By (Mrs) Amb Narinder Chauhan
Nord Stream is a system of offshore natural gas pipelines in Europe, running under the Baltic Sea from Russia to Germany. It includes two pipelines from Vyoberg to Lubmin forming the original Nord Stream or Nord Stream 1 (2011-12), and two further pipelines from UstLuga to Lubmin termed Nord Stream 2. At 1,222 kms Nord Stream 1 is the longest subsea pipeline in the world. The laying of Nord Stream 2 was carried out in 2018-21, the first line was completed in June 2021 and the second in September 2021, following the reduction in May 2021 of US sanctions on German companies involved in the project with Russia. Nord Stream has total annual capacity of 55b cubic meters, the 1200 kms long Nord Stream 2 is expected to double this capacity to 110b cubic meters.
Most of the natural gas supply to the EU comes from Russia. In 2020, Russian gas accounted for 43% of the total gas imports into the EU. One third of Russian gas to the EU travels through Ukraine. Several EU states are, therefore, highly sensitive to Russo-Ukrainian relations. Previous disputes have seen Russia turn off its gas pipelines to Ukraine,leaving millions of Europeans without gas during the winter months in 2006 and 2009. As a result, some EU states began to explore alternative routes to get gas without disruption. This led to the push for Nord Stream 2 (and Turk Stream, a southern pipeline to carry gas from Russia to the Balkans through Turkey under the Black Sea). Things came to a head with Russia’s invasion of Crimea in 2014 and resultant breakdown of relations with Ukraine. In 2017, Gazprom’s western partners agreed to help fund Nord Stream 2 which costs $11b. By January 2018, Germany had granted permits for its construction.
The Nord Stream projects have been fiercely opposed by the US on the grounds that direct supply of gas to Europe would strengthen Russia’s economic and political influence over the region. The Economist warned that Europe was getting dependent on Russia while Russia’s own reserves were in decline and could face problems meeting a surge in domestic and foreign demand. Advocates of the pipeline claim US opposition stems from its wish to sell more of its liquified natural gas to Europe and therefore sees the deal with Russia as an obstacle to its commercial interests. The pipeline company Gazprom of Russia contends the pipeline is more important to Germany than Russia, which could easily sell the gas to China and other Asian nations.
Central and East European countries that straddle alternative pipelines (Ukraine, Slovakia, Czech Republic, Belarus and Poland) see Nord Stream 2 as a move by Russia to bypass traditional transit countries and consequent large reduction in transit fees for them.Ukraine, a non-EU country, will lose transit fees of up to $720m/yr from Nord Stream 1 and $4.3b/yrfrom Nord Stream 2. Additionally, Ukraine fears it will lose leverage with Europe as its pipelines become obsolete and Russia would feel bold to further meddle without consequence. Others are concerned that the long-term plan of Russia is to exert political influence on them by threatening their gas supply without affecting supplies to Western Europe. Russia has not ratified the Energy Charter Treaty. Following the Russo-Ukraine gas wars, as well as foreign policy towards eastern Europe-it has been contended that gas supplies by Russia can be used as a political tool.
The Russian response has been that the pipeline increases Europe’s energy security, and that the criticism is caused by bitterness about the loss of significant transit revenues, as well as the loss of political influence that stems from the transit countries’ ability to hold Russian gas supplies to western Europe hostage to their local political agendas. It would reduce dependence of Russia on transit countries as for the first time it would link Russia directly to Western Europe.
It is contended that the Russian energy sector lacks transparency and Gazprom is no exception. An antitrust investigation against Gazprom reveals several abusive practices against the recipients in the EU and from this angle seen as strengthening Gazprom’s position in the EU even more. Further, if relations between Russia and Europe were to sour, Russia would turn off the gas supply, like what it did to Ukraine. It is also feared that Russian military presence in the Baltic Sea will increase thereby destabilizing the Baltic states. Sweden, for instance, is concerned about the increase of Russia’s Naval presence in the Swedish economic zone and that Russians could use this for military intelligence. It is argued that the fiber optic cables and repeater stations along the pipeline could theoretically also be used for espionage. It is also claimed maintenance costs of a submarine pipeline are higher than an overland route.
Gazprom has dismissed these concerns as laughable that a gas pipeline could be a weapon in a spy war.Russia and Germany have claimed that the pipeline leads to economic savings due to the elimination of transit fees (as transit countries would be bypassed), and a higher operating pressure of the offshore pipeline which leads to lower operating costs (by eliminating the necessity of midway compressor stations.). Gazprom says it would divert 20b cubic meters of gas from Ukraine pipelines to Nord Stream.
Critics argue the pipeline is not compatible with European climate goals. The greatest environmental impact, it is claimed, would result from more imports of natural gas into the EU resulting in release of additional 110 mt of CO2 carbon emissions annually that would conflict with decarbonization efforts. Further, as the pipeline crosses the waterway to Polish ports, there are concerns it will reduce the depth of waterways leading to the ports. There are also concerns of seabed disturbance and dislodging of WW2 era toxic substances including mines, chemical waste etc. dumped in the Baltic Sea. The impact on bird and marine life is also a concern. These are dismissed by Russia as far-fetched and politically motivated and that all these aspects have been factored in the environment impact assessment of the project during the construction phase.
Eventually, in July 2021, German Chancellor Angela Merkel and US President Joe Biden reached a deal that the US may trigger sanctions if Russia uses Nord Stream as a ‘political weapon’. The deal aims to prevent Poland and Ukraine from being cut off from Russian gas supplies. Ukraine will get a $50m loan for green technology until 2024 and Germany will set up a billion-dollar fund to promote Ukraine’s transition to green energy to compensate for the loss of the gas transit fees. The contract for transiting Russian gas through Ukraine will be prolonged until 2034, if Russia agrees.
Nord Stream 2 represents a shorter route to Europe than Ukrainian pipelines and being modern, it is efficient and cheaper to maintain. It will decrease risks in the unstable transit zones. The construction of the Nord Stream 2 gas pipeline is finished but is waiting regulatory approval before it can start supplying the gas. It is only a matter of time before the German energy regulators approve. German Chancellor Angela Merkel has backed it for the sake of cheaper gas for German people. Her predecessor Schroeder now works for Gazprom. Austria also favours it. The task is not that easy amid heightened geopolitical tensions.
Nord Stream 2 has gained attention as energy prices have soared across Europe. Higher gas and electricity prices could undo the recent economic recovery and thus the leaders are under pressure to act to mitigate the impact. Increasing gas imports from Russia could provide some sort of short-term relief but there are tough questions about what to do in the medium and the long term. The Aim of a carbon neutral Europe has raised the question about the kind of energy mix those countries should have.Some see natural gas, a fossil fuel, to reduce CO2 emissions as a way out, others argue that energy independence is paramount, hence nuclear and renewables should be the option – for the former, in west Europe, there is little appetite. In March 2021, Germany left nuclear power energy and chose to move towards a low carbon economy. Consequently, Germany has begun to compensate its energy mix with an increased natural gas supply.
A representative Forsa study of May 2021 revealed 75% of Germans favour Nord Stream2. The Committee on Eastern European Economic Relations criticized that US sanctions were threatening democratic processes in Germany and Europe, endangering Germany’s interests and causing damages of several billion euros at the cost of European taxpayers and businesses. Approvals for gas delivery through Nord Stream 2 were further delayed in late November 2021 when Germany required part of Gazprom-owned business entity to be transferred to German ownership; concurrently, the US imposed more financial sanctions on Russian companies involved in the project. Germany has urged the US Congress not to sanction the project as doing so would weaken ‘US credibility’ and ‘undermine transatlantic unity’. The energy analysts state the delay of gas deliveries through Nord Stream 2 has significantly exacerbated the 2021 energy crisis.
(The author is a former Indian ambassador and former envoy to the EU. Twitter:@nchauhanifs Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).