Nord Stream 2

Alan Duncan Excerpts

Tuesday 17th July 2018 Westminster Hall

[The Minister for Europe and the Americas (Sir Alan Duncan)]

I express my gratitude to my hon. Friend the Member for The Wrekin (Mark Pritchard) for securing this debate. I recognise his long-standing commitment to foreign policy and security issues, particularly in this region. I am also very grateful for the very constructive comments made by other hon. Members. I will try to respond to the points.

I start by saying that President Trump’s criticism of Germany’s energy relationship with Russia at the NATO summit drew the world’s attention to the proposed Nord Stream 2 gas pipeline. Hon. Members who have followed the issue will know that the Government have been clear about our own significant concerns, which we have expressed both in public and in private.

From a domestic point of view, and that of sheer national interest, Nord Stream 2 would not particularly affect the flow of gas into our own homes. The UK has a diverse and dependable gas supply. The vast majority comes from our own production and from imports from stable producers such as Norway and Qatar. Only about 1% comes from Russia. If we were faced with an interruption to our current supply, we would not be dependent on Russian gas. In such circumstances, we could increase imports of liquefied natural gas and import from many different alternative producers. So Nord Stream 2 would not have a direct impact on the energy security of our own country, but it could have serious implications for other European countries and for Ukraine in particular. There are also serious, wider, strategic implications around the proposed construction of the pipeline.

Last year, 37% of the European Union’s gas imports originated in Russia and some member states were wholly dependent on Russian supplies, so we recognise that Russia will remain a major player in the European gas market. However, we do not believe that Nord Stream 2 is necessary to meet future European demand for gas.

A number of our European partners have raised concerns about the potential impact on European energy security if 80% of Russian gas supplies were to be concentrated through a single entry point into the EU. The Government share those concerns. At a time when Europe should be diversifying energy supply, Nord Stream 2 risks entrenching dependency on Russian gas in the European energy market for decades to come. It would increase Russia’s ability to use energy as a political tool in a manner that could go to the heart of certain countries’ economic wellbeing.

To counteract that, it is essential that European countries support initiatives that diversify and strengthen the wider European gas market. To that end, we support, for instance, the southern gas corridor that would bring gas from Azerbaijan into the EU. That project offers increased diversity of supply to south-eastern Europe and it would contribute to enhanced energy security across the wider continent.

Proposed amendments to the EU gas directive, which are under discussion, would also help to alleviate the risks associated with Nord Stream 2, as they would require Nord Stream 2 and all other interconnected pipelines between EU member states and third countries to be fully compliant with EU rules. We support efforts to implement those amendments, as they will help to ensure a level playing field and a competitive market for gas in the EU.

As has been mentioned, the potential impact of Nord Stream 2 on Ukraine is a particular concern and has come to dominate the strategic assessment of this proposed project. Ukraine hosts the largest existing transit pipeline for Russian gas, and transit fees made up 2.3% of Ukraine’s GDP last year. If constructed, Nord Stream 2 would divert supplies away from Ukraine, with significant consequences for its economy. Furthermore, Russia has historically used gas as a political tool against Ukraine, for instance causing serious gas disruptions in 2006, 2009 and 2014-15. At one point, Russia threatened to do so again this year. So Ukraine’s energy system would only become more vulnerable if it was replaced by Nord Stream 2 as a transit route.

The current gas transit agreement between Russia and Ukraine expires in December 2019. It is essential that there is a new agreement in place beforehand, to provide long-term certainty for the Ukrainian Government and the Ukrainian people. I welcome Chancellor Merkel’s statements in April that Nord Stream 2 has a political dimension and would not be possible without clarity on the future transit role of Ukraine. I also welcome the EU Commission’s efforts to facilitate gas transit negotiations between Russia and Ukraine.

I take this opportunity to reiterate our long-standing and unwavering commitment to Ukraine. The UK is, and will remain, one of Ukraine’s strongest supporters. We provide political and practical support that strengthens Ukraine’s sovereignty and resilience. Over the next year, we will provide another £35 million in technical and humanitarian support to Ukraine. We will press on with training the Ukrainian armed forces, to strengthen their ability to defend their country. We will help Ukraine to counter Russian disinformation; we will help Ukraine with reforms to its energy market; and we will work closely with the Ukrainian Parliament’s fuel and energy committee.

[Stewart Malcolm McDonald]

Forgive me, Sir Edward; this question is certainly related to the debate, although it may not seem so on the face of it. Can the Minister say whether any of the support that the Government plan to give, now and in future, involves resolving the ludicrous visa situation that exists?

[Sir Alan Duncan]

That is slightly tangential, as the hon. Gentleman admitted in his first sentence. Wherever I go, visas are a serious diplomatic problem. They cause a lot of upset in many countries when people, quite rightly and with reasonable intent, wish to travel here, but find that it is very expensive, it takes a long time and it is sometimes very inefficient.

[Mark Pritchard]

The Minister may be coming on to make some remarks about Denmark, but I hope that he will be able to address the question I set out in my speech: what representations have the UK Government had with the Government of Denmark over Nord Stream 2, and what was the precise nature of those discussions?

[Sir Alan Duncan]

I can answer that straightaway. I am fully aware that Denmark has not yet issued the relevant permits for the construction of Nord Stream 2—which would be in its territorial waters, as has been mentioned. We have raised our security of supply concerns with Denmark, and we anticipate its decision in the autumn. The former Foreign Secretary, my right hon. Friend the Member for Uxbridge and South Ruislip (Boris Johnson), raised the issue with the Danes, and I have discussed it in the margins of foreign affairs committees in Brussels in the past.

We give all that help to Ukraine because it is essential for Ukraine’s future security and prosperity, and because it is essential for upholding European values and the wider security and prosperity of Europe. I fully recognise the concerns that hon. Members have expressed and I am grateful to my hon. Friend the Member for The Wrekin for drawing attention to this important issue by securing the debate.

Let me be clear: Nord Stream 2 represents a risk to European energy security and to Ukraine. Existing pipelines already provide enough capacity to meet the European demand for gas. We do not believe that Nord Stream 2 is necessary and we remain concerned that its construction will be harmful to European interests and those of Ukraine.

For that reason, we will continue to express concerns in discussions with partners across Europe, as I did with the German Minister, Michael Roth, last week. As the Prime Minister noted yesterday, she has been discussing it around the EU Council table for some time. We back amendments to the gas directive to ensure that all interconnector pipelines operate within EU internal energy market rules, and we will continue to support initiatives that strengthen and diversity the supply of gas to the European market. I assure hon. Members that we will play our full part in defending the interests of Ukraine, and we will not shy away from having a strong opinion about such an important strategic proposal.