Opinion

The clock is ticking: Ukraine’s last chance to prevent Nord Stream 2

Ukraine is running out of time to provide western gas consumers with the necessary trust to abandon the Nord Stream 2 gas pipeline project.

By: and Date: January 24, 2018 Topic: Energy & Climate

This opinion piece was also published in European Pravda

European Pravda logo

Nord Stream 2, the gas pipeline to directly connect Russia and Germany, is undoubtedly bad for Ukraine. It will allow Gazprom to largely circumvent the Ukrainian gas transit system when supplying EU consumers. This could result in significantly lower transit revenues for Ukraine: up to USD 2 billion per year, which currently corresponds to about 2-3% of Ukraine´s GDP.

More importantly, it might make gas supplies from the EU to Ukraine more difficult. If Russian gas supplies to Slovakia are delivered through Nord Stream 2, Germany and the Czech Republic, the price of this gas at the Ukrainian border will be significantly higher – if the volumes are at all sufficient to supply Ukraine.

Hence, Ukraine might be forced to resume buying gas from Russia. Without the leverage of gas transit it used to have in the past, these negotiations will be very one-sided. In fact, Russian demands might not only be about substantial prices, but could also include political components.

Ukraine is not doing enough to prevent Nord Stream 2 from happening. True, Naftogaz and some policy makers are trying to lobby in Washington and Brussels to prevent the pipeline from being built. But they do not have good arguments to convince influential European gas consumers.

It will not be the fault of others acting in their own interest, it will be the fault of Ukraine

The gas transit tariffs through Ukraine are currently more expensive than the expected tariffs for Nord Stream 2, and the Ukrainian tariff policy is neither transparent nor predictable. European gas consumers simply do not trust that Ukraine will be an inexpensive, reliable gas transit route for the next decade.

Instead of developing an attractive offer for gas transit customers, Ukraine´s government has been sitting on its hands for two years. The energy regulator is politicised and dysfunctional. The gas transit system remains largely unreformed and integrated into Naftogaz. And discussions in Kyiv remain centred on who controls the transit income. And with every day, Nord Stream 2 inches closer to completion.

At this point, it is not about political statements of good will or timid reform plans stretching to 2020, it is about action in the first half of this year. The transit system operator (TSO) should be immediately unbundled and a fair tender for the operation of the system should allow western system operators to take over the management of the new TSO.

This could provide western gas consumers with the necessary trust to abandon the Nord Stream 2 project. Without quick and decisive steps, however, there will be almost no chance to prevent the fulfilment of the project and its potentially disastrous consequences for Ukraine. And make no mistake, it will not be the fault of others acting in their own interest. It will be the fault of Ukraine, if it does not manage to offer a trustworthy, economically sound alternative to Nord Stream 2.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read article More on this topic
 

Blog Post

Making sure green household investment pays off

Policies are needed to support green fuel switching by households; support should be phased out as the carbon price rises.

By: Ben McWilliams and Georg Zachmann Topic: Energy & Climate Date: July 19, 2021
Read article More on this topic More by this author
 

Podcast

Podcast

Belarus: a test for Europe’s foreign policy?

The forced landing of an internal EU flight is just the latest development in the President of Belarus’ efforts to cling to power.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: June 1, 2021
Read article More on this topic More by this author
 

Blog Post

How to extend carbon pricing beyond the comfort zone

Rapid emission cuts need a carbon price for the whole economy. This must be introduced in careful stages. 

By: Georg Zachmann Topic: Energy & Climate Date: April 1, 2021
Read article Download PDF More on this topic
 

Policy Contribution

Navigating through hydrogen

Policymakers must address the need to displace carbon-intensive hydrogen with low-carbon hydrogen, and incentivise the uptake of hydrogen as a means to decarbonise sectors with hard-to-reduce emissions.

By: Ben McWilliams and Georg Zachmann Topic: Energy & Climate Date: April 1, 2021
Read about event More on this topic
 

Past Event

Past Event

A new carbon pricing paradigm for the path to net zero

Which role carbon pricing could and should play in the future policy mix?

Speakers: Ottmar Edenhofer, Peter Liese, Sam Van den Plas, Beatriz Yordi Aguirre and Georg Zachmann Topic: Energy & Climate Date: March 9, 2021
Read article Download PDF More on this topic
 

Policy Contribution

A whole-economy carbon price for Europe and how to get there

Putting carbon pricing at the centre of the EU climate policy architecture would provide major benefits. Obtaining these benefits requires a uniform, credible and durable carbon price – the economic first-best solution, however, several preconditions required to attain this solution are not yet met. This paper proposes a sequenced approach to ensure convergence of the policy mix on the first-best in the long run.

By: Ottmar Edenhofer, Mirjam Kosch, Michael Pahle and Georg Zachmann Topic: Energy & Climate Date: March 9, 2021
Read about event More on this topic
 

Past Event

Past Event

Paris Reinforce: Central Asia and Caspian region Stakeholder Discussion Series #2

Second edition of the Paris Reinforce workshop with focus on Central Asian and Caspian (CAC) region.

Speakers: Gabriele Cassetti, Haris Doukas, Rocco De Miglio and Georg Zachmann Topic: Energy & Climate Date: March 2, 2021
Read about event More on this topic
 

Past Event

Past Event

Paris Reinforce: Central Asia and Caspian region Stakeholder Discussion Series

New Paris Reinforce workshop with focus on Central Asian and Caspian (CAC) region.

Speakers: Gabriele Cassetti, Rocco De Miglio, Haris Doukas and Georg Zachmann Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: December 9, 2020
Read article Download PDF More on this topic
 

External Publication

Perspective of comprehensive and comprehensible multi-model energy and climate science in Europe

A comprehensive and comprehensible multi-model framework offers a real example of “collective” science diplomacy, as an instrument to further support the ambitious goals of the EU Green Deal, in compliance with the EU claim to responsible research.

By: Alexandros Nikas, Ajay Gambhir, Evelina Trutnevyte, Konstantinos Koasidis, Henrik Lund, Jakob Zinck Thellufsen, Didier Mayer, Georg Zachmann, Luis Javier Miguel, Noelia Ferreras Alonso, Ida Sognnæs, Glen Peters, Enzo Colombo, Mark Howells, Adam D. Hawkes, Machteld Van Den Broek, Dirk-Jan van de Ven, Mikel Gonzalez-Eguino, Alexandros Flamos and Haris Doukas Topic: Energy & Climate Date: November 5, 2020
Read about event More on this topic
 

Past Event

Past Event

Paris Reinforce workshop on India's mitigation pathways

What are current greenhouse gas mitigation scenarios commonly proposed for India?

Speakers: Georg Zachmann Topic: Energy & Climate Date: November 3, 2020
Read article More on this topic More by this author
 

Opinion

Understanding the world of tomorrow through the great challenges of energy and climate change

“Only a broad policy framework – taking into account economic, fiscal, industrial, labour, innovation and social policy issues – can address the challenges of the climate crisis in a balanced way.”

By: Simone Tagliapietra Topic: Energy & Climate Date: October 26, 2020
Read article More on this topic More by this author
 

Podcast

Podcast

Global Energy Fundamentals

Bruegel research fellow Simone Tagliapietra discusses his new book, Global Energy Fundamentals.

By: The Sound of Economics Topic: Energy & Climate Date: September 23, 2020
Load more posts