THE SHELL LEAKS FILES — 21 OCTOBER 2026
SLF-2007-094
The Sakhalin Papers LXXXIV: The Foreseeability Test — What Shell and Its Partners Knew Before the Nord Stream 2 Investment Was Written Off
Shell’s own records establish that its final Nord Stream 2 loan instalments were made in the second quarter of 2020. By then, European legislation had changed, the project was facing legal challenges, American sanctions had disrupted construction and Germany’s energy regulator was deciding whether the pipeline qualified for an exemption. A subsequent European court judgment raises an important question: how much of this risk was foreseeable?
Archive reference: SLF-2007-094
Publication date: 21 October 2026
Collection: The Sakhalin Papers — Shell, Gazprom and Russia
Previous instalment: SLF-2007-093, The Sakhalin Papers LXXXIII, 20 October 2026
Principal sources: Shell’s 24 April 2017 financing announcement; Shell’s published 2022 financial results; European Parliament proceedings; European Commission and Council records; the German Federal Network Agency’s May 2020 decision; the EU General Court’s November 2024 judgment; Allseas’ December 2019 statement; and contemporaneous Reuters reporting.
Evidence classification: Authenticated corporate disclosures, official legislative and regulatory records, judicial findings, contemporaneous journalism and separately identified editorial analysis.
INTRODUCTION: TWO SHELL DOCUMENTS, THREE YEARS APART
On 24 April 2017, Royal Dutch Shell announced that it had signed a financing agreement for Nord Stream 2.
The announcement appeared in Shell’s official collection of corporate press releases.
It named four other European energy companies: ENGIE, OMV, Uniper and Wintershall.
Each committed to provide financing and guarantees covering up to 10% of the project’s estimated €9.5 billion cost.
The pipeline was intended to transport Russian natural gas beneath the Baltic Sea to Germany.
Gazprom remained the sole shareholder of Nord Stream 2 AG.
At the time, Shell and its partners presented the arrangement as participation in a major European energy infrastructure project.
Nearly six years later, another Shell document supplied a particularly revealing detail.
In its financial results published on 2 February 2023, Shell confirmed that its final Nord Stream 2 loan instalments had been made in the second quarter of 2020.
The same disclosure recorded that Shell had fully written down the loan in the first quarter of 2022.
The amount was $1.126 billion.
Between those two financial milestones lay a succession of publicly documented warnings.
European politicians had challenged the pipeline.
The European Commission had proposed legislation extending EU gas-market rules to pipelines entering from outside the Union.
The legislation had become law.
Nord Stream 2 AG had commenced litigation against the European Union.
American sanctions had disrupted construction.
And Germany’s energy regulator had rejected the project’s claim to a regulatory exemption.
The question is not whether those developments were publicly known.
The official records establish that they were.
The more difficult question is what they meant for Shell’s financing decisions.
That requires a distinction between three things: a risk being publicly identifiable, a company recognising that risk internally, and management making a decision that subsequently proves unsuccessful.
They are not the same.
The previous instalment examined Nord Stream 2 AG’s arbitration against the European Union.
Today’s investigation returns to the financing chronology.
What was already on the public record before Shell finished advancing the money?
1. AUGUST 2016: THE FIRST FINANCING STRUCTURE ENCOUNTERS POLISH OPPOSITION
The regulatory difficulties surrounding Nord Stream 2 did not begin in 2019.
They were already apparent in 2016.
The original proposed ownership structure contemplated participation by Gazprom and five European companies.
The arrangement required consideration by Poland’s competition authority, the Office of Competition and Consumer Protection, commonly known as UOKiK.
On 22 July 2016, the Polish Press Agency reported that the authority had expressed concerns about the proposed concentration.
The authority considered that the arrangement could restrict competition in Poland’s gas market.
Its particular concern was Gazprom’s already substantial market position.
These concerns were not a final judicial finding that the proposed project was unlawful.
They were formal competition objections raised during a regulatory assessment.
Nevertheless, the proposed shareholders subsequently withdrew their application.
A contemporaneous legal analysis published on 16 August 2016 confirmed that the proposed joint venture would not proceed in its original form.
This matters to the subsequent Shell financing arrangement.
The European companies had originally contemplated becoming shareholders.
Instead, the project proceeded with Gazprom as sole shareholder and the European companies providing financing.
The change preserved their commercial participation without adopting the ownership arrangement that had encountered Polish regulatory resistance.
Contemporaneous Reuters reporting on 24 April 2017 explicitly connected the financing structure with the earlier Polish objections.
The historical point is straightforward.
When Shell signed its financing agreement in April 2017, regulatory opposition to the project’s structure was already a documented fact.
That does not establish that Shell’s subsequent financing was unlawful, or that the Polish objections should have prevented the agreement.
It establishes that regulatory risk was not a wholly unexpected later development. pap.pl
2. APRIL 2017: WHAT SHELL ACTUALLY COMMITTED
Shell’s original announcement deserves close attention because its financial detail is sometimes obscured by later references to the lost investment.
The announcement specified an estimated project cost of €9.5 billion.
Each of the five European companies agreed to provide financing and guarantees for up to 10% of that amount.
The maximum indicated commitment was therefore approximately €950 million per company.
But Shell’s announcement contained a more precise breakdown.
It identified a long-term funding facility of €285 million, expected to be drawn in 2017.
It also identified up to €665 million in additional short- and long-term funding and guarantees.
The utilisation of that additional facility depended upon future financing decisions by Nord Stream 2 AG.
The distinction is important.
A commitment to provide financing is not necessarily the same as an immediate transfer of the entire committed amount.
Nor is a financing guarantee equivalent to a cash loan.
The April 2017 document establishes the structure and upper limits of the financing arrangement.
It does not provide a complete schedule of subsequent cash disbursements.
Likewise, Shell’s status must be correctly understood.
Shell did not acquire a 10% ownership interest in Nord Stream 2 AG under the arrangement announced in April 2017.
Gazprom retained sole ownership.
Shell became one of the project’s principal European financiers.
The company’s eventual $1.126 billion loan write-down must therefore be understood as the impairment of a financial exposure, not the loss of an equity stake in the pipeline company.
This distinction is central to any serious examination of Shell’s decisions.
The relevant questions concern credit exposure, repayment expectations, contractual protections and the recoverability of the financing.
They are not simply the questions that would arise if Shell had owned part of the pipeline itself.
Primary evidence: Shell’s authenticated corporate announcement dated 24 April 2017, reproduced on page 40 of its official 2017 press release compilation. Shell
3. SEPTEMBER 2017: A WARNING FROM THE EUROPEAN COMMISSION
An especially revealing document comes from the European Parliament.
On 14 September 2017, the Parliament debated Nord Stream 2.
The official verbatim transcript records remarks by Miguel Arias Cañete, then the European Commissioner responsible for climate action and energy.
His explanation demonstrates that the European Union was already considering a new regulatory framework for pipelines entering from third countries.
The Commission regarded the existing legal position as insufficiently clear.
It wanted a framework based upon principles including third-party access, separation between gas supply and transmission, transparency and non-discriminatory tariffs.
The Commissioner also explained that the Commission had sought authority to negotiate with Russia about the pipeline’s operation.
Importantly, he confirmed that work was underway on legislation to clarify the regulatory framework.
This was not an anonymous political rumour.
It was an official statement by the responsible European Commissioner, made in the European Parliament and preserved in the parliamentary record.
It was also public information.
However, its timing requires care.
The debate occurred nearly five months after Shell’s April financing announcement.
It cannot be presented as proof that Shell knew the precise contents of the eventual legislation when it signed the agreement.
What it establishes is that, during the period in which the project was being financed and developed, a significant potential change in European regulation was publicly under consideration.
The transcript also reveals the political divisions surrounding the project.
Some parliamentarians argued that Nord Stream 2 would increase Europe’s dependence on Russian energy.
Others questioned its effect upon existing gas transit routes and European solidarity.
These were political arguments advanced by identified participants, not findings by a court.
Taken together, however, the proceedings show that the project’s regulatory and geopolitical sensitivity was being examined in a formal European institutional setting.
Primary evidence: European Parliament, verbatim report of proceedings, 14 September 2017. European Parliament
4. NOVEMBER 2017: THE REGULATORY RISK BECOMES A LEGISLATIVE PROPOSAL
On 8 November 2017, the European Commission published its proposal to amend the EU Gas Directive.
The Commission announced that major gas pipelines entering European Union territory should comply with relevant internal-market requirements.
These included transparency, third-party access and rules intended to support competition.
The proposal had important implications for the commercial model of Nord Stream 2.
The pipeline was being developed around the transportation of Russian natural gas.
Its financing arrangements depended upon the project’s ability to operate and generate revenue.
Requirements affecting pipeline operation, access and tariffs could therefore influence the assumptions underlying the investment.
At this stage, the legislation had not been adopted.
Its final provisions remained subject to the European legislative process.
Consequently, the precise regulatory outcome was not certain in November 2017.
But the possibility of changes was no longer merely a general political concern.
It had become a formal legislative proposal.
That is a meaningful difference for investment-risk analysis.
A company can disagree with proposed legislation.
It can believe the measure is legally defective.
It can lobby against it, or anticipate that the final legislation will contain favourable exemptions.
Those possibilities do not erase the fact that the proposal exists.
By November 2017, anyone examining the project’s regulatory environment had access to a concrete European Commission document describing the intended changes.
The subsequent court judgment would attach considerable importance to this stage of the chronology. European Commission
5. APRIL AND MAY 2019: THE PROPOSAL BECOMES LAW
The legislative process continued throughout 2018 and into 2019.
On 12 February 2019, representatives of the Council and European Parliament reached a provisional agreement.
On 4 April 2019, the European Parliament approved the amended rules.
On 15 April 2019, the Council completed the legislative adoption process.
Directive (EU) 2019/692 was adopted on 17 April 2019 and entered into force on 23 May 2019.
The legislation extended relevant EU internal gas-market requirements to pipelines connecting Member States with countries outside the European Union.
These included rules addressing transmission-system separation, third-party access, tariffs and regulatory supervision.
The legislation also provided for certain derogations.
But an important distinction arose between pipelines that were already completed and those that were not.
The relevant provisions allowed the possibility of derogations for qualifying pipelines completed before the directive entered into force.
Nord Stream 2 was still under construction.
Whether it could obtain an exemption therefore became an increasingly important question.
By this stage, the matter had moved well beyond a possible future regulatory change.
There was an enacted legal framework.
The pipeline company would need to operate within that framework or establish a valid legal basis for obtaining relief from its requirements.
The European Union’s official legislative history provides dates against which Shell’s subsequently disclosed financing schedule can be examined.
The amended legislation entered into force in May 2019. Shell’s final loan instalments were made during the second quarter of 2020.
Those two facts are independently established.
Their significance depends upon the circumstances of the funding commitments, the terms of the financing agreement and the assessments made by Shell.
The public sources examined do not establish those internal assessments. consilium.europa.eu
6. SEPTEMBER 2019: THE PIPELINE COMPANY COMMENCES ARBITRATION
Nord Stream 2 AG did not simply accept the new regulatory arrangements.
On 26 September 2019, it commenced international arbitration against the European Union under the Energy Charter Treaty.
As established in yesterday’s instalment, the claimant alleged that the legislative changes violated protections applicable to its investment.
The company disputed the fairness and legality of the new regulatory treatment.
It sought relief intended to protect its ability to operate the pipeline under its intended commercial arrangements.
The proceedings are important to today’s investigation for a different reason.
The existence of the dispute was itself a documented feature of the investment environment before Shell’s final loan instalments.
There was now a formal legal challenge involving the project’s central regulatory assumptions.
That does not mean Nord Stream 2 AG had no prospect of success.
Nor does it mean that financing the project while litigation was underway was automatically unreasonable.
Large infrastructure developments frequently continue during regulatory and legal disputes.
Companies may consider that their contractual protections, legal arguments and projected revenues justify continued participation.
But arbitration brings its own uncertainty.
A tribunal may reject the claim.
Proceedings may last for years.
Even a favourable determination may not restore a project’s original commercial circumstances.
The existence of a legal claim is not equivalent to winning that claim.
And the decision to pursue litigation is not a guarantee that financial exposure will ultimately be recovered.
For Shell shareholders, the relevant historical point is that the regulatory challenge had crystallised into formal proceedings by September 2019.
The financing arrangements remained in place.
7. DECEMBER 2019: SANCTIONS BEGIN TO INTERRUPT CONSTRUCTION
The next event concerned a separate category of risk.
European gas-market regulation was one problem.
American sanctions were another.
On 21 December 2019, Allseas announced that it had suspended its Nord Stream 2 pipe-laying activities.
Allseas was a major contractor responsible for offshore pipeline installation.
Its statement explicitly connected the suspension with American sanctions legislation.
This was no longer a hypothetical possibility that sanctions might eventually complicate the project.
A principal construction contractor had publicly announced the suspension of work.
The consequences were significant.
Nord Stream 2 required specialised vessels and complicated offshore installation operations.
The interruption affected the project’s construction programme and created further uncertainty over completion.
The United States opposed Nord Stream 2 partly because of concerns that it would deepen European dependence on Russian gas.
Supporters of the project, including German political and commercial interests, argued that it would help satisfy European energy demand.
Those positions were contested.
What is not contested is the occurrence of Allseas’ suspension.
The contractor’s announcement is an authenticated contemporary corporate record dated 21 December 2019.
It therefore provides another fixed point in the chronology.
By the end of 2019, the project faced both an enacted European regulatory framework and an interruption to construction associated with American sanctions.
Shell’s own subsequent disclosures establish that the final loan instalments were still to be made in the following year.
That does not establish whether Shell could have withheld those instalments without breaching its contractual obligations.
The financing agreement’s detailed provisions would be necessary to answer that question.
Primary evidence: Allseas, corporate statement dated 21 December 2019. Allseas
8. MAY 2020: GERMANY REFUSES NORD STREAM 2 AN EXEMPTION
On 15 May 2020, Germany’s Federal Network Agency, the Bundesnetzagentur, announced a decision of particular importance.
The regulator rejected Nord Stream 2 AG’s application for a derogation from the relevant gas-market requirements.
The reason concerned the pipeline’s completion date.
Under the applicable German legislation implementing the amended European rules, qualifying infrastructure had to have been completed before 23 May 2019.
Nord Stream 2 had not been fully laid by that date.
The regulator interpreted completion in constructional and technical terms.
The pipeline company’s arguments concerning the economic development of the project did not persuade it that the statutory requirement had been satisfied.
The regulator therefore concluded that Nord Stream 2 would be subject to the relevant German and European requirements.
These included provisions concerning unbundling, network access and cost regulation.
The Bundesnetzagentur published both an official announcement and its decision.
This was not speculation by journalists or an allegation advanced by a political opponent.
It was a formal determination by the responsible German regulatory authority.
Yet an important question of timing remains.
Shell disclosed that its final loan instalments were made in the second quarter of 2020.
That quarter ran from 1 April to 30 June.
The Bundesnetzagentur’s decision was dated 15 May.
Shell’s public disclosure does not identify the precise dates on which its last instalments were transferred.
Consequently, the documents do not establish whether Shell’s final payment preceded or followed the regulator’s decision.
It would be improper to claim otherwise.
What can be said is that the decision occurred during the same quarter in which Shell completed its loan instalments.
Furthermore, the preceding European legislation, arbitration and American sanctions interruption were already public before that quarter began.
The distinction between what can be proved and what remains unknown is essential.
Primary evidence: Bundesnetzagentur, decision and announcement dated 15 May 2020, proceeding BK7-20-004. Federal Network Agency
9. THE CRUCIAL SHELL DISCLOSURE: SECOND QUARTER 2020
We now return to Shell’s financial statements.
On 2 February 2023, Shell published its fourth-quarter and full-year 2022 results.
Page 23 contains a section dealing with the company’s withdrawal from Russian activities.
Under the heading concerning Nord Stream 2, Shell confirmed its original position as one of the five European financing companies.
It then disclosed the timing of the final loan instalments.
Those instalments had been made in the second quarter of 2020.
This is a particularly valuable piece of evidence because it comes directly from Shell.
It does not depend upon an estimate by a journalist or an inference about the project’s financing requirements.
It is a company statement identifying the period during which its loan disbursements were completed.
The same section records that Shell subsequently reassessed the loan’s recoverability following its announcements in the first quarter of 2022.
The result was the full $1.126 billion write-down.
These disclosures establish the beginning and financial outcome of Shell’s involvement with unusual clarity.
They do not provide every intermediate decision.
In particular, the publicly available material examined for this instalment does not identify the exact dates and amounts of each Shell disbursement during 2020.
It does not establish whether the later payments were unavoidable under pre-existing contractual commitments.
It does not disclose the internal credit assessments accompanying those payments.
And it does not show which executives reviewed the evolving regulatory and sanctions risks.
Such information would be relevant to evaluating Shell’s investment governance.
Without it, the documentary record supports a narrower conclusion.
Shell continued to have financing obligations that were discharged through the second quarter of 2020, after several material risks to the project had become matters of public record.
That is a historical fact worthy of examination.
It is not, by itself, proof of negligent or improper conduct.
Primary evidence: Shell plc, fourth-quarter 2022 and full-year results, published 2 February 2023, page 23. Shell Plc
10. AUGUST 2020: A CONTEMPORARY WARNING ALREADY IN OUR ARCHIVE
The next document has an additional significance for The Shell Leaks Files.
It was published on RoyalDutchShellPlc.com more than six years ago.
On 11 August 2020, the website reproduced a Reuters report by Christoph Steitz and Tom Käckenhoff concerning Nord Stream 2.
The article examined statements by Uniper, another of the five European financing companies.
Uniper publicly acknowledged that intensifying American sanctions increased the possibility of the pipeline being delayed or not completed.
The company also recognised that failure to complete the project could require impairment of its loan.
This was a striking contemporary acknowledgement of financial exposure.
It demonstrated that at least one financing company was publicly discussing the risk of losing money through the project’s failure.
But, once again, chronology is decisive.
The Reuters report appeared on 11 August 2020.
Shell’s final loan instalments had been completed by the end of June.
Therefore, the August article cannot be treated as a warning that Shell necessarily received before making its final payments.
It is evidence of publicly articulated financial concerns later that summer.
Its significance lies partly in the fact that the RoyalDutchShellPlc.com archive preserved the contemporary reporting.
Today’s examination is not solely an exercise in retrospective reconstruction.
Some of the concerns were being documented and published while the project was still intended to proceed.
The archive’s original headline referred to the possibility of Shell having to write off its investment if the pipeline collapsed.
At that stage, such an outcome was a possibility, not an established fact.
By the first quarter of 2022, Shell had recognised the full write-down.
The earlier reporting did not predict the precise geopolitical developments that followed.
It did, however, illustrate that the financing risks surrounding a failure to complete the project were being publicly discussed well before Shell recognised its loss.
Contemporaneous archive: RoyalDutchShellPlc.com — Shell May Have to Write Off Nord Stream 2 Investment If Project Collapses, 11 August 2020. The original report was attributed to Reuters. S&P Global
11. NOVEMBER 2024: WHAT THE EUROPEAN GENERAL COURT ACTUALLY DECIDED
We now reach the judicial finding that gives this instalment its title.
On 27 November 2024, the General Court of the European Union dismissed Nord Stream 2 AG’s challenge to the amended Gas Directive.
The case was T-526/19 RENV, Nord Stream 2 v Parliament and Council.
The official Court of Justice press summary provides a particularly important explanation of the judgment.
The court examined the claimant’s arguments concerning legal certainty and the protection of legitimate expectations.
Nord Stream 2 AG had argued that the regulatory changes unfairly affected an investment undertaken under an earlier legal framework.
The court rejected that challenge.
It concluded that Nord Stream 2 AG had made and continued its investments during a period when it had no assurance that European Union law would remain inapplicable to the pipeline.
It also considered that the company could foresee EU institutions and Member States using their legislative powers to extend internal gas-market rules to pipelines entering from third countries.
The November 2017 legislative proposal was particularly relevant.
Given the progress of construction at that time, the company could foresee that the pipeline would not qualify for the derogation reserved for qualifying infrastructure completed before the future directive took effect.
The court also considered that the absence of the derogation did not, in itself, prevent the project from operating under economically acceptable conditions and obtaining an appropriate return.
These were findings concerning the legality of the European regulatory framework in the circumstances examined by the court.
They were not findings that Nord Stream 2 remained commercially viable after the invasion of Ukraine.
Nor were they findings that Shell’s investment was prudent or imprudent.
Nevertheless, the court’s treatment of foreseeability is significant.
It confirms that the regulatory risk was not simply invented after the project had run into difficulty.
The possibility of legislative change was objectively identifiable during the period of investment.
The court rejected the pipeline company’s contention that the regulatory framework gave it the legal protection it claimed.
Official judicial source: Court of Justice of the European Union, Press Release No. 195/24, 27 November 2024, summarising the General Court’s judgment in Case T-526/19 RENV. The press release is an official summary, not a substitute for the judgment itself. curia
12. WHAT THE COURT DID NOT FIND ABOUT SHELL
There is a danger in applying judicial language more broadly than the judgment permits.
The General Court’s findings concerned Nord Stream 2 AG.
That company was responsible for developing and operating the pipeline.
It was the litigant challenging the legislation.
Shell was one of its financiers.
Those are legally and commercially distinct positions.
The judgment did not examine Shell’s internal board papers.
It did not determine what Shell’s individual directors knew at particular dates.
It did not assess the contractual obligations governing Shell’s final instalments.
It did not decide whether Shell had made adequate provision for sanctions risk.
It did not find that Shell violated any legal duty to its shareholders.
It did not determine the causes of Shell’s eventual loan impairment.
Accordingly, it would be wrong to transform the court’s conclusion about Nord Stream 2 AG’s ability to foresee regulatory changes into a judicial finding of wrongdoing by Shell.
A more defensible interpretation is that the judgment identifies regulatory circumstances that were publicly ascertainable during the period in which Shell remained financially involved.
That invites examination of Shell’s own risk assessments.
It does not supply them.
The difference is fundamental.
13. THE $1.126 BILLION LOSS: WHAT CHANGED IN 2022?
The timing of Shell’s write-down requires separate consideration.
In February 2022, Russia launched its full-scale invasion of Ukraine.
European governments and businesses responded with a series of measures concerning their Russian activities.
Germany suspended the certification process for Nord Stream 2.
Shell announced that it intended to end its involvement in the project and withdraw from its Russian ventures.
Its subsequent financial reporting recorded a complete impairment of the Nord Stream 2 loan.
The amount was $1.126 billion.
It would be misleading to suggest that the 2019 amendments to the European Gas Directive, by themselves, caused that write-down.
The evidence does not support that proposition.
Shell’s financial statements connect its reassessment of the loan’s recoverability with the announcements and developments of the first quarter of 2022.
The company was responding to a radically changed geopolitical and commercial environment.
That environment was different from the regulatory uncertainties of 2017–2020.
The earlier legal disputes concerned the conditions under which a pipeline might operate.
The later crisis concerned whether the pipeline could realistically enter commercial service at all.
Both categories of risk matter.
They should not be collapsed into a single explanation.
Nor would it be fair to maintain that the particular events of February 2022 were predictable simply because political opposition to Nord Stream 2 was already evident several years earlier.
The record establishes that the project faced identifiable risks before 2022.
It does not establish that Shell anticipated, or should necessarily have predicted, the particular sequence of events resulting from the invasion.
Shell’s loss is documented. The internal reasoning behind its earlier financing decisions remains a separate evidential question. Shell Plc
14. THE DOCUMENTARY QUESTIONS THAT REMAIN OPEN
The available records permit the financing chronology to be reconstructed.
They do not permit every internal decision to be explained.
A fuller assessment would require examination of the original financing agreements and relevant contractual provisions.
It would also benefit from contemporaneous Shell investment papers, credit assessments, sanctions analyses and internal risk reports.
Several questions are particularly important.
What assumptions about EU gas-market regulation accompanied the April 2017 financing decision?
How were those assumptions updated after the Commission’s November 2017 legislative proposal?
What assessment followed the adoption of Directive 2019/692?
How did Shell evaluate the effect of American sanctions and the suspension of Allseas’ construction activities?
Did the financing agreements require continued disbursement regardless of the evolving regulatory position?
What contractual protections, guarantees or recovery mechanisms were considered available?
And what information supported Shell’s assessment that the financing remained recoverable before the first-quarter 2022 write-down?
These are legitimate documentary questions.
They are not allegations that particular Shell executives acted improperly.
It would also be incorrect to assume that the absence of such internal papers from public archives means they did not exist.
The company may have conducted extensive assessments that have not been published.
A reliable historical archive must recognise that possibility.
The objective is to establish what the evidence demonstrates, rather than fill gaps with assumptions.
DOCUMENTARY FINDINGS
Established facts
Shell entered a Nord Stream 2 financing agreement on 24 April 2017. The company’s announcement identified a maximum financing and guarantee commitment of approximately €950 million and confirmed that Gazprom remained sole shareholder of the pipeline company.
Regulatory concerns preceded the agreement. Poland’s competition authority had challenged the earlier proposed ownership structure in 2016, resulting in withdrawal of the proposed joint-venture application.
European regulatory change was under active consideration during 2017. The European Commissioner responsible for energy discussed the developing framework in Parliament in September 2017. The Commission published a formal legislative proposal in November.
The legislation became law in 2019. Directive (EU) 2019/692 entered into force on 23 May 2019.
The pipeline company challenged the regulatory changes. Nord Stream 2 AG initiated international arbitration against the European Union in September 2019.
American sanctions disrupted construction. Allseas announced the suspension of its Nord Stream 2 pipe-laying activities on 21 December 2019.
Germany rejected the pipeline’s derogation application. The Bundesnetzagentur’s decision was dated 15 May 2020.
Shell completed its loan instalments during the second quarter of 2020. This was confirmed in its published financial results.
Shell subsequently recorded a $1.126 billion write-down in the first quarter of 2022.
The European General Court rejected Nord Stream 2 AG’s challenge in November 2024. Its reasoning included the foreseeability of changes to the relevant EU regulatory framework.
Contested positions
Nord Stream 2 AG maintained that the amended European legislation unfairly interfered with its investment and legitimate expectations.
European institutions defended the legislation as an appropriate extension of internal gas-market regulation.
The pipeline company pursued legal remedies, including international arbitration, rather than accepting the regulatory consequences as lawful.
Those positions must be distinguished from the findings actually made by courts and regulators.
Matters not established
The examined material does not establish that Shell’s directors knowingly disregarded specific legal advice.
It does not establish that Shell could have cancelled its remaining financing commitments without contractual consequences.
It does not identify the exact dates of Shell’s final loan instalments within the second quarter of 2020.
It does not establish that the German regulator’s May 2020 decision preceded those payments.
It does not establish that EU regulatory changes caused Shell’s eventual impairment.
And it does not establish that the General Court made any finding of negligence or wrongdoing against Shell.
EDITORIAL COMMENTARY: THE DIFFERENCE BETWEEN FORESEEING A RISK AND FORESEEING A DISASTER
The documentary chronology reveals something more interesting than a simple retrospective accusation that Shell should never have become involved in Nord Stream 2.
Large infrastructure investments are made in conditions of uncertainty.
Political opposition does not necessarily render a project uneconomic.
A regulatory dispute does not automatically mean an investment will fail.
Sanctions may change, exemptions may be granted and legal challenges sometimes succeed.
Commercial management involves making judgments about such possibilities.
That is the context in which Shell’s financing decisions must be assessed.
But risk assessment also requires continuous reassessment.
A financing commitment made in April 2017 does not exist in a historical vacuum.
By September 2017, European officials were discussing a new legal framework.
By November, there was a legislative proposal.
By May 2019, there was an enacted directive.
By September 2019, international arbitration was underway.
By December, sanctions had disrupted construction.
By May 2020, Germany’s regulator had rejected an important exemption.
Those developments did not arrive simultaneously.
They accumulated.
That accumulation is the most revealing feature of the historical record.
Shell’s own accounts place the completion of its loan instalments in the middle of that sequence.
Whether Shell was contractually obliged to continue advancing the money, whether it could have reduced its exposure, and how it evaluated the changing circumstances are questions the public documents do not fully answer.
They remain proper subjects for investigation.
The November 2024 General Court judgment adds a useful legal perspective.
It rejected the proposition that Nord Stream 2 AG was entitled to assume that European regulation would remain unchanged.
Its reasoning provides a warning against an investment philosophy that treats the regulatory environment as permanently fixed.
Yet the court was not judging Shell’s management.
We should not pretend otherwise.
The company ultimately suffered a substantial financial loss after Russia’s invasion of Ukraine transformed the project’s prospects.
That outcome was not simply the inevitable result of the earlier Gas Directive dispute.
It arose from a series of developments with different causes, legal consequences and degrees of foreseeability.
For Shell shareholders, the appropriate lesson is therefore not that every unsuccessful investment represents misconduct.
It is that the quality of investment governance can only be assessed by examining the information available when decisions were made, the risks recognised at the time and the contractual choices actually available.
That is precisely why historical documents matter.
A company’s final accounting entry tells shareholders what was lost.
It does not necessarily explain every decision that preceded the loss.
The purpose of this archive is to preserve the evidence needed to understand that difference.
SOURCE RECORD AND DOCUMENTARY PROVENANCE
The following documents provide the principal evidential foundation for this instalment.
- Shell — 24 April 2017. Original financing announcement identifying the five European companies, funding arrangements, project cost and Gazprom’s sole ownership. The announcement appears on page 40 of Shell’s official 2017 press release compilation. Shell — Corporate Press Releases 2017
- Polish Press Agency — 22 July 2016. Contemporaneous reporting of UOKiK’s competition concerns over the originally proposed Nord Stream 2 ownership structure. Poland’s Antitrust Body Issues Reservations About Nord Stream 2
- CMS — 16 August 2016. Contemporary legal analysis explaining the withdrawal of the proposed joint-venture application following Polish regulatory objections. Application for Clearance for the Creation of a JV to Construct Nord Stream 2 Withdrawn
- Reuters — 24 April 2017. Contemporary account of the financing agreement and its relationship to the preceding Polish objections. Gazprom’s Western Partners Agree Nord Stream 2 Pipeline Financing
- European Parliament — 14 September 2017. Official verbatim debate on Nord Stream 2, including the European Commission’s explanation of its developing approach to third-country pipelines. European Parliament — Verbatim Report of Proceedings
- European Commission — 8 November 2017. Official announcement of the proposal to update the Gas Directive and extend relevant rules to pipelines entering EU territory. Commission Proposes Update to Gas Directive
- Council of the European Union — 15 April 2019. Official legislative record confirming adoption of the amended rules and summarising their regulatory requirements. Council Adopts Gas Directive Amendment
- Allseas — 21 December 2019. Authenticated corporate announcement confirming the suspension of Nord Stream 2 pipe-laying activities in connection with impending American sanctions legislation. Allseas Suspends Nord Stream 2 Pipelay Activities
- Bundesnetzagentur — 15 May 2020. German regulatory decision rejecting Nord Stream 2 AG’s application for derogation. The regulator also makes its decision and an English translation available. Bundesnetzagentur — Nord Stream 2 Derogation Proceedings
- Reuters, reproduced by RoyalDutchShellPlc.com — 11 August 2020. Contemporary report examining Uniper’s warning that failure to complete Nord Stream 2 could result in impairment of its loan. Shell May Have to Write Off Nord Stream 2 Investment If Project Collapses
- Shell plc — 2 February 2023. Published fourth-quarter and full-year 2022 results. Page 23 confirms that final Nord Stream 2 loan instalments were made in the second quarter of 2020 and records the $1.126 billion write-down in the first quarter of 2022. Shell — Fourth Quarter 2022 and Full Year Results
- General Court of the European Union — 27 November 2024. Case T-526/19 RENV, Nord Stream 2 v Parliament and Council. The official Court of Justice press release summarises the findings concerning legal certainty, legitimate expectations and the foreseeability of regulatory changes. Court of Justice — Press Release 195/24
Documentary disclaimer: This instalment distinguishes authenticated corporate disclosures, official records and judicial findings from allegations, interpretation and editorial comment. The European General Court’s November 2024 findings concerned Nord Stream 2 AG, not Shell’s directors or the legality of Shell’s financing decisions. The timing of Shell’s final loan instalments is established only to the quarter disclosed by the company. No allegation of deliberate misconduct, concealment or breach of duty by Shell management is made on the basis of the examined evidence. The article should not be read as a legal opinion or a determination of liability. Further authenticated documents, factual corrections and responses from the parties concerned remain welcome.
The website’s general disclaimer also applies.
NEXT IN THE SHELL LEAKS FILES
SLF-2007-095 — The Sakhalin Papers LXXXV: The Warning Already in Print — Uniper’s August 2020 Loan Alarm and the Road to Shell’s Billion-Dollar Write-Down
The next instalment will return to a revealing article published on RoyalDutchShellPlc.com on 11 August 2020.
It reported that Uniper, one of Shell’s four European financing partners, was publicly contemplating the possibility of writing down its Nord Stream 2 loan.
The report followed increasing American pressure against the pipeline.
Uniper’s concern was not simply that construction might be delayed.
It was that the project might never be completed, raising questions about repayment of the money already advanced.
That warning now deserves closer examination.
What did Uniper disclose about the financial risks?
What were the other European financing companies saying?
How were American sanctions developing?
And what can the contemporaneous record tell us about the increasingly uncertain prospects for recovering the money invested in Nord Stream 2?
We will also examine the significance of timing.
Uniper’s public warning came after Shell’s final loan instalments, but well before Shell recognised its complete loss.
That interval is important.
It offers an opportunity to investigate the period between the completion of financing and the eventual write-down without confusing warnings made in 2020 with the extraordinary events of 2022.
The next instalment will draw on contemporary corporate reporting, sanctions records, financial disclosures and the original Reuters coverage preserved in the independent Shell archive.
The financing had been completed.
The risks were increasingly public.
The financial consequences were still to come.
The Sakhalin Papers continue.
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