Ukraine-Russia: Germany Halting Nord Stream 2 Gas Pipeline

What does Nord Stream 2 and gas got to do with the Ukraine standoff?

Gas is not just a source of energy, sometimes it is a political weapon. As western countries weigh possible sanctions against Russia for an invasion of Ukraine, the future of the Nord Stream 2 pipeline hangs in the balance. But it’s complicated. The EU gets 41% of its gas from Russia; Russia earns 60% of its import revenues from the bloc. The crisis over Ukraine comes as Europe is struggling to deal with soaring gas prices and internal divisions over how to wean itself off fossil fuels in response to the climate emergency.

What is Nord Stream 2?

Nord Stream 2 is a 750-miles pipeline connecting Russia and Germany, with the potential to supply 26m German homes. The pipeline has been completed but has not yet certified by Germany’s energy regulator.

It’s much more than another engineering project. The Baltic Sea pipeline bypasses Ukraine and is seen as depriving Kyiv of lucrative transit fees. One former Polish foreign minister even likened it to the 1939 Molotov-Ribbentrop pact that carved up eastern Europe between Nazi Germany and Soviet Russia.

Germany freezes Nord Stream 2 gas project as Ukraine crisis deepens

German Chancellor Olaf Scholz said Tuesday (Feb 22) that he was suspending the Nord Stream 2 pipeline project with Russia in response to Moscow’s recognition of two breakaway regions in Ukraine.

Scholz said he had ordered a halt to the review process by the German regulator for the pipeline, seen by Western partners and Kyiv as a crucial bargaining chip in the increasingly fraught standoff with Russia.

The pipeline had been set to ease the pressure on European consumers facing record energy prices amid a wider post-pandemic cost of living crisis, and on governments that have already forked out billions to try to cushion the impact on consumers.

Dmitry Medvedev, Russia’s former president and now deputy chairman of its Security Council, tried to rub salt in that wound. “Welcome to the new world where Europeans will soon have to pay 2,000 euros per thousand cubic metres!” he tweeted – suggesting prices were set to double.

Germany gets half its gas from Russia and had argued that Nord Stream 2 was primarily a commercial project to diversify energy supplies for Europe. But despite the potential benefits, the pipeline had faced opposition within the European Union and from the United States on the grounds that it would increase Europe’s energy dependence on Russia as well as denying transit fees to Ukraine, host to another Russian gas pipeline, and making it more vulnerable to Russian invasion.

“This is a huge change for German foreign policy with massive implications for energy security and Berlin’s broader position towards Moscow,” said Marcel Dirsus, non-resident fellow at Kiel University’s Institute for Security Policy.

The Russian state-owned gas giant Gazprom owns the entire pipeline but paid half the costs, with the rest shared by Shell, Austria’s OMV, France’s Engie and Germany’s Uniper and Wintershall DEA .

Russian response

Russian President Vladimir Putin, meanwhile, said Russia would continue uninterrupted natural gas supplies to world markets. “Russia aims to continue uninterrupted (gas) supplies, including liquefied natural gas, to the world markets, improve related infrastructure and increase investments in the gas sector,” Mr Putin said written remarks for a gas summit in Qatar on Tuesday.

A deputy Russian foreign minister brushed off Germany’s decision to halt the pipeline’s certification, saying that Moscow feared nothing and “doesn’t believe in tears”, the TASS news agency reported. Europe would not be able to replace large volumes of Russian gas with LNG from elsewhere, Russian energy minister Nikolai Shulginov reiterated on Tuesday.

Moscow’s own options to re-route gas from Europe, which comes via pipelines not connected with Asia, are limited. Russian gas supplies had been in the spotlight long before the Ukraine crisis amid increased global demand for the fuel which pushed up European spot gas prices. As customers relied on stockpiles while waiting for prices to cool down, the Yamal gas pipeline, which usually brings Russian gas westwards to Germany via Poland, was switched eastwards, sending gas back to Poland instead.

The receiving station of the Nord Stream 2 gas pipeline ear Lubmin, Germany. The pipeline has been completed but not yet certified by the courntry’s energy regulator. Photograph: Sean Gallup/Getty Images

Eastward flows from Germany back to Poland continued for the tenth week on Tuesday. Gazprom says it is meeting its contractual obligations while not adding gas for the spot markets. Austria’s OMV, another big Gazprom’s customer and a financial partner in the Nord Stream 2 gas pipeline, said on Tuesday that Russian gas supplies continued as usual and in accordance with the contract.

Will the crisis force the EU to reduce dependence on Russian gas?

Despite successive gas disputes with Russia and the huge diplomatic fallout over the annexation of Crimea and downing of flight MH17 in 2014, the EU has done little to wean itself off Russian gas. Borrell said in a blogpost before his Washington trip that the EU had not done enough to “enhance our capacity to face potential gas supply cuts”, while Russia had been building up its foreign currency reserves, a measure to insulate itself from western sanctions.

The latest crisis could force a reckoning, as should the EU’s climate policy, which has a legally binding target of net zero emissions by 2050. The problem is many member states see gas as a bridge away from coal or nuclear power. The need for a “gas bridge” is disputed by environmentalists, but the policy choice has already been made in many European capitals. Europe’s thirst for gas, it seems, is not going to disappear anytime soon.

References:
https://www.reuters.com/business/energy/germanys-scholz-halts-nord-stream-2-certification-2022-02-22/
https://www.theguardian.com/world/2022/feb/07/what-have-nord-stream-2-and-gas-got-to-do-with-ukraine-standoff
https://www.straitstimes.com/world/europe/germanys-scholz-halts-nord-stream-2-as-ukraine-crisis-deepens