The Nord Stream 2 gas pipeline from Russia to Germany and into the European network seems to be on course despite opposition from the US, Ukraine and Poland.
Donald Trump’s opposition to Nord Stream 2 is about trade and the belief that US liquefied natural gas (LNG) sales to Europe could rebalance trade ties that he thinks work against US interests.
Eugene Rumer, a director at the Carnegie Endowment for International Peace, wrote in the Financial Times: “In reality, Europe is not overly dependent on Russian gas. Russia accounts for 37 per cent of EU gas imports, a share that has declined steadily from 75 per cent in 1990. New sources of gas, including LNG supplies, have effectively undercut Russian leverage. Nord Stream 2 will not change that.”
Almost US$40 billion in revenue came from Russian gas sales to Europe last year, meaning Russia is reliant on its European customers.
The EU’s successful efforts to liberalise its energy market, partly with more LNG terminals, reverse flow pipelines and inter-connectors have also reduced Russia’s control.
Unlike pipeline gas, LNG imports are not locked to a location but rather the destination is determined by market demand. Currently, the major reason for Germany choosing pipeline-delivered Russian gas is that it is as much as 25 per cent cheaper than LNG, Rumer argues.
Ukraine stands to lose as much as US$3 billion annually in pipeline transit fees it earns from Gazprom.
But reports that Russia aims to bypass Ukraine completely are exaggerated. The capacity of the Russian pipelines bypassing Ukraine — Nord Stream and TurkStream to Turkey — add up to 158 billion cubic metres (bcm) a year and, at 85-per-cent capacity, it would reach 134bcm a year. Assuming that Russian exports to Europe are at 190bcm a year, this would mean that about 54bcm a year would still need to pass through Poland and Ukraine, down from the current 90bcm per year.
In 2006, Poland’s then defence minister Radoslaw Sikorski likened the first Nord Stream pipeline to the 1939 Nazi-Soviet Pact.
And Poland worries Nord Stream 2 will undermine its plans for an LNG terminal and gas pipeline from Norway.
But the first Nord Stream pipeline did not diminish Germany’s response to Russia’s 2014 annexation of Crimea, Rumer wrote.
The gas pipeline from Siberia to Europe did not stop the collapse of the USSR, despite the Reagan administration’s warnings it would boost Soviet military power.
“Undercutting Germany, whether over a pipeline whose significance is vastly exaggerated or over ephemeral trade deals, makes little strategic sense for either the EU or US,” Rumer argued.
Nord Stream 2 looks like it is going ahead. Picture credit: YouTube