Gazprom Germania and Nord Stream 2: dissolution of an empire

The Nord Stream 2 gas pipeline is filled with gas, but it will probably never go into operation. Who is responsible for them now? And what will happen to the other western activities of your parent company, Gazprom? A search for clues in Switzerland and Germany.

The Nord Stream 2 gas pipeline reaches Germany in Lubmin near Greifswald in the state of Mecklenburg-Western Pomerania. It is filled with gas but not in operation.

Krisztian Bocsi / Bloomberg

It could become one of the most expensive industrial ruins in economic history: the Nord Stream 2 pipeline with a capacity of 55 billion cubic meters of natural gas per year, pipes in two strands with a total length of 2460 kilometers and project costs of around 9.5 billion euros. It is fully built, filled with natural gas and connects Russia with Germany directly through the Baltic Sea. However, because the German government stopped the certification process shortly before the Russian invasion of Ukraine, the gas pipeline cannot be put into operation. The operating company Nord Stream 2 AG, based in Switzerland, was also the target of American sanctions.

Zug company in debt restructuring moratorium

It is not to be expected that natural gas will ever flow through the pipe to Germany in the foreseeable future: “In view of the Russian war of aggression against Ukraine and its fatal consequences, commissioning Nord Stream 2 has become unthinkable,” affirmed the Federal Ministry of Economics on request. But what happens to the company Nord Stream 2 AG, and what about the pipes that are now running uselessly through the sea?

At the beginning of March, it was initially said that Nord Stream 2 AG, based in Zug, was insolvent and filing for bankruptcy, which the company denied at the time. It has now received a provisional debt restructuring moratorium until September 10 of this year from the cantonal court in Zug. A provisional trustee was appointed. During these four months, the company cannot be operated by its creditors. The firm can review and implement remediation options while operations continue. It is also possible that the company will be transferred to another company during this period.

Externally, however, the company has already dissolved, so to speak. Nord Stream 2 AG, which is a subsidiary of the state-controlled Russian natural gas company Gazprom, laid off 105 employees in Zug; among them, according to the commercial register entry, was CFO Paul Corcoran, whose contract was terminated. However, the Brit still holds the same position at sister company Nord Stream. The company website is no longer operational. A few days ago, a person answered the intercom at the company headquarters in Zug, but the answer was dismissive: “We don’t provide any information.” Inquiries to Gazprom’s headquarters in Russia also came to nothing.

«Metal and concrete only»

The pipeline itself, designed to operate for up to fifty years, will remain where it is for the time being. Both strands are filled with natural gas and are under a pressure of just over 100 bar, explains the spokesman for the Economics Ministry of the state of Mecklenburg-Western Pomerania, on whose soil the pipeline lands near the town of Lubmin on the German coast. The filling took place towards the end of 2021 for test purposes and as a prerequisite for later commissioning. For actual operation, the pressure would have to be increased.

The pipeline is “technically in operation”, commercial commissioning has not taken place, the spokesman continued. Nord Stream 2 AG, which is also the owner, is responsible for maintenance. There are company employees on site who could be approached. From the point of view of the Stralsund Mining Authority – the competent authority – there are currently no concerns regarding the safety and integrity of the gas-filled lines and the pig receiving station, which is a technical facility for inspecting the pipes.

From a technical point of view, there is no reason to dismantle the pipeline, adds the Federal Ministry of Economics. It is “just metal and concrete” and does not consist of harmful substances.

Lenders are withdrawing

The parent company Gazprom, on the other hand, has already announced a kind of “child removal”. The surplus onshore gas transport capacities on the Russian side are to be used for gas supply in north-western Russia, a statement said. The Russian state-owned company also said that for the time being only one of the two strands of the pipeline could be used, even if Germany decided to put Nord Stream 2 into operation. Gas could probably only flow through the second line from 2028.

In view of the sharp tones of the German government, however, it seems doubtful whether the pipeline will ever go into operation. The European energy companies Engie (France), OMV (Austria), Shell (UK), Uniper and Wintershall Dea (both Germany), which were involved as financial investors or lenders in Nord Stream 2, have already said goodbye and made corresponding write-downs. At the parallel pipeline North Stream 1 on the other hand, which was completed in 2012 and is still in operation, cooperation between Gazprom and European partners is still going well.

Moscow sanctions

Russia is more radical with Gazprom Germania. Moscow on Wednesday published a decree on sanctions against Gazprom’s former German subsidiary. The Berlin-based company maintains large natural gas storage facilities, trades in gas and is a co-owner of gas pipelines. At the beginning of April, the German government placed it under trusteeship with the Federal Network Agency after Gazprom had tried to sell the German subsidiary to “opaque owners”, according to the Ministry of Economic Affairs, without the necessary approval from Berlin.

In practical terms, Russia’s sanctions mean a gas supply freeze to Gazprom Germania. However, this is only in the order of 10 million cubic meters per day, as the German Economics Minister Robert Habeck explained on Thursday. That corresponds to around 3 percent of Germany’s total annual consumption. These quantities could be procured elsewhere on the market. The federal government will do everything to stabilize Gazprom Germania. It shows once again that Russia uses energy as a weapon. The situation is manageable, but it could get worse, admitted Habeck.

The company network of Gazprom in Germany

The company network of Gazprom in Germany

The Russian sanctions list, which includes 31 companies, also mentions three Swiss companies with which Gazprom will no longer do business. These are Gazprom Schweiz AG, which markets natural gas in Central Asia and Eastern Europe, the Swiss branch of the trading company Gazprom Marketing & Trading (GM&T), which is responsible for international business, and Imuk AG, which according to the commercial register trades in real estate and land abroad operates. All three belong to Gazprom Germania, all three are domiciled in Zug. According to the website, Gazprom Schweiz AG employs 19 people, for GM&T in Switzerland this is not shown separately. GM&T could not be reached.

Is the gas running out?

The Polish company Europol Gaz, which owns the Polish section of the Yamal pipeline, is also affected by the Russian sanctions. The gas pipeline is one of the main routes for transporting Russian natural gas to Germany. Gazprom has already announced that the company will no longer be able to use this pipeline. For Thomas Rodgers, natural gas analyst at industry service Icis, this is the most important development for the European gas market due to Moscow’s sanctions. “In the summer, when demand for Russian natural gas is low, the risk is less pressing. In winter, however, these limits are tested,” says Rodgers.

In Germany, the question arises as to how well the gas storage tanks will be filled for the cold season. The Rehden storage facility, which belongs to Gazprom Germania, is currently almost empty. The German Economics Minister Habeck already said that filling the gas storage tanks by winter was the top priority. The development of the reference price for European natural gas reflects these assessments: After the announcement of the sanctions, the futures market price at the Dutch trading point TTF rose sharply. However, it fell again on Friday.

You can contact the Berlin business correspondent René Holtschi and the business editor Gerald Hosp on Twitter follow.


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