June 16, 2016 / 5:45 PM / a year ago

Exclusive: EU's Juncker says doubts over Nord Stream 2 pipeline plan 'beyond legal'

European Commission President Jean-Claude Juncker attends a session of the St. Petersburg International Economic Forum 2016 (SPIEF 2016) in St. Petersburg, Russia, June 16, 2016.Valery Sharifulin/TASS/Host Photo Agency/Pool

BRUSSELS (Reuters) - European Commission President Jean-Claude Juncker said outcry over Russia's plan to double its gas pipeline to Germany went beyond legal issues as the project would alter the EU's gas market landscape, according to a letter seen by Reuters.

The letter weighs into a heated debate that has pitched the EU's powerhouse Germany against central and eastern European nations who say the Nord Stream 2 pipeline would undercut Ukraine and increases the bloc's dependence on Russia's Gazprom.

Sent to nine member states who oppose the plan on June 3, just before Juncker's high-profile visit to Russia on Thursday, the letter appears aimed at placating some concerns amid signs of a tentative thaw in EU-Russian ties despite difficulties in implementing a peace deal in Ukraine.

"The impact of a pipeline such as Nord Stream 2 goes beyond the legal discussions. If built, Nord Stream 2 could alter the landscape of the EU's gas market while not giving access to a new source of supply or a new supplier," Juncker said.

"No market operator should be able to leverage a position of dominance to the detriment of competitors and consumers."

Junker said Nord Stream 2 could not be built "in a legal void, or only according to Russian law" and that Brussels was discussing the matter with German authorities and regulators before it issues its assessment.

The letter came as an answer to a March letter by the Czech Republic, Estonia, Hungary, Latvia, Poland, Slovakia, Romania and Lithuania warning that Nord Stream 2 would have "potentially destabilising geopolitical consequences".

Gazprom and its European partners agreed the project last year but many eastern European countries and the United States have said the pipeline could limit supply routes and the energy security of the EU, which gets a third of its gas from Russia.

They also say it would affect Ukraine's efforts to reform its economy because Nord Stream 2 would sideline the country as a gas transit route, depriving it of billions of dollars in transit fees. Gazprom-led Nord Stream 2, due to open in 2019, should double the amount of gas directly shipped from Russia to Germany.

Gazprom's gas routes to Europe have become increasingly politicised following Russia's annexation of Crimea in 2014 and role in the Ukraine crisis.

"If built, Nord Stream 2 would have to fully comply, as any other infrastructure project, with applicable EU law, including on energy and environment. This is also the case for the off-shore infrastructure," Juncker said.

"Nord Stream 2 will, due to its route, likely alter the landscape of the European Union's gas markets, and the Commission will carefully assess its impact against the EU priorities in terms of security of supply, diversification and creation of competitive gas markets."

He added that the Commission would only provide financing for projects that were "in line with the core principles" of the bloc's energy union.

Speaking at Russia's high-profile St Petersburg economic forum on Thursday, Juncker said he had a "strong preference for pipelines that unite rather than for pipelines that divide", and that east EU states must have solid access to energy supplies.

German Chancellor Angela Merkel said on Thursday that the Nord Stream project was an economic one and that lifting of EU sanctions against Russia did not depend on plans for the pipeline.

The Nord Stream 2 consortium includes E.ON, Wintershall, Shell, OMV and Engie.

A spokeswoman for the European Commission confirmed Juncker had replied to the March letter by EU states concerned with Nord Stream 2, but declined to comment on the contents.

Editing by Alexandra Hudson

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