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Gazprom hopes to gain greater access to European markets in the long run, which will see the Czech Republic receiving a significant increase in profits from the transit of gas through its territory.

The Czech Republic’s importance as a transit country is set to rise even more if the second Nord Stream is built. The contentious Russia-backed project, criticised by the European Parliament and some European commissioners, aims to deliver 55 bln cubic metres per year of Russian gas to Germany via the Baltic Sea, cutting out traditional transit states such as Ukraine and Poland.

Although the Czech government tends to view Nord Stream from a commercial perspective, the project also presents geopolitical challenges. This puts the Czech Republic in a difficult position.

On the one hand, both pipelines bring or will bring increased revenue and help boost ties with Germany, but on the other, an overtly welcoming stance may alienate the Czech Republic’s Visegrad partners, especially eastern neighbour and traditional ally Slovakia.

Nord Stream 2 would cost Slovakia about €800 million ($870 million) per year in gas transit revenue, according to government estimates. That is why Slovakia – along with other Central European countries, including Poland and the Baltic states – continues to rail against the project. They are also protesting against the recent decision by the European Commission regarding OPAL.

Czech decision-makers are therefore trying to play the situation both ways, Adéla Denková, energy expert and editor-in-chief of EurActiv.cz, told Interfax Natual Gas Daily. "They try to be outspoken neither about the exemption of OPAL nor Nord Stream 2. The official position can be summarised like this: the capacity of Nord Stream could be doubled, but it should be also guaranteed that significant volume of gas is available from Ukrainian direction."

The mixed Slovak-Czech ownership of Slovak transmission system operator (TSO) Eustream makes the Czechs’ situation even more complicated.

Energetický a prumyslový holding (EPH), owned by Czech entrepreneur Daniel Kretínský, holds a 49% stake in Eustream. The rest remains in the hands of the Slovak state. Muddying the water further is Mirek Topolánek, former Czech prime minister, who is among EPH’s top lobbyists against Nord Stream 2.

"Slovak-Czech relations are not bad, but not perfect, especially between individual actors, such as TSOs. There are good personal channels, they respect one another, but their positions are substantially different now," Jan Osicka, an expert at the Center for Energy Studies at the Masaryk University in Brno, told Interfax Natural Gas Daily.

Low-key player

The Czech Republic chose not to join other countries in the region last year in protesting against Nord Stream 2 to the European Commission. According to sources close to the situation, it was the result of a disagreement between the more economically oriented position of the Ministry of Trade and Industry – supported by Deputy Prime Minister Andrej Babiš, the country’s top oligarch – and Czech Prime Minister Bohuslav Sobotka, who opted for sticking with Visegrad partners.

A compromise was eventually reached, with Sobotka signing a milder version of the letter three months later.

For the time being Czech politicians have adopted a wait-and-see strategy. This seems reasonable, given that the 15% share gas has in the country’s total primary energy supply is less than half that of Hungary’s; the country has a higher storage capacity (nine underground storage tanks with a total capacity of 2.9 bln cubic metres to cover 37% of its annual gas consumption) than Poland; and, in comparison with Slovakia, the Czech Republic has diversified imports.

The Czech Republic’s primary supplier is Russia, which provides around three-quarters of its gas needs, but the rest comes from a consortium of Norwegian producers and the German gas exchange.

"That is why the Nord Stream 2 is not a burning issue. If the pipeline is not built, we will still keep the two supply routes, via Ukraine and Nord Stream 1, which now will be even more sufficient. But, of course, money is important. The more [that] gas goes via Germany, the more decent revenues are to be brought to the country," said Osicka.

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