Natural gas prices in Europe soared on Tuesday after Germany confirmed that it has suspended the process of certifying a controversial new Russian gas pipeline called Nord Stream 2.
The German energy market regulator said in a statement that it could not certify Nord Stream 2 as an independent operator because the company was based in Switzerland, not Germany.
“Following a thorough examination of the documentation, the [regulator] concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organized in a legal form under German law,” it added.
European gas futures prices gained 10%, piling on the pain for businesses and households already paying much higher bills. Leading energy traders have warned of the risk of rolling blackouts in Europe in the event of a colder than average winter.
The German decision comes at a time of rising tension between the European Union and Russia over Ukraine and a migrant crisis on the Belarus-Poland border.
The European Union gets about 40% of its natural gas from Russia. Nord Stream 2, which bypasses Ukraine and connects Russia directly to Germany, was completed in September despite years of opposition from countries including the United States, which warned that it would boost Moscow’s influence in Europe.
Germany’s energy regulator said Nord Stream 2, which is owned by Russia’s state-owned Gazprom, was planning to establish a German subsidiary to own and operate the German section of the pipeline. Once the main assets and staff have been transferred to the subsidiary, and provided it satisfies all relevant legal requirements, the certification process could resume, it added.
Ukraine welcomed Germany’s decision to put the approval process on hold. But it urged the West not to fall for what it called “Gazprom’s tricks” in announcing the formation of a German subsidiary.