Polish Watchdog Fines Gazprom $7.6 Billion Over Nord Stream 2 Gas Pipeline

October 7, 2020 Updated: October 7, 2020

WARSAW/MOSCOW—Poland has fined Russia’s Gazprom more than 29 billion zlotys ($7.6 billion) for building the Nord Stream 2 gas pipeline without Warsaw’s approval, its watchdog said on Wednesday, prompting the company to say it will appeal.

The project has stoked concern about Moscow’s dominance of European energy supplies and attracted U.S. sanctions, although rival sales of Azeri gas and U.S. liquefied natural gas (LNG) may squeeze Russia’s market share in Europe.

Poland’s UOKiK anti-monopoly watchdog said it had also imposed a total fine of 234 million zloty spread across five other companies involved in financing the $11 billion project to double Russia’s gas export capacity via the Baltic Sea.

A road sign directs traffic towards the Nord Stream 2
A road sign directs traffic towards the Nord Stream 2 gas line landfall facility entrance in Lubmin, Germany, on Sept. 10, 2020. (Hannibal Hanschke/Reuters)

Nord Stream 2 is led by Gazprom, with half of the funding provided by Germany’s Uniper and BASF’s Wintershall unit, Anglo-Dutch company Shell, Austria’s OMV, and Engie.

OMV and Engie face the biggest fines of 88 million zlotys and 55.5 million zlotys respectively. Engie declined immediate comment and OMV has yet to respond to requests for comment.

Following the watchdog’s decision, the companies are obliged to terminate the agreements for financing Nord Stream 2, UOKiK said.

Gazprom said it has not violated Polish anti-monopoly regulations and will appeal against the fine.

“The UOKiK ruling breaches the principles of legality, proportionality and just trial, while the unprecedented size of the fine is a testament to the desire to oppose the Nord Stream 2 project’s implementation by any means,” Gazprom said.

Uniper also disagreed with the decision and said it was considering an appeal. It said a final ruling could take up to four to five years and any fines would only be payable then.

Years of Scrutiny

The UOKiK has examined the project for years. In August it fined Gazprom 213 million zlotys over a lack of cooperation regarding the project.

“The launch of NS2 will threaten the continuity of natural gas supplies to Poland. An increase in the price of the product is also highly likely, with the said increase being borne by Polish consumers,” said Tomasz Chrostny, president of the UOKiK.

“Completion of this investment project increases economic dependence on Russian gas—not only in the case of Poland, but also of other European states,” Chrostny said.

Most of the gas consumed in Poland is from Gazprom, but Warsaw has reduced its reliance through LNG purchases, mostly from Qatar and the United States.

Construction of the 1,230-kilometre Nord Stream 2 pipeline is complete barring a final stretch of roughly 120 km in Danish waters.

Work stopped in December after pipe-laying company Swiss-Dutch Allseas suspended operations because of U.S. sanctions targeting companies providing vessels.

The alleged poisoning of Alexei Navalny, a prominent Kremlin critic, has led Western politicians to intensify demands to block the project permanently.

Dmitry Marinchenko, an analyst with Fitch, told Reuters a permanent stoppage was a risk.

“Europe has yet to work out its opinion on whether implementing the project in the current environment—after what had happened to Alexei Navalny—is the right thing to do,” he said.

($1 = 3.8107 zlotys)

By Agnieszka Barteczko and Oksana Kobzeva