* Alternative gas route to Germany seen as non-essential
* Strained Moscow-Berlin ties may lead to project being axed
* Western companies would suffer hard but Gazprom more
* Gas prices likely to rise but COVID-19 dampens demand
By Vera Eckert, Paul Carrel and Tom Käckenhoff
FRANKFURT/BERLIN/DUESSELDORF, Sept 7 (Reuters) - Abandoning
the nearly complete Nord Stream 2 gas pipeline from Russia to
Germany could create a legal mess and nudge up energy costs for
European households but Germany would cope with any disruption
to supplies, economists say.
German Foreign Minister Heiko Maas at the weekend questioned
the project -- thus far supported by Germany -- following the
suspected poisoning of Kremlin critic Alexei Navalny.
Chancellor Angela Merkel's spokesman reinforced the shift in
tone on Monday, saying she shared the view of Maas, who told
newspaper Bild am Sonntag: "I certainly hope that the Russians
will not force us to change our position on Nord Stream 2."
Their comments cast doubt over the future of a project that
is more than 90% complete, scheduled to operate from early 2021
and which would double the capacity of the existing Nord Stream
1 pipeline from Russia to Germany, Europe's largest economy.
Knocking out that additional capacity would put upward
pressure on gas prices. But reduced energy demand due to the
COVID-19 pandemic, and slack in the German economy, would give
Berlin time to work out alternative additional supply sources.
"Germany could easily afford it," Berenberg Bank economist
Holger Schmieding said of the possibility of axing the pipeline,
describing the impact on economic output as "negligible".
"We have time anyway, and now with GDP only to reach
pre-pandemic levels in 2022, in a way we have more time to
figure out how to grapple with it than we had before," he said.
Navalny was airlifted to Germany for hospital treatment
after falling ill on a Russian domestic flight last month. The
German government says he was poisoned with a Novichok nerve
agent similar to the one used in an attempt to kill a former
Russian spy in England two years ago.
Moscow says it has seen no evidence he was poisoned.
Merkel, who had until now been unwavering in her support for
Nord Stream 2, wants to agree a response to the affair with
Germany's European Union partners and is first awaiting an
explanation from Russia.
TRADE-OFFS
Merkel and the EU face a trade-off between the economic
benefits of the pipeline and the firm political message that
abandoning it would send to Russia, analysts say.
"Merkel's perhaps deliberate opening of the domestic debate
underlines that Berlin's support for pragmatic dialogue with
Putin is not for free," said Carsten Nickel at Teneo, a
consultancy.
Germany could use the threat of an exit from the project to
try to get more engagement from Russian President Vladimir Putin
on issues such as Ukraine or Belarus, he said.
But with 2,300 km of the 2,460 km twin-pipeline length
completed, the commercial momentum behind the project may well
carry it through.
A study undertaken in April by Cologne University's energy
economics institute (EWI) showed that consumers would benefit
from a 5% gas price discount if Nord Stream 2 materialised.
There is strong commercial resistance to axing the project.
Oliver Hermes, chairman of the Ost-Ausschuss, which represents
German business interests in Russia, said abandoning it would
damage Germany's commercial reputation.
"This would place a considerable burden on the image of the
EU and Germany as a safe investment location," he said.
German gas stocks were filled to 93.2% capacity on Saturday,
data from European infrastructure group GIE showed, more than
enough to cope with the immediate challenge of heating Germans'
homes this winter.
But sourcing alternative energy supplies in the longer term
- potentially from U.S. fracking gas, liquid gas from Russia and
Qatar, or additional pipeline gas - would cost "billions of
euros per year, which European consumers in particular would
then have to pay," Hermes said.
The legal costs of abandoning Nord Stream 2 could also prove
a major headache. The five Western partners in the 9.5 billion
euro project led by Russia's Gazprom would suffer massive
writedowns should it be axed.
Half a dozen people familiar with the industry said pulling
the plug would provoke a backlash from among the 120 firms
involved in the project. Two of the people, including a
specialist energy lawyer, forecast a raft of lawsuits.
(Additional reporting by Andreas Rinke; Writing by Paul Carrel;
Editing by Nick Tattersall)
