Merkel says Nord Stream 2 not possible without clarity for Ukraine

BERLIN (Reuters) - A gas pipeline planned to run from Russia to Germany through the Baltic Sea cannot go ahead without clarity on Ukraine’s role as a transit route for gas, German Chancellor Angela Merkel said on Tuesday, appearing to harden her stance on the scheme.

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The project, Nord Stream 2, would double the existing Nord Stream pipeline’s annual capacity of 55 billion cubic meters.

Eastern European and Baltic states fear the pipeline could increase reliance on Russian gas and undermine Ukraine’s role as a gas transit route, which provides valuable revenues to a country hit by a conflict with pro-Russian separatists.

According to energy firm Naftogaz expectations, Ukraine will earn around $3 billion in 2018 from transit.

Germany, along with other potential beneficiaries of increased supplies in northern Europe, has so far backed the project.

“I made very clear that a Nord Stream 2 project is not possible without clarity on the future transit role of Ukraine,” Merkel told a joint news conference in Berlin with Ukrainian President Petro Poroshenko.

“So you can see that it is not just an economic issue but there are also political considerations,” she added.

Merkel said she had also discussed the project on the telephone with Russian President Vladimir Putin on Monday.

“I also said to President Putin yesterday: it cannot be that through Nord Stream 2, Ukraine has no further importance regarding the transit of gas,” she said.

The Ost-Ausschuss, which represents German business interests in Russia, issued a statement after Poroshenko’s visit stressing the importance of the project.

Russian gas giant Gazprom’s western partners for the project include Uniper, Wintershall, Shell, OMV and Engie.

Nord Steam 2 will respond to growing demand from western Europe by bringing additional gas from northern Siberia via a shorter route and so keeping costs down, the Ausschuss said.

The firms involved have already invested more than 4 billion euros ($5 billion) in the project.

“To change the legal basis with hindsight for political reasons would hurt confidence in legal certainty,” said the Ausschuss.

A spokesman said it was clear Ukraine would remain a transit country for gas.

(This version of the story changes description of unrest in Ukraine in paragraph 3)

Additional reporting by Pavel Polityuk in Kiev; Reporting by Madeline Chambers; Writing by Paul Carrel; Editing by Dale Hudson and Mark Potter