Poland Slaps $7.6 Billion Fine on Gazprom over Nord Stream 2 Pipeline

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)-- Poland's anti-monopoly authority has issued an "unprecedented" fine of 6.5 billion euros ($7.6 billion) against Russia's state-owned energy giant Gazprom over its controversial Nord Stream 2 gas pipeline project to Europe.

Poland--a long time opponent of the 1,260-kilometre (km) pipeline from Russia into Europe--said that the pipeline will be damaging to Polish consumers and increases Europe's already high dependence on Russian gas imports. The Office of Competition and Consumer Protection also issued fines against five European companies which have a 50% stake in the project totaling $61 million: Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands), OMV AG (OTC:OMVKY) (Vienna, Austria), BASF/Wintershall (Ludwigshafen, Germany) and ENGIE (EPA:GSZ) (Paris, France). It has called on the European companies to pull out of the project within 30 days. In all cases, the fines equalled 10% of the companies' annual turnover. Gazprom said it will challenge the fine.

The news comes just days after Denmark granted permission for the pipeline to be laid in Danish waters, effectively removing the final European hurdle to the project, which is more than 90% complete. For additional information, see October 13, 2020, article - Denmark Clears Way to Finish Nord Stream 2 Pipeline.

Tomasz Chrostny, president of Poland's Office of Competition and Consumer Protection, announcing the fine, commented: "The launch of Nord Stream 2 will threaten the continuity of natural gas supplies to Poland. An increase in the price of the product is also highly likely, with the said increase being borne by Polish consumers. Completion of this investment project increases the economic dependence on Russian gas--not only in the case of Poland, but also of other European states. It is astounding that Western corporations fail to understand that and participate in an undertaking that not only disturbs competition on the market, but also poses a threat to Europe's energy security."

Gazprom countered that the fine "violates the principles of legality, proportionality and the right to a fair hearing. The unprecedented size of the fine indicates a desire to oppose the implementation of Nord Stream 2 by any means."

The 9.5 billion-euro ($10.5 billion) pipeline starts in Russia and passes through Finnish, Swedish, Danish and German marine areas, before it makes landfall on the northern German coast. The pipelines can transport 55 billion cubic meters (Bcm) of natural gas per year, doubling the capacity of the existing Nord Stream pipeline. The main opposition to Nord Stream 2 has been coming from the U.S. via a series of increasingly tough sanctions on any companies involved in the project. New measures will extend existing sanctions to include penalties on companies involved in pipe-laying activities and those offering underwriting services, insurance or reinsurance services. It also adds sanctions on companies offering any services or facilities for the vessels being used, including welding equipment, retrofitting or tethering of the ships. For additional information, see July 22, 2020, article - Germany Rejects New U.S. Sanctions on Nord Stream 2 Pipeline.

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