Nord Stream 2 may take months to untangle European red tape

(Bloomberg) --Russia’s Nord Stream 2 may need a few more months to clear remaining red tape before the controversial pipeline begins pumping natural gas to Germany to help ease Europe’s energy crunch.

The Baltic Sea project -- which has raised concerns over the Kremlin’s control of energy supplies to the continent, including among Germany’s Greens -- is complete and awaiting certification from national and European Union authorities. Russian President Vladimir Putin has pledged to step up gas supply, and has said Nord Stream 2 can be activated “the day after” regulatory sign-off.

However, the pipeline might not be approved until May if regulators use all the time they’re allowed. Whether the bureaucrats would be willing to accelerate the process if Europe’s energy woes intensify remains to be seen.

Soaring energy prices coupled with below-capacity deliveries in recent weeks have prompted accusations from European officials that Russia is curbing supply to pile pressure on authorities to grant certification for the new link.

The political dial is unlikely to move much. The German government under outgoing Chancellor Angela Merkel has been steadfast in its support for the project over the objections of the U.S. and some European Union partners, as well as Russia’s neighbor Ukraine.

With Olaf Scholz, a Social Democrat whose party has firmly backed the pipeline, seeking to form a new government to succeed her, a shift in policy is not on the horizon.

Still, the Greens, the second-largest political force negotiating for a coalition, have long opposed the project. Co-leader Robert Habeck, who will play a leading role in any new government, on Wednesday reinforced the party’s calls for the pipeline to adhere to EU rules and accused Russia of using the project as a tool for blackmail.

“If you ask me if Nord Stream 2 should be allowed to go online, I would say only if all European rules are adhered to,” Habeck said in an interview with Deutschlandfunk radio. “I wouldn’t see that as being the case right now and would doubt that.”

Here’s a look at what to expect:

German Approval

Germany’s Federal Network Agency has until Jan. 8 to issue a draft decision on certification, the end of a four-month window after the paperwork was submitted to German authorities.

Approval appears to be a foregone conclusion after the Economy Ministry in Berlin issued an assessment last month saying that Nord Stream 2 poses no risk to the energy supply of Germany and the EU.

EU Finding

The draft decision will then be handed over to the European Commission for review, particularly on whether the pipeline meets EU rules stipulating that the gas-transport business is separate from production and sales -- a process known as unbundling.

A group of senior European Parliament lawmakers wrote a letter to EU Energy Commissioner Kadri Simson last month warning that Nord Stream 2 doesn’t conform with unbundling requirements. They called for a “clear and robust” adherence to European energy rules, a point echoed by the German Greens’ Habeck.

But the Commission’s finding isn’t binding, limiting the scope to halt the project. More likely is a delay. The EU has two months to reach a conclusion, which can be extended for another two months.

Only then can Germany’s regulator grant certification -- potentially putting Nord Stream 2’s starting date well into next year.

“If the German regulator allows supplies tomorrow, deliveries will begin the day after tomorrow,” Putin said in Sochi last month.

Political Backing

Opposition to the pipeline, particularly among eastern EU member states such as Poland, remains strong, and the government in Warsaw  last month called on the Commission to launch a probe into possible market manipulation by Nord Stream 2 owner Gazprom PJSC.

The EU executive arm said it’s quizzing gas producers and suppliers as it examines “all allegations of possible anti-competitive conduct” to check whether current price increases are related to antitrust breaches.

A political demise of the project is all but ruled out. Merkel agreed in a declaration with the U.S. that Germany will take action if Putin weaponizes energy, but there is little intention in Berlin to shut down the pipeline.

Scholz is holding talks to form a government with the Greens and pro-business Free Democrats, both of which were outspoken opponents of Nord Stream 2 on the campaign trail. But as the largest party in the government, the SPD would almost certainly block any language in a coalition accord that would endanger the project.