Nord Stream 2

Debate between John Whittingdale and James Heappey

Tuesday 17th July 2018 Westminster Hall

[Mr John Whittingdale (Maldon) (Con)]

I begin by warmly congratulating my hon. Friend the Member for The Wrekin (Mark Pritchard) on securing this debate, which covers a matter of considerable concern, both in this country and across Europe. I think we saw evidence of that yesterday, when the Prime Minister gave her statement following the NATO summit. In the questions that followed, five hon. Members raised the issue of Nord Stream 2 and expressed concern about its consequences.

That concern has been echoed in Governments across Europe. My hon. Friend said that he had spoken to the President of Latvia, the former President of Poland and to Italy. As he knows, I chair the all-party parliamentary groups on Ukraine, Moldova, Lithuania and Belarus, and when the Moldovan and Lithuanian Foreign Ministers visited London they raised Nord Stream 2 as a specific concern and potential threat to the security of their countries. Last week at the OSCE Parliamentary Assembly in Berlin, I participated in a meeting organised by the Ukrainian delegation to highlight many of the points that my hon. Friend made so forcefully.

When my right hon. Friend the Minister has discussed Nord Stream 2 in the past—I have raised it with him—he has suggested that it is primarily a commercial matter and, because the UK is at the far end of a long pipeline, it is of less concern to us. However, I hope he will recognise the security implications that we must take seriously. First, is this a commercial matter? It is hard to see any commercial justification for the massive investment that Nord Stream 2 will require. The existing pipeline, which crosses through Ukraine, does a pretty good job. It is highly flexible, allowing fluctuations in gas pressure, and it has spare capacity. It may need some investment to bring it up to modern standards, and that could cost an estimated $100 to $300 million a year.

[James Heappey]

On a recent trip to Brussels, I spoke to the Commission about its plans for a net-zero target, which would bring a significant reduction in gas demand across north-western Europe. One would think that that would revise yet further the commercial case for a new pipeline such as Nord Stream 2.

[Mr Whittingdale]

My hon. Friend makes a good point. The more one looks at the economic case for the investment, the harder it is to see. The cost of building Nord Stream 2 is estimated at $17 billion, and it will not add to capacity as there is spare capacity in the existing pipeline. Ukraine moved about 94 billion cubic metres of gas last year, which left 55 billion cubic metres of spare capacity. It difficult to see any significant increase in demand—in actual fact, as he points out, there may well be a reduction.

The commercial justification simply does not add up. In a recent analysis of the economics, Sberbank said, “The Power of Siberia”—another gas pipeline—

“Nord Stream-2 and Turkish Stream are all deeply value-destructive projects that will eat up almost half of Gazprom’s investments over the next five years. They are commonly perceived as being foisted on the company by the government pursuing a geopolitical agenda.”

We are extremely familiar with the idea that Gazprom is used by the Russian Government as an instrument to deliver their political objectives. In the last decade or so, we have seen the Russian Government use gas as a weapon on numerous occasions—particularly in 2009 and 2014—either reducing the amount or, in some cases, cutting off supply altogether.

The Russians use gas because they have the overwhelming supply for most of Europe, and they do not hesitate to deploy it as a political weapon. The new chairman of the Ukrainian gas company Naftogaz, Clare Spottiswoode, will be familiar to many of us here, as for a long time she was the regulator for energy markets in the UK. She did a fantastic job in the UK of fostering competition among gas suppliers, because she believes, as I do, that the way to provide the best service to consumers is by increasing competition, yet she points out that Nord Stream 2 will have a detrimental effect on competition. It is anti-competitive and it will increase the monopolistic stranglehold of Gazprom, and behind it the Russian Federation.

As my hon. Friend the Member for The Wrekin pointed out, Nord Stream 2 is essentially a political tool. The Polish Prime Minister has described it as a new hybrid weapon. If it replaces the Ukrainian gas pipeline—I think all of us believe that is the long-term objective—the consequence will be for Ukraine to lose up to 4% of its GDP, with an effect on government spending of a cut of about $2.3 billion. This is an economy that is already suffering, with Ukraine having part of its territory under occupation, notably its manufacturing heart in the east. The loss of the pipeline would be a further economic blow to a country that is already finding things difficult.

The consequences for Ukraine, however, are not only economic. The building of Nord Stream 2 and Europe no longer having to rely on Ukraine as a transit country for its supply of gas would remove one of the critical obstacles that stands in the way of further Russian aggression against Ukraine. The need to preserve the existing pipeline has to some extent acted as a disincentive to Russia; removing that disincentive could allow it to increase its military aggression against Ukraine.

As my hon. Friend said, Germany is phasing out nuclear power and, in all likelihood, we shall if anything increase our dependence on Russian gas, and yet at the same time we are engaged in hybrid warfare, as has been pointed out in debates in Parliament on a number of occasions: Russia occupies a part of Ukraine in the Crimean peninsula; it supports separatist movements in eastern Ukraine; it interferes in elections, in particular in the United States and in France; it runs a disinformation campaign through black propaganda; and of course our Government hold it responsible for the murder of a British citizen on UK soil and for the attempted murder of several others. This is not the time to make ourselves more vulnerable to Russian pressure by allowing Russia to increase its stranglehold on gas supply into Europe.

I therefore very much agree with my hon. Friend, and I congratulate him. I hope that the Minister will express—perhaps in stronger terms than we have heard before now—the concerns that exist in the British Government should that project go ahead.