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Nord Stream 2 – is there still a point?

NordStream2
©EPA-EFE/MAXIM SHIPENKOV  |   A flag of the Russian multinational energy corporation Gazprom waves outside of Moscow office building of the company in Moscow, Russia

The Nord Stream 2 pipeline, set to transport Russian gas straight to Germany, seems to have hit a few snags amidst growing opposition. Even if it does get finalized, Nord Stream 2 could prove useless due to Europe’s transition to alternative energy sources.

A Russian project promoted by a former German chancellor

5% of the total of 1,224 kilometers still need to be built before Nord Stream 2 can be complete. Linking Russia to Germany, the pipeline has cost nearly 10 billion Euro. The unseen costs are even much higher, with long-term effects. The idea of building the pipeline emerged in early 2000s, when (few people remember that) Europe was marked by a series of gas crises, apparently generated by Ukraine, the main link for Russian gas imports to Europe (a legacy of Soviet infrastructure).

Coincidence or not, the Nord Stream consortium, which also manages this section, was founded on November 30, 2005. Germany’s former chancellor, Gerhard Schroeder, ended his term in office on November 22 the same year. Shortly after the Social-Democrats lost the election 16 years ago, Schroeder greenlit the building of the Nord Stream 1 pipeline with a last-minute call before the end of his mandate.

After accepting to become Angela Merkel’s deputy, Gerhard Schroeder was immediately contacted by Vladimir Putin, who appointed him Chairman of the Shareholders’ Committee at Nord Stream AG, a consortium with a majority Russian shareholders headquartered in Switzerland.

Since then, Schroeder has spearheaded the Kremlin’s interests in Germany. Gerhard Schroeder however is not Germany. This upcoming September, the Federal Republic of Germany will host parliamentary elections, with the Greens favored to win. One of the engines of their election campaign has been to halt the Nord Stream 2 project. Not even Angela Markel, whose term in office is nearing its end, is fully invested in the project. A lot is expected to change this autumn. Time is short and it explains why the Russians are in such a rush to complete construction works.

America’s opposition and Germany’s hesitation

The Americans never liked the project to begin with, for reasons that are political (take, for instance, Ukraine’s gradual silencing or Russia’s growing influence in Europe) or trade-related, considering they are exporting liquefied gas to Europe through new terminals being built in northern Europe. Before the end of his mandate, president Donald Trump issued a number of sanctions against companies that contribute to the building of Nord Stream 2. Not even his successor, Joe Biden, has a mind for the Nord Stream 2 pipeline. It’s bad business for Ukraine, the new White House leader has said, every time arguing that the project is affecting the USA’s European allies. It’s something that Secretary of State Anthony Blinken also mentions each time the topic is raised.

The United States is preparing a package of harsh sanctions, including a number of extremely aggressive actions aimed at stopping the project. The sanctions are still on hold, but the Biden administration is facing a lot of pressure from Congress to act and impose sanctions against Nord Stream 2.

President Joe Biden is probably well-aware that sanctions are not the solution in this case, which, all things considered, will affect Europeans, since the Russian-German deal violates EU regulations on energy policy, which also stipulate a separation of energy supply and generation.

In the case of Nord Stream 2, the Russian company Gazprom, the majority shareholder, is both producer and distributor, which explains why the Russian giant has been constantly opposing Europe’s unbundling policy.

Going back to the Americans, Joe Biden, who isn’t new to global politics, also knows that Germany too wants a deal with Washington regarding this controversial project, to see it through once and for all.

At the same time, president Biden knows that the companies currently helping to complete the pipeline have already factored in possible sanctions, considering the benefits outweigh the possible costs. Sanctions with no effect could backfire on his administration. Biden also knows Angela Merkel recently went public and called for blocking the project, when the whole world learned that Russian opposition leader Alexei Navalny was the target of a Novichok poisoning attempt. Germany’s chancellor is herself under fire from her own party, especially now, around the election, and is expected to officially call off construction works for the pipeline, which is almost complete.

Nord Stream 2, a likely failure for Putin

I believe this time Vladimir Putin counted his chickens before they hatched. And if we’re to be sarcastic through-and-through, we could argue that, beyond the obvious material gains the pipeline is expected to bring, the Kremlin leader envisaged Nord Stream 2 as an instrument to destabilize Europe as a whole, the entire community bloc, natural gas being the bone of contention. At first, he designed an alliance with Germany, Austria, the Netherlands and Belgium against northern and eastern Europe. Yet statistics point to an overall drop in Russian gas exports to European markets. Just to get an idea, from a peak of $69 billion registered in 2008, Russian gas exports to the EU dropped to merely $25 billion last year.

Europe is shifting towards green energy, channeling its investments on that. America’s LNG could be an alternative, but the price has to match Russia’s.

Professor Anders Aslund of Georgetown University, an expert in the economic policy of Russia, Ukraine and East Europe, believes that if Nord Stream 2 is finalized and rendered operational, it will benefit no one, the least so Russia.

In the current context, as Europe is highly unlikely to build another pipeline to import Russian gas, Nord Stream 2 no longer has the trade purpose it theoretically serves. The outcome will become clear in autumn, after the parliamentary election in Germany. If the Greens win, the project is as good as stopped.

 


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  • The Nord Stream 2 pipeline, set to transport Russian gas straight to Germany, seems to have hit a few snags amidst growing opposition. Even if it does get finalized, Nord Stream 2 could prove useless due to Europe’s transition to alternative energy sources.
  • The Americans never liked the project to begin with, for reasons that are political (take, for instance, Ukraine’s gradual silencing or Russia’s growing influence in Europe) or trade-related, considering they are exporting liquefied gas to Europe through new terminals being built in northern Europe. Before the end of his mandate, president Donald Trump issued a number of sanctions against companies that contribute to the building of Nord Stream 2. Not even his successor, Joe Biden, has a mind for the Nord Stream 2 pipeline. It’s bad business for Ukraine, the new White House leader has said, every time arguing that the project is affecting the USA’s European allies. It’s something that Secretary of State Anthony Blinken also mentions each time the topic is raised.
  • Beyond the obvious material gains the pipeline is expected to bring, the Kremlin leader envisaged Nord Stream 2 as an instrument to destabilize Europe as a whole, the entire community bloc, natural gas being the bone of contention. At first, he designed an alliance with Germany, Austria, the Netherlands and Belgium against northern and eastern Europe. Yet statistics point to an overall drop in Russian gas exports to European markets.
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