Nord Stream 2 can be justified if Ukraine's interests safeguarded

BERLIN (Reuters) - Germany’s economy minister said he believed the Russian-backed Nord Stream 2 pipeline can go ahead while preserving Ukraine’s vital interests, but that Berlin is also in talks to diversify its energy supply with liquefied natural gas.

German Economy Minister Peter Altmaier pauses during an interview in his office in Berlin, Germany December 14, 2018. REUTERS/Annegret Hilse

U.S. President Donald Trump in July accused Germany of being a “captive” of Russia due to its energy reliance and urged it to halt work on the $11 billion, Russian-led Nord Stream 2 gas pipeline that is to be built in the Baltic Sea.

Berlin and Moscow have been at odds since Russia annexed Crimea four years ago, but they have a common interest in the Nord Stream 2 project, which will double the capacity of the existing Nord Stream 1 route from next year.

Washington is concerned the pipeline, which will bypass Ukraine by running under the Baltic Sea, will strip Ukraine of important transit revenues and says Moscow is using the project to divide Europe.

“Personally, I believe that this project can be justified if Ukraine’s vital interests are preserved at the same time,” German Economy Minister Peter Altmaier told Reuters in an interview conducted on Friday for publication on Sunday.

“And one of these vital interests is that even after 2019, substantial gas transit through Ukraine will take place from Russia. There are discussions about this at the moment,” he said, adding that the detail of the talks was “very difficult”.

Ukraine derives up to 3 percent of its gross domestic product (GDP) from transit charges.

“We will not reduce dependence on Russia by torpedoing a pipeline such as Nord Stream 2 and then sourcing gas from Russia from other pipelines,” Altmaier said.

“Greater independence is only conceivable if, in addition to the long-term supply of gas, we also create an LNG infrastructure in Germany.”

Washington has touted liquefied natural gas (LNG), delivered by U.S. companies, as an alternative to Russian gas.

Altmaier said German government members were agreed they wanted to build the infrastructure to import LNG soon, and “we are currently in the process of clarifying the location issue with private investors.”

Turning to Britain’s departure from the European Union, Altmaier said an EU summit last week showed a deal on Britain’s withdrawal from the bloc could not be renegotiated but “on the other hand, that the European Union is ready to provide clarification”.

“Between these two poles ... there is a certain amount of tension that can only be overcome by Britain putting proposals on the table that, as far as I can see, are not yet available,” he added.

On German domestic politics, he said Chancellor Angela Merkel’s Christian Democratic Union (CDU) was not divided following a robust leadership contest this month.

“It is now clear that we have a stable government with a chancellor for the next few years,” he added.

Writing by Paul Carrel; Editing by Elaine Hardcastle