Germany's energy regulator suspended the approval process for Russia's Nord Stream 2 gas pipeline on Tuesday, dealing another setback to the geopolitically sensitive project and causing Europe's sky-high gas prices to soar further.

The regulator said the Swiss-based "Nord Stream 2 AG" operating company first needed to become compliant with German law before it could be certified, potentially delaying the project's start date.

Benchmark European gas prices jumped around 10 percent higher on the announcement, adding to jitters on a continent already facing soaring energy bills -- with winter fast approaching.

Critics have in recent weeks accused Moscow of intentionally limiting gas supplies to Europe and driving up prices in an effort to hasten the launch of Nord Stream 2, a claim Russia denies.

Russia's state-owned gas giant Gazprom holds a majority stake in Nord Stream 2. Germany's Uniper and Wintershall, France's Engie, the Anglo-Dutch firm Shell and Austria's OMV are also involved.

The 10-billion-euro project ($12 billion) has for years been dogged by delays and drawn fierce criticism from Germany's eastern European Union allies like Poland and from the United States.

Gas prices soared by 10 percent in Europe after Germany suspended the certification of Nord Stream 2.
Gas prices soared by 10 percent in Europe after Germany suspended the certification of Nord Stream 2. AFP / John MACDOUGALL

The Baltic Sea pipeline is set to double supplies of cheap natural gas from Russia to Germany, which the EU's top economy says is needed to help it transition away from coal and nuclear energy.

But opponents say the recently completed pipeline will increase Europe's energy dependence on Russia -- which already provides a third of Europe's gas.

Crucially, the pipeline also bypasses Ukraine's gas infrastructure, depriving that country of much-needed transit fees.

Washington has called the project a "bad deal for Europe".

Ukraine -- in conflict with Russia since Moscow's 2014 annexation of Crimea -- has warned that the pipeline could be used by Moscow as a "dangerous geopolitical weapon".

Nevertheless, the US earlier this year waived sanctions on the project imposed by former president Donald Trump, as the Biden administration looked to shore up transatlantic relations.

Map of Europe with gas pipelines network including Nord Stream.
Map of Europe with gas pipelines network including Nord Stream. AFP / Patricio ARANA

The pipeline was finally completed in September but is waiting for the approval process to be completed before it can go online.

Like its Nord Stream 1 predecessor, the 1,200-kilometre (745-mile) pipeline will be able to ship around 55 billion cubic metres of gas annually from Russia to Europe, with Germany as the main transit hub.

Germany's energy regulator said the certification procedure "will remain suspended until the main assets and human resources" have been transferred from the Nord Stream 2 parent company to a new German subsidiary that will own and operate the German part of the pipeline.

Germany's energy regulator has four months to give its green light for Nord Stream 2. Before the suspension, the review was scheduled to last until early January.

After that, the European Commission still needs to give its recommendation.

Tuesday's suspension will likely slow down the process. Should the operator start using the pipeline without awaiting certification, it risks being fined.

Germany's economy ministry said the suspension was "purely regulatory" and that "if the requirements are met, the (regulator) can continue its review within the remaining four-month period".

Nord Stream 2 AG said it was setting up the German subsidiary "to ensure compliance with applicable rules and regulations".

"We are not in the position to comment on details of the procedure, its possible duration and impacts on the timing of the start of the pipeline operations," it added.

The halt was welcomed by Germany's Green party, which opposes Nord Stream 2 and is in the final stages of forming a coalition government with the Social Democrats and the liberal FDP party.

Greens MP Oliver Krischer said Gazprom kept giving the impression "of not taking German and European law seriously".

The suspension will "significantly delay the launch of the pipeline, which is therefore unlikely to play a role this winter," he told Germany's Rheinische Post newspaper.

The NGO Environmental Action Germany (DUH) also applauded the hold-up.

It urged Germany's incoming government to cancel "Europe's biggest fossil fuel project" altogether.