Ukraine and the politics of Nord Stream 2

There is a lot of talk about Ukraine crisis being engineered by the US/allies to dissuade Germany, the European powerhouse, from pursuing an economically significant pipeline project called North Stream 2 (Nord Strom 2). The fear is that the consequent economic interdependence between Germany and Russia would dilute NATO, reducing German standing against Russia. Washington considers the pipeline threatening its primacy in Europe.

The North Stream (NS) System consists of two pipelines between Russia and Western Europe — the 1,222 km NS-1, formerly called North Transgas and the 1,234 km NS-2, formerly the North European Gas Pipeline; in addition to two minor lines. The NS-2 is a system of offshore natural gas pipelines under the Baltic Sea, connecting Russia to Germany, bypassing the overland pipelines laid over a decade ago (NS-1).

Russian state company Gazprom and its subsidiary operate both lines and own majority shares in the System having built these via a consortium of companies. The NS-1 was inaugurated in 2011, whereas NS-2 awaits final certification from German regulators. NS-2 is expected to provide German homeowners/businesses inexpensive, reliable and clean energy, besides significantly boosting Russian gas revenues in return. NS-1 can carry 55 billion m3 (1.9 trillion cu ft) of gas annually, whereas NS-2 has double this capacity.

Opposition to the NS-2 project in particular has been stronger by the US, Ukraine and other Central/Eastern European countries due to: a) fear of enhancing Russian influence through dangerous energy dependence, as Russia already fulfills 35% European gas needs; b) expected reduction in transit fees for existing overland pipelines in affected European countries; and c) Russian ability to bypass the traditional transit countries (Belarus, Czech Republic, Poland, Slovakia, and Ukraine). With NS-2, Russia potentially threatens gas supplies to these nations without affecting German/Western European supplies.

Sweden and Finland are also uneasy by Russian decision to deploy its Baltic Naval Fleet for ecological safety of the NS-2 project. Both are suspicious that the fiber optic cable/repeater stations running along the pipeline could be used by Russia for eavesdropping/espionage.

Russia contends that NS-2 increases Europe’s energy security and rejects criticism as maleficent, triggered mainly by loss of transit revenues to the opposing countries, besides their reduced leverage. Russia reckons NS-2 (being under Sea) frees Russia and Western Europe especially Germany from dependence/blackmail of the transit countries, in particular Ukraine.

The US had asked Ukraine to withdraw its objections in summer 2021, as President Biden and Chancellor Angela Merkel concluded a deal, stipulating the US sanctions if Moscow used NS-2 as a ‘political weapon’. Poland and Ukraine were to be compensated for being cut off from the Russian gas supplies and losing transit fees. Ukraine’s potential loss is significant, calculated at $720 million per year. The NS-2 project is so vital that on 16 November 2021, European natural gas prices shot up 17%, when German regulators withheld its approval. A representative study conducted in May 2021 found 75% Germans supporting NS-2.

Europe, with dwindling gas reserves, finds no affordable alternative to the Russian gas as some countries are totally dependent on Russian gas. Russian gas dependence ranges from 100% (North Macedonia) to 94% (Finland), 24% (France), 49% (Germany), 46% (Italy) and 40% (Poland), etc. Qatar, meanwhile has declared it could not replenish the needed gas by itself. And Central Asia remains complaint to Russia.

Although the US ramped up its LNG production, making roughly half of its extra LNG available to Europe through 60 cargoes last week. However, this may increase LNG prices for US consumers, as pointed out by some 11 US senators; would still be insufficient; and would cost more to Europe. The US has also asked Japan to divert some LNG to Europe.

The announcement of sanctions against Russia threw energy market in crisis mode on 22 February with oil touching $ 100/barrel. Russian crude exports accounts for 48% of European and 11% of the US imports. European governments are understandably anxious about public backlash for rising energy prices.

Germany, meanwhile considers NS-2 a ‘purely commercial’ project, against the US considering it ‘geopolitical’. Germany had gone ahead with it despite sanctions. Further ‘enveloping sanctions’ are already contentious within NATO/gas-dependent countries, especially Germany, and would impact Russo-EU trade also, that was over $188 billion in 2021.

So, President Putin — correctly reading the US/European lack of plan to substitute Europe’s energy dependence now and in near future; allies’ lack of resolve to risk a war over Ukraine; and the ‘anticipated’ bite of sanctions — feels having a strong hand to play. He knows what he is doing and why.

The US Foreign Policy establishment disdains more German dependence on Russian gas for fear of an ensuing Russo-German entente; as expanded trade and commercial ties would create an alternative European security architecture. In that future world, analysts believe, US military bases, its expensive weapons’ exports, deployment of missile systems and even NATO become redundant. This might, subsequently, lead to de-dollarisation of European/German economy, making US Treasuries stockpiles irrelevant. Moreover, NS-2 is slated to bring Europe and Asia closer, minus the US.

This grand strategic iteration seems plausible as an alternative view. Ironically, the ‘democratic’ US has been meddlesome and interventionist, as it remained on a regime-changing spree in over 50 countries, and maintains military presence on more than 800 bases around the globe.

The Under-Secretary of State for Political Affairs, Victoria Nuland, is on record in a January 27 State Department press briefing: “If Russia invades Ukraine one way or another Nord Stream 2 will not move forward.” Biden has augmented that view, empathically declaring, “If Russia invades … there will no longer [be] a Nord Stream 2. We will bring an end to it.”

Therefore, under encapsulated US strategy, Team Biden seems to “goad Russia into an orchestrated military response to sabotage NS-2. And Germany under immense pressure has announced putting it on hold.

Putin, meanwhile, in Phase 1, walks away with ironclad guarantees about NATO not admitting any former Soviet Socialist Republic; autonomy/peacekeeping for the Donetsk and Luhansk republics in Ukraine’s Donbas Region; and economic blockade plus ‘possible’ regime change in Kiev. Duma and Russian public opinion are rock solid behind him. Putin is expected to continue with his ‘nibbling’ strategy, calibrating it with US/Western response.

PM Imran Khan needs to listen ‘carefully’ to Moscow’s security concerns.

 

Published in The Express Tribune, February 24^th, 2022.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.