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The Nord Stream 2 gas pipeline moves on
“CALMLY, WITHOUT giving in to provocations, we lay our gas pipeline over their sanctions.” This piece of doggerel, delivered, mortifyingly, in hip-hop form last year by a Kremlin propagandist, invited Russians to resist Western attempts to thwart the motherland’s mighty energy policy. In fact, even though Russia is under sanctions, Nord Stream 2 (NS2), a Russia-Germany undersea gas pipe that has divided Europeans and angered America, is not. Day by day, the companies contracted by Gazprom, the Russian state-owned gas giant and NS2’s sole shareholder, are laying their concrete-coated steel pipe segments on the bed of the Baltic Sea. They aim to finish by the end of the year.
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NS2 is a deeply troubling prospect for those who have long feared the Kremlin’s ability to export political influence along with gas. Critics charge that, by increasing dependence on Russia, it exposes parts of Europe to the risk of energy blackmail at the hands of an increasingly antagonistic supplier. Ukraine is particularly jittery. NS2 bypasses its territory entirely, potentially depriving it of transit fees it currently charges Gazprom, worth about 2% of GDP, and of a useful piece of leverage against a large, aggressive neighbour. No wonder Gazprom has vowed to eliminate its dependence on Ukraine for transit.
For a time, sceptics of NS2 looked to the European Commission for salvation. The EU’s pro-market energy rules have successfully tamed Gazprom’s ability to weaponise its gas exports in the past. Over the past week governments and MEPs wrestled over an update to a directive covering pipelines from outside the EU. After a brief Franco-German contretemps, a settlement was found: EU rules to encourage competition will apply to NS2 when it enters European territory, but German regulators will be left in charge of implementing them. Exemptions from the pro-market strictures are allowed, though the commission must sign off on them.
This could make life trickier for Gazprom. Its monopoly on Russian piped gas exports, for instance, violates an EU rule obliging owners to grant third parties access to pipelines (Rosneft, another Russian energy giant, is said to be sniffing around). Merely negotiating with German officials and waiting for approval from Brussels will delay the point at which gas starts to flow.
Yet the EU probably will not stop it. Many European governments, including the Baltic and Nordic states, Poland, France and Britain, had hoped otherwise. And they might once have had cause to expect Germany to be on their side. In 2014, after Russia annexed Crimea and invaded eastern Ukraine, Angela Merkel formed a common EU line on sanctions that, defying all predictions, still holds today (indeed, more measures may follow next week). The chancellor hinted at a multi-generational struggle against Russia.
But talk about energy, and Germany reverts to small-minded legalism. NS2 does not threaten the security of Europe’s supplies, say German officials, because of the multiplicity of import options from elsewhere. It creates interdependence, because Gazprom needs European custom. Mrs Merkel has belatedly acknowledged that NS2 has a political dimension, and now insists that gas must continue to flow through Ukraine. But it is not clear how that promise can be upheld. And a broader strategic assessment of the impact of the pipeline is almost wholly absent in Berlin.
What explains Germany’s attitude? Its consumers and firms like the prospect of secure, cheap supplies; gas fuels half Germany’s heating. Some want to sell it on to Germany’s neighbours. Mrs Merkel’s coalition partners, the Social Democrats, have their fair share of Putinversteher (“Putin-understanders”). Mrs Merkel, whose parliamentary constituency encompasses the point at which NS2 reaches Germany, has stared down these interest groups before. But her furious telephone diplomacy to other EU leaders over the past week shows how much the project matters to her. “It’s very inward-looking, and has damaged Germany’s image in Europe,” says Stefan Meister at the German Council on Foreign Relations.
If there is a wild card, it lies across the Atlantic. America has long argued that NS2 undermines European security, but under Donald Trump the tone has sharpened. His ambassador to Germany, Richard Grenell, has angered his hosts by threatening European companies involved in NS2 with sanctions. (Five European firms are co-financing the pipeline, and dozens more are contractors.)
Germans detect an outrageous attempt to use Ukraine as a pretext to bully them into buying American liquefied natural gas (LNG), which sells at a 20% premium over Russia’s piped stuff. This is hardly unreasonable; Mr Trump has not otherwise evinced much concern over eastern Europe’s security. Germany hopes its plans to build at least two LNG terminals on its north coast, confirmed this week, will help mollify the administration. But Congress and the State Department are at least as tough on NS2 as the White House, and will not be bought off.
Yet although American sanctions remain possible, their potential utility dwindles daily as the construction of NS2 creates facts on the seabed. And ultimately, even if European firms quit the project under American pressure, Gazprom and its sponsors in the Kremlin will find a way to finish the job themselves. However unhappy it makes some Europeans, the pipeline looks unstoppable.