EC proposes ban on Nord Stream, Nord Stream 2 transactions in new sanctions package

The European Commission is proposing a ban on transactions related to the Nord Stream and Nord Stream 2 gas pipelines from Russia to Germany as part of its 18th package of sanctions against Moscow, EC President Ursula von der Leyen said June 10.

In an online briefing, von der Leyen said the proposal was part of measures to "step up" pressure on Russia over its invasion of Ukraine.

"For the first time, we propose a transaction ban for Nord Stream 1 and Nord Stream 2," von der Leyen said.

"This means that no EU operator will be able to engage directly or indirectly in any transaction regarding the Nord Stream pipelines. There is no return to the past," she said.

The measures appear designed to future-proof the EU against the restart of gas flows via either of the pipeline systems.

The two-string 55 Bcm/year Nord Stream pipeline began commercial operations in 2011, but deliveries were halted at the end of August 2022, with Russia's Gazprom blaming the suspension on sanctions preventing maintenance on turbines at the Portovaya compressor station.

Construction of Nord Stream 2 was completed in September 2021, almost two years behind schedule, but the pipeline never started commercial operations amid regulatory delays.

In September 2022, both pipelines were targeted in sabotage attacks that rendered both Nord Stream strings and one of the Nord Stream 2 strings unusable.

Recent peace talks over Ukraine have led to renewed speculation about a potential return of large-scale Russian gas exports to Europe, with the undamaged string of Nord Stream 2 considered a candidate to carry increased flows.

However, German Chancellor Friedrich Merz said May 28 that Germany would do "everything" it could to make sure the Nord Stream 2 gas pipeline did not become operational.

A German government spokesperson also said May 23 that Merz also actively supported sanctioning Nord Stream 2.

EU sanctions against both systems would be seemingly designed to make sure no Russian gas can reach Europe via either line.

Peace talks

Russian Foreign Minister Sergey Lavrov in March suggested talks were taking place around Nord Stream 2 as part of efforts to restore normal energy supplies to Europe.

And Russian President Vladimir Putin has repeatedly said that the undamaged string of Nord Stream 2 could begin operations quickly to supply gas to Europe.

The EC, however, remains committed to the phase-out of Russian gas.

On May 6 it presented its long-awaited roadmap for eliminating Russian energy imports, saying it would put forward legislative proposals in June to implement a ban by the end of 2025 on the import of Russian gas both under new contracts and existing spot contracts.

In the roadmap, first expected in February, the EC also said it would propose next month a ban on the remaining imports of Russian gas and LNG -- volumes imported under existing long-term contracts -- to take effect no later than the end of 2027.

Other significant obstacles remain to gas flowing through Nord Stream 2, however, not least Germany's approval.

In order to begin operations, Nord Stream 2 and its operator would have to be legally certified. That process was suspended by Berlin on Feb. 22, 2022, two days before Moscow's invasion of Ukraine.

Germany's economy ministry said at the start of March that it was not involved in talks on the fate of Nord Stream 2, stressing again that the link was not legally approved to flow gas.

After the halt in the certification process for Nord Stream 2, Russian gas deliveries to Europe continued to be gradually reduced, with flows halted via the Yamal-Europe pipeline and deliveries cut via Ukraine through 2022.

Gazprom then began to cut exports via the first Nord Stream system in June 2022, citing maintenance issues with turbines at the Portovaya compressor station, before stopping Nord Stream flows completely at the end of August.

European buyers of Russian gas were forced to buy replacement gas to make up for the shortfall to meet their supply obligations, with prices rising to record highs in August 2022.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh ($365.67/MWh) on Aug. 26, 2022.

Prices remain relatively high, with Platts assessing the TTF month-ahead price on June 9 at Eur35.62/MWh.