have to ask: Why would you support Ukraine with onehand and strangle it with the other," Deputy Assistant Secretaryfor Energy Diplomacy Robin Dunnigan told a conference ofpolicymakers.

"Cutting off all gas transit through Ukraine would depriveit of $2.2 billion in annual revenue," Dunnigan said.

Russia's Gazprom already sends gas to Germanyacross the Baltic Sea via the Nord Stream pipelines and theproposed Nord Stream-2 project would double capacity to 110billion cubic metres (bcm) per year.

Gazprom also sends large volumes of gas to the EU viaUkraine but has said it aims to bypass this route, most recentlyunder a plan to build a new pipeline to Turkey.

In September, Gazprom formed a consortium with E.ON, BASF/Wintershall, OMV, ENGIE and Royal Dutch Shell for Nord Stream-2 thatcould see Russia bypass Ukraine from 2019.

Gazprom has put the cost of the plan at up to 9.9 billioneuros ($11 billion).

While the EU and United States have imposed sanctions onRussia because of its annexation of Crimea and its support forseparatist rebels in eastern Ukraine, energy ties between Moscowand Europe remain deep. Russia provides around a third of theEU's energy needs.

"North Stream-2 actually threatens not only Ukraine'ssurvivability and their resources, but it is a risk to fueldiversification in Europe, especially southeastern Europe,"Dunnigan said.

COMMISSION CONCERNS

European Commission Vice-President Maros Sefcovic onThursday said he had spoken with German Vice Chancellor SigmarGabriel to voice the Commission's concerns about whether theproject breaches EU rules.

Sefcovic noted that as only about half of the pipelinecapacity between Russia and Europe was being utilised there werequestions about why more was needed.

"As we showed for previous projects like South Stream, forthe European Commission it's very clear that such projects mustrespect European law," he told the conference.

Russia's proposed South Stream pipeline to bypass Ukraine bysending gas across the Black Sea to Bulgaria was opposed by theEU, prompting Moscow to propose a new route to non-EU Turkeyinstead. (Additional reporting by Paul Taylor; writing by Michael Kahn;editing by Jason Neely)

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