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Sanctions 'only solution' to block Nord Stream 2 natural gas pipeline: Poland's PGNiG

London (Platts)--25 May 2018 924 am EDT/1324 GMT


Poland's PGNiG believes sanctions represent the "only solution" to block the planned 55 Bcm/year Nord Stream 2 gas pipeline from Russia to Germany, a senior company official said Friday, as the project becomes increasingly politicized.

**Ukrainian PM calls on EU, US to help stop new link

**US sanctions law still could be applied to Nord Stream 2

**Poland, Ukraine also attack EU antitrust ruling on Gazprom

PGNiG deputy chief Maciej Wozniak, speaking during a live-streamed meeting of top European energy officials in Brussels, called on the international community to support Polish efforts to derail the project on the grounds it increases Russian influence over European gas markets.

The controversial pipeline project is opposed by the European Commission, the US and much of Eastern Europe.

But it has the support of five European energy companies -- France's Engie, Austria's OMV, Shell, and Germany's Uniper and Wintershall -- that are helping to finance the project, saying it was a commercial project that will help meet Europe's growing gas import needs.

"The only solution to stop this pipeline is probably sanctions on it," Wozniak said.

In August 2017, the US approved a new sanctions law -- the Countering America's Adversaries Through Sanctions Act (CAATSA) -- which included measures that could be take against companies that invest in Russian energy export pipelines.

Despite guidance in late October that those sanctions would only be imposed after coordination with allies and that projects that had been approved before August 2 would not be affected, recent comments from US officials suggested sanctions could still be used against Nord Stream 2.

In April, US State Department spokeswoman Heather Nauert said companies working in Russian energy export pipeline were engaging in a line of work that "could subject them to sanctions".

The message was reinforced Friday by Adam Shub, US Ambassador to the EU. "We have been very clear that firms working in the Russian pipeline sector carry a sanctions risk," Shub said, adding that Washington continued to review possible sanctions action against Nord Stream 2.

POLITICAL RHETORIC

The rhetoric around Nord Stream 2 -- whose construction is already ostensibly under way after work began mid-May to dig the trench for the pipelay offshore Germany -- has intensified in recent months.

The mood shifted in particular in mid-April when German Chancellor Angela Merkel said there were also political considerations around Nord Stream 2 and it was unacceptable for the project to mean Ukraine no longer had "any significance" in transiting Russian gas. Ukrainian Prime Minister Volodymyr Groysman said in Brussels Friday that Nord Stream 2 was a "weapon" being used by Russia to exert more influence over the European gas market.

"I categorically deny that it is a commercial project. It is a new weapon. We should simply stop it," Groysman said.

"There is no need to build new capacity. Russia's aim is to build its own gas transport system and annihilate Ukraine's gas system. Russia wants a single lever to influence European countries," he said.

"If they build Nord Stream 2 they would immediately start killing any possibilities for the Ukrainian system [to be used]. We cannot let them do it."

Dominique Ristori, director general of the European Commission energy directorate, reaffirmed the EU's opposition to the pipeline on the grounds it increased Europe's dependence on one import route.

"This is not a project that corresponds with our priorities -- namely diversification of supply," Ristori said. "This project is the opposite."

He said he hoped the EU could come up with some legal parameters to manage "this very difficult issue".

ANTITRUST VERDICT

PGNiG's Wozniak, meanwhile, slammed the European Commission's decision Thursday in the long-running antitrust case against Gazprom.

The Commission opted not to impose a financial penalty against Gazprom, instead imposing a "tailor-made rulebook" that would require the Russian company to change the way it operates in central and eastern Europe.

"Prices will not decrease in central and eastern Europe," he said. "[The decision] will not prevent Gazprom from dominating the market. DG Competition let Gazprom off the hook and accepted a pro-Russia deal."

Companies in the region have lost Eur19 billion ($22 billion) because of Gazprom's pricing policy, he said, adding PGNiG had not imported a single molecule of gas over the past two years that was more expensive than the gas it imported from Russia.

"LNG from the US, LNG from Qatargas, LNG from Norway or spot gas from the European market -- all of them were cheaper than Russian gas," he said. --Stuart Elliott, stuart.elliott@spglobal.com

--Edited by Daniel Lalor, newsdesk@spglobal.com




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