July 26, 2019 / 11:29 AM / 4 months ago

UPDATE 2-Russia's Nord Stream 2 pipeline takes EU to court over new gas rules

(Adds EU and company comment)

By Alissa de Carbonnel and Maria Grabar

BRUSSELS/MOSCOW, July 26 (Reuters) - A Russian-led project to lay a new gas pipeline to Europe is taking the European Union to court to challenge new rules it says endanger its business model, opening a new front in a fight that has divided EU nations.

Nord Stream 2 on Friday said it had asked the EU's top court to annul an EU gas directive amendment that includes a requirement for pipelines not be owned directly by gas suppliers and for at least 10 percent of capacity be made available to third parties.

The EU executive defended the rule change, saying it would apply to all gas flowing into the bloc.

"The EU now has clear rules that apply to all pipelines used to import gas into the European market," a European Commission spokeswoman said, adding that the directive is "fully compatible with the EU's international obligations".

Under current plans, the pipeline will be both owned and operated by Russian gas export monopoly Gazprom, though 50% of the funding is provided by Germany's Uniper and BASF's Wintershall unit, as well as Anglo-Dutch oil major Shell, Austria's OMV and France's Engie.

EU nations passed the rules this year over shared concerns that the pipeline would deprive Ukraine of gas transit fees that are a lifeline for its economy by doubling the amount of gas that could be pumped under the Baltic Sea directly to Germany.

Reuters exclusively reported on Friday that Russia wants to strike a short-term deal with Kiev on gas transit to Europe when the current 10-year agreement expires, buying time to complete pipelines that will bypass Ukraine.

Russia also said on Friday that a second leg of its TurkStream gas pipeline is planned to go bring supplies to Europe via Bulgaria, Serbia and Hungary.

Worries that these new routes will dry out gas transits via Ukraine and increase the EU's dependence on Russia for energy supplies have also driven fierce U.S. lobbying against Nord Stream 2.

Eastern European, Nordic and Baltic Sea countries say the pipeline will increase EU reliance on Moscow, while those in northern Europe, especially Germany, prioritise the economic benefits.

The new rules cast doubt over the commercial operation of Nord Stream 2, which argues that it has been unfairly targeted by fast-tracked legislation to stall the project.

"The amendment was clearly designed and adopted for the purpose of disadvantaging and discouraging the Nord Stream 2 pipeline," it said in a statement, adding that the new rules breached "EU law principles of equal treatment and proportionality."

What could be a protracted legal battle adds to uncertainty over how gas may be shipped through pipeline, which is due to be completed by the end of the year. The project is also still awaiting a permit for the final leg of construction from Denmark.

More than 1,600 km of pipes have already been laid for the pipeline, with annual capacity of 55 billion cubic metres (bcm), Nord Stream 2 said.

"We don't see impacts on the timeline for implementation of our project," company spokesman Sebastian Sass said in an email to Reuters. "The action for annulment aims at avoiding discriminatory rules for the operation of Nord Stream 2." (Reporting by Maria Grabar in Moscow and Alissa de Carbonnel; Additional reporting by Daphne Psaledakis in Brussels Editing by David Goodman)

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