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GTSOU and Naftogaz call for an end to legal exemptions for Nord Stream 1

The Gas Transmission System Operator of Ukraine (GTSOU) and the National Joint Stock Company, Naftogaz submitted requests to the Federal Ministry for Economic Affairs and Climate Action of Germany and Bundesnetzagentur (BNetzA), asking to reconsider its decision of 20 May 2020, pursuant to which the gas interconnector Nord Stream 1 (NS1) was granted a derogation from the application of German and EU energy regulation requiring unbundling, transparent tariffs and third party access for a period of 20 years with effect from 12 December 2019.

The derogation was granted to the operator of NS1 based on the assumptions that the gas pipeline would strengthen the security of gas supply in Europe, increase market competitiveness and ensure energy solidarity. However, according to the press release of GTSOU, these assumptions have been proven wrong and significant changes in circumstances provide a legal basis for BNetzA to exercise its authority to reassess its Derogation Decision.

“Using Russian gas flows, Europe expected to obtain mechanisms for strengthening energy security,” said Sergiy Makogon, GTSOU’s CEO. “However, Russia has once again demonstrated that it considers energy resources exclusively as the most effective weapon for destabilising the European economy and political blackmail. Pipelines bypassing Ukraine were built in violation of EU Regulations to oust a reliable partner – the Ukrainian GTS, from the European market and to increase Russia’s leverage against European countries. Considering Russia’s invasion of Ukraine and new threats to energy security, we propose to redirect part of the gas volumes currently transported by Nord Stream 1 to the Ukrainian GTS.”

Among the many changes in circumstances, GTSOU and Naftogaz invoked, in particular, the fact that the gas crisis in Europe with energy prices soaring from the autumn of 2021 is, to a significant extent, the result of Gazprom’s abusive policy of deliberately restricting gas supplies, initiated to exert pressure on Germany and the EU countries to approve the Nord Stream 2 gas pipeline on anti-competitive terms, contrary to European law. Furthermore, at the end of March Russia’s president issued a decree requiring European gas buyers to pay for gas from Russia in rubles and providing that gas supplies would be cut if this demand is not adhered to, based on which gas supplies to Bulgaria, Poland and Finland were stopped.

More recently, on May another Russian presidential decree imposed sanctions against European gas companies, including Gazprom’s European subsidiaries. Notably, the owner of the Yamal pipeline section from Belarus through Poland to Germany, Europol Gaz, was sanctioned. To comply with the sanctions, Gazprom terminated gas flows through the Yamal pipeline, which demonstrates that Gazprom is an unreliable gas supplier. Furthermore, the fact that Gazprom no longer transports gas through the Yamal pipeline in Poland while continuing to transport at maximum capacity through NS1 contradicts a key assumption for the derogation decision. This, for the gas TSO, clearly contradicts the reasons for the legal derogation for Nord Stream 1.

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