Neutral countries and Italy

This week I was assigned to look further into the countries that have not really taken a radical position on the NS2 Issue (and Italy) and what might be their motivations not to take a stand in it.

SUMMARY:

Neutral countries have each specific reasons for staying out of the NS2 controversy. Broadly speaking, the Finnish and Swedes follow the need of manteining overall neutrality in the Baltic neighbourhood. Norway is fairly neutral due to the fact that it shares a lot of characteristics with Russia in terms of market share of the european gas market. Spain and Portugal are largely cut off from the central european gas market and as such are satistfied to bandwagon with the big countries position. France is quite ambivalent and seems only to regard the project as a wat to get some quid pro quo from Germany. Finally, Greece and Italy, despite some periods of criticism, are eager as well to become hubs for distributing russian gas to the rest of europe, so their position has become more welcoming.

SWEDEN

Amid rising tensions in the baltic region the Swedish initially appeared to want to block the project to the best of their ability. In 2014 a major naval operation was mounted by the swedish military to search for what was suspected to be an intrusion by a russian submarine in territorial waters.

The security concerns over russian interference was the reason why in late 2016  the foreign Minister of Sweden Margot Wallström declared that it was the government’s belief that allowing the use of ports for the construction of the pipeline would “affect Swedish defence policy interest negatively”. The Council of the strategic island of Gotland decided against allowing the russians to build the pipeline citing the government concerns. But this initial position was quickly reversed, with rumors of a different approach already a month later.

Finally, in June 2018 the government released an official statement clarifying that it had resolved the proposed pipeline route to go through their territory The government argued that as a coastal state, Sweden could not impede the laying of pipelines in the Swedish exclusive economic zone.

The  Minister for Enterprise and Innovation Mikael Damberg stated that “The starting point in international law is that all States are entitled to lay pipelines, through the ‘exclusive economic zone’ of the coastal State. The Government has now examined the application and notes, as Finland has recently done, that national and international law do not give the Government scope to reject the application”

In the same statement though the swedes warned that they were critical of the project as it risked contravengint the goals of the EU energy union and did not comply with the applicable EU legislation.

FINLAND

Nord Stream 2 AG submitted an application In September 2017 for the Government’s consent under the Act on the Exclusive Economic Zone of Finland. Much as in the case of Sweden the finnish government acknowledged that Finland’s exclusive economic zone legislation and the United Nations Convention on the Law of the Seas set that the exclusive economic zone is international waters and as such the construction of the pipeline would be allowed.
As pointed out in an article by OSW Justyna Gotkowska Piotr Szymański in 2016, the absolute dependence of Finland on russian gas and the historical reliability of the russian supply gave them very little incentives to oppose the project.

NORWAY

There is a lack of relevant information on Norway’s position regarding this. Naturally as the other major EU market gas supplier the construction of the pipeline would run counter their interests. Yet due to this very issue the Prime Minister Erna Solberg said in 2018  that “It’s a project that several people have questioned. But we have not been able to have opinions about this particular project, simply because we are Russia’s biggest competitor on gas, and it will always be perceived that we melt our own cake if we had opinions about it.”

So given their special political status as a non-eu country and their direct competition with Russia. They seem to let the europeans settle the affair between themselves.

PORTUGAL AND SPAIN

As mentioned before in the Blog. Portugal and Spain seem to be quite far and absent from the NS2 debate.

Spain  currently imported natural gas from 11 different countries, Algeria being the main supplier. In 2017 around 17% of the gas received in Spain was in the form of LNG.The Spanish system is interconnected with Algeria (via the Medgaz pipeline) and with Morocco (via the Maghreb pipeline). Spanish and the Portuguese systems are interconnected via the Badajoz and Tuy pipelines. Gas is supplied to Portugal mainly from Algeria and Nigeria with the remainder being through LNG.

Given the huge underused capacity for LNG that Spain has we previously speculated as to the reason for them not being a more strong voice regarding the expansion of russian gas supplies to the rest of the EU.

Some of the reasons for the Iberian neutrality in this regard seems to come from the reluctance of France to establish a pipeline that would allow the Iberian peninsula to supply other parts of the european gas markets.

Given the negative of the French to develop this line and the relative weight of these latin countries within the EU they seem to have given up on this and prefer to get concessions in other areas by bandwagoning with German and French positions.

FRANCE

As mentioned in the previous post regarding France. Only recently and very briefly France challenged the german stance regarding the pipeline construction. France imports gas mainly for heating of individual households (which account for about two thirds of the total final consumption) and a third for industry.

The origin of natural gas in France comes predominantly from Norway, which in 2016 accounted for 41% of the imports, followed by Russia with 21%, Netherlands with 11% and Algeria with 10%.  Actually France is importing around 30% of its gas through LNG terminals and has the third largest installed capacity to reliquify gas in Europe.

This situation puts the French in a comfortable position, they are not so deeply reliant on Russian gas in the first place and have been parallel in building LNG capacity which could weather off a supply shortage. It is not clear why the french government has taking such an adamant rejection of connecting their gas network with Spain. Given their investment in LNG and the impressive excess capacity of Spain they prefer to be poised as the potential the gateway of LNG to Central Europe directly.

GREECE

As mentioned in the previous post regarding southeastern europe Greece remains heavily dependent on Russian gas.

Greece was one of the transit countries in the failed South Stream project although the main distribution and lading point of the pipe would be set in Bulgaria. Due to EU Commision pressure and the deteriorating relation between the West and Russia following the Crimea annexation the project was scrapped by the Kremlin in 2014.

Greece does not oppose Nord Stream 2 for good reason. After the failure of South Stream the russians embarked on a new proposed pipeline called Turk Stream that would end in the European side of Turkey. The next destination for the russian gas would naturally be Greece, placing it at the helm of further distribution up to Bulgaria and crossing to Italy. The greek government has openly suggested this idea to Brussels and Moscow.

For this reasons its evident that blocking NS2 would set a bad precedent for current greek plants. One situation that might prove to test this resolve is the recent discovery of large gas fields off the coast of the disputed island of Cyprus.

ITALY

As we have mentioned before. Italy is not critical of Europe`s dependence on russian gas. . Italy gets  45% of its natural gas imports from Russia . The second most supplier exporter is Algeria with 32%, followed by Libya (8%) and Netherlands (5%).

But the canceling of South Stream left the Italians with a sense that the EU had different treatment for them and since then did oppose NS2 together with the V4 countries on the grounds that it violated the Third Energy Package.

But with Turkstream set to be built now right up to gate of Europe and possibly extending into Greece, the italians seem to be coming back to the neutral camp disregarding the worries of the countries of the east.
Italy has invested heavily on its gas infrastructure over the last years and its current aim is to become a gas hub for the rest of Europe. To do this, they need to get as much gas inflows as they can get.

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