EU Legal Blow to Bid to Regulate Russia's Nord Stream 2 Pipeline

BRUSSELS (Reuters) – An EU legal opinion has rejected a European Commission proposal to extend the bloc’s internal energy market rules to regulate Russia’s planned Nord Stream 2 gas pipeline to Germany.

The opinion is a blow to the EU executive’s push to stall Russia’s plan to double the gas it could pump under the Baltic Sea to Germany, bypassing traditional routes via Ukraine. The Commission fears the pipeline would undercut efforts to reduce dependence on Moscow and its support for Kiev.

The opinion, seen by Reuters, from the legal service of the Council of the European Union, the body where EU ministers meet, said applying EU rules to offshore pipelines may breach U.N. law regulating the seas.

The Commission last year proposed the changes to its gas directive to make all import pipelines subject to rules that require they not be owned directly by gas suppliers, apply non-discriminatory tariffs and make capacity available to third parties.

The Nord Stream 2 project, fully owned by Russia’s gas export monopoly Gazprom, is far from complying with the so-called third energy package rules.

The opinion, dated March 1, said the Commission’s proposal “lacks any reasoning on the regulatory power of the Union over offshore pipelines” crossing an EU nation’s exclusive economic zone (EEZ).

“The Union does not have jurisdiction to apply energy law … which is unrelated to the economic exploitation of the EEZ, to pipelines crossing the EEZ of Member States,” the Council’s legal service said.

Doing so would run counter to the United Nations Convention on the Law of the Sea as interpreted by the European Court of Justice, the document says, adding that additional analysis is needed on the matter.

The Commission’s moves to regulate Nord Stream 2, including by seeking a mandate from member states to negotiate directly with the Russian government, challenges big member states, who have companies invested in the project.

Five European energy firms are financing the 1,225 km (760 mile) pipeline to carry 55 billion cubic metres of gas per year: German energy groups Uniper and Wintershall , Anglo-Dutch group Shell, Austria’s OMV and France’s Engie. (Reporting by Alissa de Carbonnel @AdeCar; Editing by editing by David Evans)