Nord Stream 2 is the latest Russian incarnation intended to bypass Ukraine and bring Russian gas directly to Europe’s borders. It would double the existing Nord Stream capacity to 110 billion cubic meters/year with two additional strings between Russia and Germany under the Baltic Sea. In spite of a recently signed shareholders agreement between Russian gas giant Gazprom and five European firms, underpinned by unflinching German support, Nord Stream 2 remains subject to considerable legal and regulatory oversight by the European Commission even before it can be commissioned.

The primary motives of the project’s promoters align with their global outlook and self-interests. Germany benefits directly, improving its supply security and becoming Russia’s primary gas transit state to the rest of Europe. Russia significantly weakens Ukraine’s relevance/leverage as a transit country, eliminates its exposure to third-country transit risk, and continues to splinter European solidarity.

Such a platform is entirely contrary to the well-articulated aims of the European Commission and its nascent Energy Union proposal, which is why the promoters make two broad claims to justify the pipeline’s construction: that it will improve Europe’s security of supply and generate commercial gains. The former claim simply does not match the Commission’s concept of European supply security. On the latter claim, it is the companies involved that will profit. Rather than generate a tangible net gain in social welfare, it is a redistribution of benefits as demonstrated by the Regional Centre for Energy Policy Research’s (REKK) modeling.

The same geopolitical rationale that fueled Russia’s ambition for South Stream is the driving force behind Nord Stream 2. Russia is determined to end its dependence on Ukraine as the main transit route to Europe so as not to affect its reliability as a supplier. Although volumes of gas transiting through Ukraine have steadily declined over the past few years, it will require the realization of at least one of these proposals—South Stream, Turkish Stream, or Nord Stream 2—to effectively make the Ukraine transit system irrelevant.

Russia’s effort to consolidate support for these projects over the past decade has created rifts between some EU member states and Brussels. This is a complimentary strategic benefit for Moscow and one that slows the progress of the EU’s energy policy initiatives, particularly in the realm of internal infrastructure that would erode Gazprom’s current monopoly in certain markets.

Even as Russia attempts to diversify its export routes to Europe, the European Commission continues to emphasize the importance of source diversification for the improvement of Europe’s security of supply.

Since 2009, the Commission helped guide the most vulnerable Central and Southeast European (CSEE) countries toward major gains in security of supply through efficient and manageable small-scale infrastructure investments. Binding regulations mandate reverse-flow obligations (although exemptions are granted) as a cornerstone of integration between historically isolated domestic markets. Most importantly, this enabled Western-sourced gas to enter pipelines that previously operated in one single-source direction—from Russia westward. Consequently, security of supply-driven bidirectional investments (e.g., Germany-Poland, Czech Republic-Slovakia, Slovakia-Ukraine among the most important) led to a degree of price convergence between cheaper spot priced Western European markets and more expensive, typically oil-indexed long-term contract-based Central and Eastern European (CEE) wholesale markets.

REKK modeling and the European Commission’s stress test have confirmed that a one-month supply disruption along the Ukraine route now, in 2015, would be much more manageable than it was in 2009 because of these upgrades. Yet the CSEE region remains vulnerable in a supply disruption scenario, particularly Ukraine, the Balkans, and to a lesser extent Hungary, despite its reasonable interconnectivity with bordering countries.

Nevertheless, the Nord Stream 2 project does not aim to secure supply for countries of this region and, in fact, undermines it. The target markets of the project — Germany, France, Austria, and Italy — are not in need of any further safeguards against a short supply disruption, while the most significant impact would be a deterioration of Ukraine’s security of supply.

A disruption or supply cut would no longer be able to be mitigated by market-based shipments with a portion of the reverse-flow capacity committed to Russia’s long-term contract obligations formerly delivered through Ukraine. Nord Stream 2 not only subtracts from Ukraine’s transit earnings and ability to maintain its transmission system, it also makes Ukraine more vulnerable to a Russian supply disruption that would otherwise be offset by Western wholesale markets as it has been since 2014, primarily through Slovakian reverse flow.

Because Russia’s “new” supply source would be used to displace an existing route, it would have to make use of west to east flows via Germany, the Czech Republic, and Austria to reach customers in Slovakia and Hungary. In this manner, Nord Stream 2 intervenes with the design and purpose of post-2009 infrastructure investments, diminishing security of supply value and restricting market development.

REKK modeling assessed the commercial benefits of the project using a gas market simulation with target markets (Germany, France, Austria, Italy) fully supplied by Russia’s long-term contract obligations through Nord Stream 2 and smaller markets in CEE (Czech Republic, Slovakia, Slovenia, Hungary) fully or partially supplied according to available transmission capacity. The result is a drop in wholesale prices in the target countries and a small price increase in CEE and the Balkans.

Taking into account consumers, producers, long-term contract holders, transmission service operators, and storage service operators, the aggregate social welfare effect in the European Union is virtually zero, but the benefits are not evenly distributed among countries and market players. Not surprisingly, Germany, France, Italy, and Switzerland would benefit the most while Slovakia and Poland would lose transit revenues. In the end, the price gap between Western and Southeastern Europe widens.

This does not seem to be a time that Brussels will shy away from its principles on the issue of energy security. A revision of the Gas Security of Supply Regulation and the release of a second list of projects of common interest are intended to improve the position of less-developed and integrated markets in the CSEE region that remain largely dependent on a single source for their energy needs. It is, therefore, ironic that in the Nord Stream 2 scenario EU-funded infrastructure intended to strengthen the CSEE’s resilience would instead facilitate the rerouting of Russia’s long-term obligations and weaken the region.

Nolan Theisen is an energy analyst at the Regional Centre for Energy Policy Research (REKK) in Budapest, Hungary.