Merkel’s $11 Billion Pipeline Plan Runs Into EU Ally Challenge

Angela Merkel’s backing for an $11 billion, Russian-backed Baltic Sea gas pipeline is exacting a cost.

Long criticized for wielding Germany’s might to run roughshod over the interests of smaller European Union members, she effectively quashed a debate over whether the bloc would target the Nord Stream 2 project in response to the poisoning of one of President Vladimir Putin’s top critics.

But then neighboring Polandtook a swing at the energy link backed by Gazprom. Imposing a record$7.6 billion fine on the gas exporter, Warsaw underscored how the pipeline project has emerged as one of the biggest geopolitical focal points in the spiraling tensions between the West and Putin’s Russia.

Not only has her determined backing for Nord Stream 2 put her in conflict with the U.S. Congress, which imposed sanctions that brought construction on the nearly complete pipeline to a halt last December. It has also raised the unusual prospect of of the EU’s biggest state siding with Moscow in a dispute with a fellow member.

“What Poland and Washington are doing is creating hurdles to its completion, to generate anger in Berlin,” said E. Wayne Merry, a senior fellow for Europe and Eurasia at the American Foreign Policy Council in Washington. “This is a big issue in German sovereignty.”

Merkel’s dogged pursuit of the energy link hasirked some allies, who say it bolsters Europe’s reliance on Russian energy and bypasses key partners such as Ukraine.

It has also spurred accusations that the EU’s longest-serving leader is putting German interests above those of fellow member states, even as she frequently exhorts them to make sacrifices on issues ranging from economic rescues to sheltering refugees.

The poisoning of Russian opposition leader Alexey Navalny with a Novichok nerve agent in August triggered a tumultuous debate in Germany on the wisdom of the pipeline, with Merkel at one point signaling it might be a target.

Then the German leader abruptly blunted the discussion, insisting that the Navalny affair wasn’t a bilateral issue and must be resolved with EU allies. Since then, German officials have dismissed ensnaring Nord Stream 2 in the debate. Instead, Germany and France have proposed araft of travel bans and asset freezes against Russian targets.

Now the frontal attack by the EU’s sixth-biggest member by population, a fine by Poland’s antitrust watchdog amounting to 10% of Gazprom’s revenue for impeding competition, presents a wholly new challenge.

The penalty is a blunt legal instrument that raises more questions — on legal standing, jurisdiction, viability — than could initially be answered.

Coming from a country whose nationalist government has berated Germany for atrocities committed on Polish soil during World War II and the subsequent 40-years of domination by the Soviet Union, it threatens to encumber the already challenged project with years of litigation.

EU rules in theory also allow Polish authorities to ask other nations in the region to help them extract fines on their behalf, even though the European Commission was caught off guard. Margrethe Vestager, the body’s competition watchdog, said the case was “new to me.”

“This is yet another stone thrown in the project’s way,” Timon Gremmels, a German Social Democratic lawmaker, said in an interview. “In the least, this adds more uncertainty to its successful outcome and may launch yet another drawn-out legal battle.”

The Polish move also raises dicey rule-of-law concerns. Any Gazprom appeal will test Poland’s judicial system following a raft of overhauls that the EU says undermines the bloc’s values by politicizing courts.

The judiciary reforms initiated in 2015 have put Poland on a collision path with its EU partners, and especially with Germany, the country’s biggest trading partner and the largest contributor to the EU budget.

Ever cautious to avoid provocation, Berlin has largely refrained from lecturing Warsaw on democratic backsliding. But last month Merkel’s government floated a proposal to suspend disbursements from the EU’s pandemic-relief fund if member states fail to adhere to rule-of-law standards.

The relationship was further strained last week at an EU summit where a response to Navalny’s poisoning was discussed. At the meeting, Polish Prime Minister Mateusz Morawiecki made clear he wanted to target the pipeline, saying it was “an element of Russia’s consistent geopolitical strategy.”

But the gas link is a crucial goal for Merkel as well. In Berlin, the government was mum. The Foreign Ministry and Economy Ministry declined to comment.

The Kremlin’s response was more pointed. Russian-Polish relations aren’t “prospering,” Putin spokesman Dmitry Peskov said on a conference. Andrey Klimov, deputy chairman of the International Affairs Committee in the upper house of Russia’s parliament, said Poland’s “anti-Russia” policy was just as much aimed at Berlin.

“We have ways to respond against Poland, different ways,” Klimov said.

— With assistance by Vanessa Dezem, Brian Parkin, Henry Meyer, and Aoife White

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