The launch of the second thread of the Nord Stream pipeline will significantly impact Ukraine’s economy by cutting the transit of natural gas through the country, according to the US Ambassador to Ukraine Marie Yovanovitch.

“This may lead to losses of up to three percent of the country’s GDP,” the ambassador said at the international conference on reforming Ukraine’s energy sector.

According to Yovanovitch, Ukraine’s state energy company Naftogaz is key to improving the energy sector, which in turn is crucial to national reforms.

“Everyone watches closely what is going to happen to Naftogaz,” she said, commenting on the company’s post-reform potential.

The reforms must provide Ukraine with a new gas market open to both domestic and outside investors, according to the ambassador.

She stressed the US is ready to aid Ukraine to adopt new technology in its energy sector.

The 1,200-kilometer Nord Stream 2 pipeline will bypass Ukraine and double the delivery capacity of the existing Nord Stream pipeline from the current 55 billion cubic meters of gas per year. The pipeline will go under the Baltic Sea to the German coast near Greifswald, to connect with the European gas transport networks.

The project has faced fierce opposition from the Baltic States, Poland, and Ukraine. Critics claim the Gazprom-led project will make Europe more dependent on Russian gas as it bypasses Ukraine as a transit country. Proponents argue it will bring gas prices in Europe down.