European energy firms pledged Monday to finance half the cost of a natural-gas link from Russia to Germany, lending support to a pipeline plan that is fueling tensions within the European Union.
A consortium of five companies said they would provide up to €4.75 billion ($5.1 billion) in long-term financing to Nord Stream 2 AG, a wholly owned subsidiary of Russia’s state-owned PAO Gazprom.
The move highlights Europe’s complicated relationship with Russia, and comes just days after U.S. President Donald Trump rejected Exxon Mobil Corp.’s request for a waiver of sanctions so it could resume an oil venture with a Russian partner.
While European firms seek to protect access to Russia’s market and resources, most EU countries oppose the Kremlin’s intervention in Ukraine and fear its push to project more power across the world. That dichotomy has pitted EU nations against each other, with some calling Nord Stream 2 a Trojan horse put forth by Russia to exploit European disagreements while others, led by Germany, are championing the project as a key energy initiative.
About a dozen EU countries claim that allowing Gazprom to double the existing Nord Stream pipeline’s capacity would increase Europe’s reliance on Russian gas while enabling Moscow to cut back on eastern routes through Ukraine and Belarus. That would threaten the bloc’s energy security, while also undermining a key diplomatic objective for Brussels: supporting Kiev amid its conflict with Moscow.
“There will need to be a very tough discussion,” an EU official said Monday. “Nord Stream is clearly a divisive project; we’ll need to do some kind of damage control.”
EU sanctions against Russia are not an obstacle to the funding agreement between Gazprom and its European partners, said Nord Stream 2’s representative to Brussels, Sebastian Sass.
Each European firm will provide up to €950 million in long- and short-term loans, according to the deal. The Russian gas giant will tap more than €1.4 billion of the cash this year, and access the rest as it decides on how to finance the pipeline, the lenders said.
“The financial commitment by the European companies underscores the Nord Stream 2 project’s strategic importance for the European gas market,” Gazprom, its European partners and the pipeline company said in a joint statement.
Monday’s agreement follows the EU’s admission last month that Brussels cannot legally block the proposed pipeline, which would be ready by the end of 2019. Nord Stream 2 would add another 55 billion cubic meters to annual gas flows to Germany, about 14% of the EU’s yearly consumption.