Merkel no longer rules out Nord Stream action to punish Putin by Bloomberg

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© Bloomberg. Pipe sections can be found at the site of the European Gas Pipeline Link (EUGAL), a joint construction project of Sicim SpA and Bohlen & Doyen GmbH, in Gellmersdorf, Germany on Tuesday, May 28, 2019. One of Europe’s largest natural gas users has turned decidedly pessimistic about fuel, prompting traders to rethink their own outlook for the industry. Photographer: Krisztian Bocsi / Bloomberg

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(Bloomberg) – Chancellor Angela Merkel has put the Nord Stream 2 pipeline on the table as Germany and its allies reflect on a response to the poisoning of Russian opposition leader Alexey Navalny.

Merkel’s reflection on her continued support for the controversial Baltic Sea pipeline highlights escalating tensions with President Vladimir Putin’s government after German military specialists determined last week that Navalny was poisoned by the Novichok, an agent neurotoxicant developed by Russia.

The German leader supports the statements of Foreign Minister Heiko Maas, who warned over the weekend that Berlin may change its support for the project, Merkel’s chief spokesman Steffen Seibert said on Monday. It is “too early” to determine what the consequences of the chemical attack would be, he added.

“The Chancellor also believes that it is wrong to exclude something up front,” Seibert said at a regular government press conference in Berlin. This marks a change for Merkel, who said on August 28 that Nord Stream should be completed and remain a separate issue from Navalny.

Putin’s spokesman Dmitry Peskov did not immediately respond to a request for comment on the statement. Earlier, he said the Kremlin saw no risk of Germany blocking Nord Stream. The two leaders have yet to discuss the Navalny affair, according to Seibert.

“Any attempt to associate Russia or the Russian leadership with what has happened is unacceptable to us, it is absurd,” Peskov said on a conference call. He reiterated that the Kremlin is awaiting information about the poisoning from the German authorities.

The ruble fell 1% against the dollar on Monday, the biggest drop among emerging market peers. Shares in Russian firm Gazprom (MCX 🙂 PJSC (OTC 🙂 – which is leading the project – also extended the losses, falling as much as 2% in exchanges in Moscow.

It remains to be seen whether Merkel would end the 9.5 billion euro ($ 11.2 billion) venture, which is nearing completion. Even as his chief spokesperson confirmed the change in sentiment, he offered a standard pipeline defense, claiming that gas deliveries from the Baltic Sea pipeline were backed by EU gas directives – and that Nord Stream is just one of the many channels for Russia. gas, including the TurkStream Black Sea pipeline.

Seibert also noted that gas is seen as one of the main energy sources for meeting Germany’s electricity needs while phasing out coal and nuclear and increasing renewables.

“The risks are very real,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, a research group that advises the Kremlin. “It is clear that Moscow’s behavior will not change” despite Merkel’s calls to react in this matter, he said, adding that “no one will say, sorry we poisoned Navalny, we will not do it again . “

Despite the public debate, coalition officials reported that there was still little appetite to abandon the project. Critics within Merkel’s Christian Democratic bloc have called for measures that fail to stop the pipeline, including a moratorium or stopping gas flows once it is completed.

Discussions are even more tense within Merkel’s coalition partner, the Social Democrats, who have consistently sought stable relations with Russia. SPD caucus leader Rolf Muetzenich said on Sunday that invoking specific measures against Moscow “does not help” – comments that appeared to rebut SPD member Maas.

Merkel last week issued an unusually harsh reprimand from the Kremlin on the discovery of the novichok and pledged a coordinated response between NATO and EU members.

The political tension caused by the poisoning of Navalny “has led to a very serious discussion in Germany and the EU on the problems of our economic cooperation with Russia, including a further critical discussion on the Nord Stream project”, said Michael Harms, head of the East German division. Trade association. “We must do everything together to ensure that this trust is not shaken and that it is restored as much as possible”

(Updates with Peskov’s comments, market reaction, coalition criticism on Nord Stream)

© 2020 Bloomberg L.P.

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