Moscow will defend Nord Stream 2, the pipeline to take Russian gas to Europe bypassing Ukraine, despite US threats against it to promote US LNG sales in the region, President Vladimir Putin said Friday after talks with German Chancellor Angela Merkel, with both agreed it was commercial, not political.
Says US LNG 25%-35% more expensive for Europe than Russian gas
Says project will not halt Ukraine transit if it is economic
Putin, Merkel agree project is commercial, not political
"We have always treated this project as a purely commercial one, a project of business entities, and always kept it outside the framework of any political processes," Putin said. "We find it profitable for us and we will fight for it."
Gazprom's 55 Bcm/year project linking Russia and Germany via the Black Sea is designed to double the capacity of the existing Nord Stream pipeline and reorient most Russian gas flows to Europe away from Ukraine and is expected to be launched by the end of 2019.
US President's Donald Trump's administration sees the project as a threat to the growth of US LNG exports to Europe. A bipartisan group of US senators recently wrote to US Treasury Secretary Steven Mnuchin calling on the Trump administration to consider sanctions on companies supporting the pipeline.
Nord Stream 2 came at heightened sanctions risk in August 2017, when Trump signed into law a sanctions bill calling for new limits on investment in Russian pipeline projects.
The US has repeatedly expanded restrictions on Arctic, deepwater and shale oil projects with Russian stakes, first imposed in 2014. In April, the US added Gazprom CEO Alexei Miller to the sanctions list in in a move some analysts saw as a first step to potentially sanction Russia's pipeline monopoly in the future.
NOT COMMERCIAL
Putin's comments came after US President Donald Trump told Merkel during their April meeting to withdraw Germany's support for Nord Stream 2 in return for considering a new trade deal with the EU, the Wall Street Journal wrote Thursday citing US and European officials.
Merkel pledged closer gas cooperation with the US if Washington exempts steel and aluminum tariffs on Europe, expected to go into force on June 1, the paper said.
Putin, however, dismissed potential increase in so far limited US LNG supplies to Europe as noncompetitive against Russian pipeline gas.
"Donald is not only the US president, but also a good strong entrepreneur. So I believe he is also promoting his business interests aimed at ensuring US LNG sales in Europe. Is it possible? It is possible, but it is expensive," Putin said.
US LNG is 25%-30% more expensive than Russian gas in Europe, and newly-built LNG terminals in Europe are only used at 25%-30% of their capacity at the moment, Putin said.
With European gas demand rising and own gas production declining, he said Nord Stream 2 will secure the needs of not only Germany, but other European countries.
Gazprom, which has been raising gas exports to Europe and Turkey in past years, eyes a new supply record of 195-200 Bcm/year in the near future, Gazprom Export CEO Elena Burmistrova said earlier this week.
UKRAINE GUARANTEES
And while Gazprom implements the project with support of five European companies, including Shell, OMV, Engie, Uniper, and Wintershall, Putin hinted other participants are welcome.
"The project is open to the participation of other partners, not only those taking part in it today," he said.
The EU and the US, besides criticizing Nord Stream 2 for increasing European dependence on Russian gas, have also been protective of transit via Ukraine.
Merkel, who met Putin in Russia's resort town of Sochi, insisted Russia must ensure transit guarantees to Ukraine.
"We in Germany are convinced -- and our economy minister held talks on the matter this week -- that following Nord Stream 2 construction, Ukraine should maintain the role of a transit country. This is of strategic significance, and Germany is ready to play its active role and assist here," she said.
"We also see Nord Stream 2 as an economic, commercial project, but it has other components. So we need to think about guarantees for Ukraine in this regard," she added.
Putin estimated Russia's transit costs via Ukraine at $2-$3 billion/year, but said Russia does not intend to shut transit completely with the new pipeline launch if the transit is profitable.
"They want us to feed Ukraine with our money somewhat. We don't object in fact. We are ready to keep the transit given economic viability. It can be achieved via talks. And we are ready for these talks with Ukraine," he said.
Gazprom CEO Alexei Miller said earlier the company intends to keep gas transit via Ukraine at 10-15 Bcm/year, compared with 94 Bcm shipped last year. Maintaining transit would require a new contract after the current one expires at the end of next year.
