Russia's Nord Stream 2: The Gas Pipeline That Germany Wants but Europe Doesn't

The pipeline stretching from Russia to Germany has sparked fears of Russia becoming a bully in European geopolitics.

(This article was originally published on 9 October 2021 and has been republished from The Quint's archives in light of Germany announcing on 22 February that it will not certify the Nord Stream 2 pipeline after Russia recognised and sent troops into Donetsk and Luhansk, in Ukraine.)

Gas prices in Europe have risen by almost 600 percent in the past year due to surging demand that has not been met by a proportionate increase in supply.

The deputy prime minister of Russia, Alexander Novak, said on Thursday, 7 October, that the Nord Stream 2 gas pipeline’s approval by Germany could get gas prices back in control, reported The Guardian.

This statement comes in the context of European politicians blaming Russia for limiting the supply of gas to European countries.

Gazprom, an energy company whose majority shares are owned by the Russian state, is Europe’s largest supplier of gas and fulfils around 35 percent of Europe’s gas demands.

European energy firms are complaining that Gazprom is limiting its supply to long-term contractual obligations and is not increasing the supply of gas to meet the rising demand, a policy that could curb gas prices in the continent.

However, European parliamentarians argue that Nord Stream 2 lies in the core of this crisis, and that Russia is using Gazprom’s monopoly on gas supply as leverage to coerce Germany’s clearance for the undersea pipeline, Reuters reported.

The US opposes the deal between Russia and Germany, saying it would make Europe heavily dependent on Russia for energy supplies, giving Russia geopolitical leverage.

In this explainer, we explain the controversy surrounding Nord Stream 2. What exactly is it, and what route does it take? Does it provide Russia leverage over Europe? Which countries are the losers in this project? What is the US' role here – does it genuinely care about its European allies, or does it have its own profit in mind?

Nord Stream 2: An Undersea Pipeline From Russia to Germany

Simply put, Nord Stream 2 is a natural gas pipeline that will stretch from the Russian fields to the German coast, spanning 764 miles (1,230 kilometres).

The pipeline will use an undersea route, under the Baltic Sea, and will increase the capacity of gas supply to double with respect to the original Nord Stream that has been running since 2011.

The total annual capacity of Nord Stream 1 to funnel gas is 55 billion cubic metres. Nord Stream 2 is supposed to funnel 110 billion cubic metres of gas per year.

Gazprom owns the project and there are five investing companies – Royal Dutch Shell Plc, ENGIE, OMV, Uniper, and Wintershall DEA – that will contribute to the $11.6-billion pipeline, according to Nord Stream 2’s official website and The Washington Post.

The construction was completed in September 2021 and is now awaiting approval from Germany to begin gas supply.

The entry point of this pipeline into the Baltic Sea will be the Ust-Luga area of Kingiseppsky District in Leningrad.

After stretching across the Baltic Sea, it will terminate in Greifswald, in the north-eastern state of Mecklenburg-Vorpommern, quite close to the termination point of Nord Stream 1.

Why Does Germany Need More Gas?

The core of the issue lies in Germany’s dependence on gas for its manufacturing sector and four main industries – automotive, mechanical engineering, chemical, and electrical.

Germany is trying to reduce its dependence on fossil fuels and has a target of ending coal-fired electricity generation by the year 2038.

Using natural gas, which is also a fossil fuel, emits less carbon compared to coal-burning and until the year 2050, by which year Germany plans to be completely carbon neutral, the country will be in need of more gas supply, according to Politico.

Additionally, renewable sources are used for around 50 percent of Germany’s electricity production. But during the winter, when there is a lack of sunlight and wind, gas is needed to meet the higher demand for energy (for heating etc).

Therefore, it is no surprise that Germany strongly supports this pipeline, as is clear by its actions. Despite the controversy surrounding the poisoning of Kremlin critic Alexei Navalny, Merkel continued to push forward the construction of the pipeline.

To reduce the severity of US sanctions on companies contributing to Nord Stream 2, the government of a rural state in Germany through which the pipeline will cross through established a foundation to aid its construction, citing "climate protection", The Economist reported.

Additionally, Merkel even called Putin in July this year to discuss the completion of the pipeline, after which the Kremlin put out a statement about Putin praising "the German side’s steadfast loyalty regarding the completion of this purely commercial project that is designed to strengthen Germany’s energy security", added Politico.

Pipeline's Geopolitical Impact: How Russia Stands To Benefit

A combination of Germany’s increasing demand for gas, declining gas production in Europe over the past few years, and the potential of Russia having an energy monopoly over Europe has created the controversy surrounding Nord Stream 2.

In simple terms, the project, once completed, will give Russia a level of control over European gas supplies that it shall use as political leverage.

The potential consequences are not hard to imagine. Europe already imports around 35 percent of its natural gas from Russia. If relations between them were to get tense, what would be stopping Russia from blocking the supply of gas, leaving millions of Europeans without it, and therefore without heating and lighting?

Critics, therefore, say that Europe’s energy security would be under severe threat from Russia.

Not only will Nord Stream 2 give Putin a huge market for gas, it will also allow him to exercise geopolitical influence over his allies and rivals in Europe.

This is exactly what was being alleged by some European parliamentarians when they said that Russia could easily supply more gas to European countries to get the prices down but was choosing not to do so.

On 15 September, even a Kremlin spokesperson named Dimitry Peskov had said that “undoubtedly, the quickest launch of Nord Stream 2 would significantly balance out the pricing parameters of natural gas in Europe”, Reuters reported.

The Biggest Losers – Ukraine and Poland  

Ukraine and Poland have consistently been vehemently opposed to the pipeline, because they have the most to lose, both politically and economically.

A large share of Russia’s gas supply to Europe passes through Ukraine and this allows Ukraine to earn around $2 billion in transit fees.

But Nord Stream 2’s route along the Baltic Sea would bypass Ukraine, thereby depriving the country of approximately 3 percent of its GDP.

Ukraine-Russia relations have been uneasy since the dissolution of the Soviet Union. They even had a gas dispute in 2009 that made Gazprom cut off gas supply to Ukraine for 13 days, the effects of which were felt by other European countries as well.

Russia annexed the Crimean Peninsula (internationally recognised as still being a part of Ukraine) in 2014.

European dependence on Russian gas could embolden Russia to bully Ukraine into submission in conflict regions like Crimea or Donbas, according to The New York Times.

Nord Stream 2 would also have severe economic consequences for Poland, which currently imports gas from the Ukrainian-Polish pipeline.

Poland says that the Russian pipeline is anti-competitive, and would make the Ukrainian-Polish one obsolete and force it to buy gas from Germany at higher prices.

Lastly, Nordic security concerns have been raised, with politicians and military experts of Finland, Sweden, and Denmark warning that Nord Stream 2 is Russia’s means to increase its presence in the Baltic Sea, CNBC reported.

US' Role: Concern for Allies or Profit Motive?

While the US claims that it is worried about its European allies becoming overly dependent on Russia for gas supplies, it is no secret that the US itself is eager to increase its sales of sea-borne liquefied natural gas to Europe, called “freedom gas”, according to Reuters and The Washington Post.

In fact, the US had imposed sanctions on various entities and vessels that were linked to the construction of Nord Stream 2.

US President Joe Biden has imposed 19 such sanctions, compared to two by President Donald Trump.

But these sanctions were lifted in May 2021. The reason that was provided was that not only was Nord Stream 2 an almost completed pipeline, but also that Biden wants to strengthen ties with Europe.

The US also says that effectiveness of the sanctions it had imposed on Russia after the 2014 Ukrainian Crisis will be undermined by the gas exports that Nord Stream 2 shall enable.

To summarise, the reasons for US involvement are political and economic. It does not want Germany and other European nations to depend on Russia for gas to the extent that Russia exercises influence over them.

At the same time, the US wants to profit by selling its own “freedom gas” to Europe.

Piped gas, however, comes at a lower cost than liquefied natural gas, reported The Economist.

Therefore, it should not come as a surprise if German industries overwhelmingly prefer Russia's gas sales to the US' gas sales. Economic power often translates into political influence.

By approving of Nord Stream 2, Germany risks handing over immeasurable political leverage to Russia over itself and the rest of Europe.

The US will not be happy about that.

(With inputs from Reuters, The New York Times, The Washington Post, The Conversation, CNBC, The Economist, Politico, and The Guardian.)