What a difference a year makes
In February 2021, Nord Stream 2 could legitimately be called a Cause célèbre - a French phrase still unnaturalized in English, meaning “famous (legal) case" - used to refer to a controversy that attracts great public attention
Fortuitously, the natural gas pipeline between Russia and Germany, still under construction at the time fell into the part with the outrage surrounding Russian opposition leader Alexei Navalny's fate
Mr. Navalny's detention remains a cause of concern but, if Nord Stream's future is more clouded than ever before, the honor today is due to the Russian president, Vladimir Putin
Turning things on their head, Mr. Putin's geopolitical choices have been reinforcing the argument made by the U.S. all along, that Russian commercial interests (selling natural gas on the European markets) were bound to take a backseat
Over the past 50 years, ever since natural gas exports took off in the 1970's, when Russia was still Leonid Brejnev's USSR, energy remained (mostly) insulated from the geopolitics of the Cold War
Not any longer...
Nord Stream 2, in planning stage since the early 2010's, completed since September 2021 and launched as a commercial enterprise between the Russian energy exporter Gazprom
The final leg of the Nord Stream 2 pipeline, some 150 km (less than 100 miles) in Danish and German waters (out of total length of 1230 km (760 miles), has been subject to a series of American sanctions since Dec. 2019, reviewed in ‘the End Game’ and in ‘Gas pipelines, ties that bind’
Security concerns remained the main focus of American legislation blocking the involvement of international companies on the project, which led to costly delays in bringing Russian pipe-laying ships on site in the Baltic
While there is some truth to the American objections, with Russian gas deliveries at approx. 40% of European consumption, the accident of geography (location of the gas fields) and the preeminence of Germany in Central Europe could well turn out to be linchpins of European stability
Russian gas exports became an influential factor of Chancellor Willy Brandt's 'Ostpolitik' during the 1970's, signaling a loosening of the Cold War between East and West, but also the emergence of a confident democratic Germany on the European stage
Both because gas delivery to the European market is channeled over many routes besides Nord Stream and because Russia's gas exporter Gazprom
Still, European dependence on Russian gas deliveries have remained a perennial bugbear of American foreign policy, depriving sanction regimes on Russia (excluding energy exports), of much of their effectiveness
As for Nord Stream 2, there may be a technical argument to doubt the merits of the new pipe line with maturing European demand, the surge of renewable energy sources, climate change and warmer winters
Market shares
As discussed in ‘Russia’s Rattenfänger’, the project initiated by Gazprom
These partners will be more than a little miffed at the prospect of abandoning a €9.5 billion ($11 billion) project, held up today by the regulatory process in Germany
Jointly with the existing Nord Stream pipeline, Nord Stream 2's route under the Baltic Sea, circumventing the existing land-based pipe lines, will deliver an export capacity of 110 billion cubic meters, around half of Russia's total gas exports to Europe a year
From Gazprom's perspective, as lowest-cost gas provider on the highly profitable European markets, it is all about profitability and market share
| Share in % | 2019 | 2020 | Jan.-Jun. 21 |
|---|---|---|---|
| Russia | 44,7 | 43,9 | 46,8 |
| Norway | 21,3 | 19,9 | 20,5 |
| Algeria | 12,1 | 11,9 | 11,6 |
| UK | 5,5 | ||
| U.S. | 5 | 6,3 | |
| Qatar | 6,3 | 4,3 | |
| Nigeria | 5,9 | ||
| Others | 9,7 | 13,8 | 10,5 |
| 100 | 100 | 100 | |
| Source Eurostat - Market Shares (in %) - 2019-2021 | |||
Russia's heft is glaring and expected to remain dominant, as other traditional gas fields (Groningue in the Netherlands, the North Sea fields for the UK and for Norway) are nearing depletion
However, Nord Stream 2 still earned rounds of condemnation by assembling opponents brought together in their rejection of Russia's regime itself
By drawing Russian energy exports into a geopolitical showdown, President Putin may be getting more than he bargained for, reigniting opposition on numerous fronts and opening the door for newish players, foremost America's and possibly Qatar's liquid gas shipments
A gamble by any name...
Opposition in many shades
Poland has declared its opposition based on security concerns of excessive dependence on Russian energy supplies – a pertinent concern following the invasion(s) which Poles have suffered up to recent history (reducing the country to satellite status under Soviet regime after WWII and until 1991 - date of the first free Polish parliamentary elections)
Poland’s reticence is probably one of the most respectable, in the light of its perennial angst of Russia’s long reach, which has been pressing west for centuries to buttress Russian security
Green opposition, especially voiced by European parliamentarians, looks self-serving and of little consequence on the fundamentals of European energy provisions, bound by geographical reality to the Eurasian landmass, the location of its energy resources and the medium-term dependency on natural gas
Ukraine, which is potentially exposed to big losses in transit fees currently paid by Gazprom, will have many reasons to oppose the project, even though the 5-year agreement signed between Russia and Ukraine in December ’19, precisely to clear the way for the pipeline completion, does guarantee transit volumes and fees...
The protection of Ukrainian interests has been very popular in non-Ukrainian circles, especially in America and the previous Trump Administration, the US Congress in a bipartisan show of strength and President Biden have dismissed the project from the start in the belief that 'Nord Stream 2 is a bad deal for Europe’
American interference with European energy policy, of which the new pipeline is part, used to appear most out of step of all the forces banded in opposition, making a weak case of NATO security, ignoring the strong guarantees of European energy policy and relying on claims supported by Ukrainian individuals (not the government) – with unambiguous business interests in selling American LNG
Polarized by Nord Stream, with tempers running high and losing all sense of geopolitical reality, even level-headed publications such as the Economist shared a narrative leaving no room for debate by suggesting that the demise of the pipeline ‘would be an ignoble end for an ignoble project’
Germany steel
If the confrontation over the pipeline is ultimately resolved, and gas starts flowing, it will be because Germany’s unflinching determination, and its industrial interests, align with economic reality
Western Europe is linked to Russian and Central European gas fields by a vast network of pipelines built since the 1970’s to guarantee energy provision across Europe, to energy-poor countries and Germany is not alone...
As reported in January 2021 by Deutsche Welle, the German broadcaster,
Green party politician Jürgen Trittin, a former German environment minister, believed cancellation of the pipeline would be futile. The pipeline's Russian developers would receive legal damages from Germany while still being able to export their gas by other means.
"I have never been a friend of this pipeline, but to stop it at this point in time would possibly have a very high price, without achieving any real effect," he said. "After all, Russia has plenty of opportunities to export its gas via other routes."
As it turns out, the headwinds blowing from Moscow have been unveiling stark strategic interests
Maybe, the security concerns of Eastern European governments and of the U.S. are premonitory after all...
But, surely, geography, model democratic governance – and energy interests – have a way of revealing the hard core of political engagement which remains wedded to the long sweep of history
History über Alles
Upending the long held guarantees of neutral energy provider, which used to be essentially unaffected by international relations, Mr. Putin has chosen to sing from a very different song book...
Commercial interests are superseded by a geopolitical gamble in Central Europe, encompassing Ukraine, Byelorussia and the commitments of NATO itself
Even though the drumbeat of war over Ukraine may be deafening, it is, by itself, the strategic reversal of the Russian President which should concentrate the minds
Perennial insecurity has dominated Russian foreign ventures through the ages, weighing on Mr. Putin's strategic options today
It is a testimony to Europe's huge success as symbol of democratic governance that the frailty of all the Eastern autocracies has become an open secret
Overlapping the loss of a legitimacy which these regimes took for granted, the dominance of Germany, backed powerfully by the European Union, is an economic reality and a political probability
A divided Continent and quiet dominance by Germany in Central Europe are probably not what either American foreign policy planners, or Russian strategists, have in mind – it is precisely what will be achieved, giving it time…as will be shown in a follow-up note 'Germany, nervöse Grossmacht'
As for Mr. Putin, although unquestionably focused on energy exports, which remain his true power base, he may in fact be downgrading energy exports to the West
Never a great supporter of pipeline extensions, as we expect to show in ‘Novatek , Russia's icebreaker’, the attention of Russia’s president is concentrated on energy demand in Asia, by way of LNG deliveries, leaving pipeline planning to Gazprom’s powerful lobby of engineers, with much reservation and perhaps unwillingly …