Franco-German alliance reaches agreement on Russian gas pipeline

Germany and France defused a growing row on energy policy on Friday with a last-minute compromise over how to regulate a controversial Russian gas pipeline.

But the dissent has revived EU tensions about the Nord Stream 2 pipeline, carrying Russian gas under the Baltic Sea to Germany. And it has renewed concerns about the EU’s Franco-German engine, two weeks after their leaders signed a political treaty promising closer bilateral co-operation.

The pipeline standoff came ahead of a Brussels vote on the renewal of an EU gas directive. Member states were discussing whether to tighten rules on pipelines outside the EU.

This could have meant strict separation of gas deliveries and pipeline operation, as is the case with pipelines inside the EU.

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Such a rule change would have impinged on Nord Stream 2, under construction since May and controlled by Russia’s Gazprom.

Berlin thought it had assembled a blocking minority against tighter regulation, thanks to support of France and other countries.

Then France aired its long-held doubts about the Nord Stream pipeline project, in particular, fears of dependency on Russian gas and the resulting loss of precious transit revenue for Ukraine through existing pipelines.

Hearing of wavering French support, and facing the prospect of Brussels muscling in on Nord Stream, chancellor Angela Merkel worked the phones on Thursday evening.

The Franco-German compromise that emerged at lunchtime on Friday, backed by EU members, shifts responsibility for regulating pipelines entering the EU from third countries to the country where its arrives – in Nord Stream 2’s case: Germany.

Dr Merkel expressed satisfaction with the agreement, saying it was reached  “because Germany and France worked closely together”.

But she didn’t get her own way entirely: the overhauled directive will apply EU energy rules to the pipeline, meaning that Gazprom can no longer be sole operator – affecting profitability.

Poland has led opposition to the new pipeline, saying it, combined with a predecessor inaugurated in 2011, will allow Russia to play politics with gas deliveries to its neighbours without affecting supply to western European customers.

Warsaw hopes to take its battle over the directive to its next destination: the European Parliament.

It has a powerful ally in US president Donald Trump. Last year Mr Trump denounced Nord Stream – saying it increased German dependency on Russia – and pushed US liquified gas as an alternative.

On Thursday three US ambassadors – including Berlin envoy Richard Grenell – urged Germany in an opinion piece to “take the concerns of their neighbours seriously”.

“More than half of the EU member states have already spoken publicly against Nord Stream 2,” they wrote.

Dr Merkel has insisted the pipeline will not make Germany “solely dependent on Russia”.

But after closing its last coal mines last year, and with nuclear plants following in three years, Russian gas imports are now an important part of Germany’s energy mix.

The pipeline row comes two weeks after Dr Merkel and French president Emmanuel Macron signed a treaty in Aachen, promising closer co-operation in energy and other areas.

Amid speculation of a bumpy second honeymoon, Mr Macron cancelled a joint appearance next week with Dr Merkel at the Munich Security Conference.

He cited domestic pressures from yellow-vest protests as the reason for his absence. But Franco-German watchers say other rows loom. Both leaders are backing different candidates as the European Commission president.

And officials from both countries are not sure how to implement Aachen’s promise of closer co-operation on military contracts, given Germany’s more restrictive arms export rules and more liberal French market-driven guidelines.