From the time the plans for construction of the Nord Stream-2 pipeline between Russia and Germany were formulated in 2015, the project has been under constant scrutiny for various reasons. These reasons have varied from the pipeline being a commercial project that would help Europe achieve its energy security, to those who have criticised the pipeline based on environmental concerns and over-dependence on Russia for energy needs. In January 2021, the Trump administration applied sanctions on the Russian ship laying the pipeline in the Baltic Sea, and now with reports regarding German willingness to put in regulatory measures to reduce friction with the Biden administration - the issue is once again at the forefront of debates on geopolitical impact of the pipeline. These debates over the strategic and economic importance of the project are further gaining prominence following the arrest of Russian opposition leader Alexei Navalnyand of other Russian citizens who protested against Navalny’s arrest, and the expulsion of three European diplomats by Russia. This paper provides a brief background to the Nord Stream-2 pipeline and analyses various concerns with the project. It also looks at why Germany is pursuing the project and various reactions to the pipeline.
Nord Stream-2 Pipeline
The Nord Stream-2 project was envisioned in 2015 to run in parallel to the existing Nord Stream-1 pipeline passing through the Baltic Sea to reach Germany, from where it connects to the European pipeline system under the unified European market. The project brings together Russian Gazprom and five European companies - Engie (France), OMV (Austria), Shell (Netherlands/UK), Uniper (Germany), and Wintershall (Germany). The estimated cost of the pipeline is pegged at US$11 billion and is expected to be 746 miles in length. With the total capacity of 55 billion cubic meters (per year), Nord Stream-2 will deliver gas to Europe from the natural gas field Bovanenkovo in North Russia’s Yamal Peninsula. The pipeline, taken together with the operational Nord Stream-1, would double the total capacity of natural gas exported to Europe to 110 bcm per year. Russia, Germany, Finland, Denmark and Sweden have granted all the necessary permits for construction of the planned pipeline within their exclusive economic zones(EEZs).
Map: Nord Stream-2 Pipeline
Source: The Economist, https://www.economist.com/europe/2021/02/01/why-germany-wont-kill-nord-stream-2
Concerns with the Project
The construction of the Nord Stream-2 pipeline serves two purposes– first, it is expected to provide Europe with a sustainable gas supply and second, it provides Russia with direct access to the European energy market. However, as the tensions between Western countries and Russia increase over a multitude of issues, concerns have been raised on the pipeline including the Russian intent. Some of these concerns are listed below:
First,concern over Ukraine transit routes - the Nord Stream-2 project is expected to directly transport natural gas from Russia to Germany through the Baltic Sea. Ukraine has hitherto acted as the “gatekeeper” for the transit of energy resources from Russia to Europe and bypassing this route would lead to a loss of approximately US$2-3 billion in revenue in transit fees per year, thereby impacting the fragile Ukrainian economy. Geopolitically, it is seen as an attempt to weaken Ukraine’s leverage in its on-going political crisis with Russia. While Russia and Ukraine have signed a five-year gas-transit agreement and German Chancellor Angela Merkel has insisted that gas must continue to flow through Ukraine, the volume of natural gas transported through this route is expected to reduce once Nord Stream-2 becomes operational. Moreover, taken in conjunction with the TurkStream pipeline - which will transport natural gas via the Black Sea from Russia to Turkey to Europe through Bulgaria - it will further diminish the reliance on Ukrainian natural gas corridors.
Second,increased dependence on Russia – The EU 27 in 2019 imported 44.7%of their natural gas from Russia making it their largest partner, followed by Norway (21.3%), Algeria (12.1%), Qatar (6.3%) and Nigeria (5.9%). Many EU members have raised concerns regarding the lack of diversification of energy resources away from Russia, which was one of the key goals in the EU’s energy security conclusions. They have also highlighted the geopolitical impact of the loss of their bargaining power with Russia given the reduced transit volume of natural gas. A study done on behalf of the European Parliament highlighted that Nord Stream-2 would result in Western European countries getting access to competitively priced gas “without the added difficulties of having to deal with Ukrainian-Russian tensions”. The central and eastern European countries view Nord Stream-2 as a ‘potent geopolitical tool’ in the hands of Russia that would “serve a broader Russian strategic objective, namely to foment division inside the EU and prevent the development of a common European foreign and energy policy”. The pipeline has divided the EU between those who view the pipeline as an economically viable project and those who object it for geopolitical and economic reasons.
Third, environmental concerns – While Nord Stream-2 consortium has argued that as natural gas emits less carbon dioxide, “by making more gas available to replace coal in power generation Nord Stream-2 will provide a cost-effective contribution to emissions reduction”.[viii] Several environmental groups like Greenpeace, ClientEarth, Nature and Biodiversity Conservation Union of Germany, etc. have highlighted the environmental impact of construction and running of Nord Stream-2 pipeline through the Baltic Sea. According to their reports and petitions, the pipeline would have a severe impact on the fragile eco-system of the Baltic Sea and would damage the flora, fauna and marine life of the region.[ix] Also, the report by German Institute for Economic Research (DIW) pointed “the carbon footprint of high leakage rates during extraction or transport is about the same as that of coal, if the entire life cycle of emissions is taken into account”[x], thereby making natural gas harmful to the environment and marine-life. The climate activists have pointed that the Nord Stream-2 “risks locking [EU and Germany] in fossil fuel use for decades…Nord Stream-2 is one of the few projects which, simultaneously, pose a threat to both energy security and climate security of the nations of the EU”[xi] – urging the Union to use every tool available at its disposal to stop the construction of the pipeline.
Support for the Project
Despite various concerns and criticism, the German government has justified its support for the project under its policy of continued engagement with Russia arguing that the pipeline is only a commercial project. One of the key arguments presented in defence of the pipeline is that Russia is more dependent on the revenues earned through natural gas supply than Germany is on the energy resources. This could be used asleverage in relations with Russia. Second, it will give a fillip to the Energiewende Policy of Germany, which aims to decarbonise the German economy by phasing out fossil fuels, closing its nuclear power plants by 2022, reducing greenhouse gas (GHG) by 80–95% by 2050 and a renewable energy target of 60% by 2050. It has been argued that natural gas can be used to supplement this German transition from fossil fuel and nuclear power to a source of energy that is less harmful for the environment. Third, abandoning the project for ‘political reasons’ is not a viable option for Germany - further scrapping it could be interpreted as Germany and EU buckling under US pressure.
Geopolitical Quagmire – Reactions to the Pipeline
The reactions to the pipeline have varied within the EU and in the transatlantic partnership highlighting the division of opinions. In 2016, eight EU governments had signed a letter addressed to European Commission President objecting to the Nord Stream-2 project highlighting that if the project went ahead, “Nord Stream-2 would generate potentially destabilising geopolitical consequences”. These countries have argued that the pipeline leaves them vulnerable to Russian energy blackmail. Italy has also opposed the construction of the pipeline, as most of its energy supplies are dependent on Ukraine’s transit routes. Any compromise on these routes would impact the energy supply to the Italian cities which would then have to be compensated through supplies from Germany, thereby increasing Berlin’s leverage in the energy market. The EU, for its part, has declared that the project is not a European project rather a German matter.
The opposition to the pipeline has strengthened especially in the aftermath of Russian opposition leader Alexei Navalny’s arrest. The European Parliament in January 2021 passed a non-binding resolution emphasising a review of any foreign policy cooperation with Russia. It called on the EU for tighter sanctions against the country and halting of completion of the Nord Stream-2 project. Among the member states, Poland and Lithuania have firmly opposed the pipeline as they see it as a political tool that can be used by Russia to control energy supplies to Europe, as was done previously with the transit countries like Ukraine and Slovakia. French European Affairs Minister Clement Beaune had also urged Germany to drop the Nord Stream-2project. Even within Germany, there have been several calls for the cancellation of the project. Green Party leader Annalena Baerbock in an interview said that “Nord Stream 2 contradicts the European climate targets and runs counter to the energy policy and geostrategic interests of the EU…the construction offends our European partners, destabilises Ukraine and thwarts a clear course on Russia at EU level.” The Director General of the Commission’s energy department said that “For the EU as a whole, Nord Stream does not contribute to security of supply” highlighting that any decision to stop the construction or to scrap the project needs to be taken at the German national level and not by the EU.
Consecutive US administrations have also opposed the pipeline observing that it will result in increasing European reliance on Russia for energy and would have an impact on the continent’s larger security policy. The project is also viewed by the US administrations as detrimental to the Ukrainian economy. The Trump administration in January 2021 put in place punitive sanctions on the Russian ship “Fortuna” and its owner, KVT-RUS which are involved in building the pipeline, under the Countering America’s Adversaries through Sanctions Act (CAATSA).On 16 February 2021, President Biden’s administration saidthat they were reviewing the project and are working towards determining whether the sanctions were to stop the pipeline project. At the Munich Security Conference 2021, President Biden referred to the project indirectly when he said, “standing up for the sovereignty and territorial integrity of Ukraine remains a vital concern for Europe and the US.”
While supporters of the project view the pipeline in a completely commercial sense, the opponents view the project with heightened concerns over increased reliance on Russian energy that can create security vulnerabilities, as was seen in the aftermath of the 2014 Ukrainian crisis and the use of energy as a political weapon by Russia. With the project near completion, it remains unlikely that any opposition to the pipeline will halt its progress. Overall, the pipeline is viewed as a geopolitical tool that provides Russia with increased leverage over Europe’s gas supplies. The construction of this pipeline has highlighted the dilemma of European countries in buying Russian energy resources at a time when the relations with Russia are at an all-time low because of recent incidents such as the arrest of opposition leader, Alexei Navalny, a police crackdown on the protestors, Russia’s expulsion of three EU diplomats and the imposition of sanctions by EU and US for poisoning of Alexei Navalny.
The pipeline has resulted in highlighting the east-west divide within the EU. The former Soviet bloc countries such as the Czech Republic, Hungary, Poland, Slovakia, Romania, Estonia, Latvia, Lithuania, and Croatia – all dependent on Russian gas – oppose the Nord Stream-2 pipeline. These countries have raised concerns over two primary issues – first, is probable loss of transit fees if the energy supplies from Russia are diverted to the Nord Stream-2. Second, possible increase in the Russian influence on the European continent would prevent any formulation of comprehensive European policy on Russia. With Germany pressing ahead with the construction of the pipeline, these member states have committed themselves to diversification of energy resources. Member states like Poland and Lithuania have deepened their partnership with the US in LNG and constructed LNG terminals at Świnoujście and Klaipėda respectively. Many of these member states have also joined the Three Seas Initiative[xxvii] which is primarily aimed at reducing dependence on Russian gas in Central and Eastern Europe.
An increased dependence on Russian gas can further reinforce the political, economic, and foreign policy divisions on Russia within the EU. It also brings into the forefront the differences between the eastern and western member states of the EU and NATO, reducing the possibilities of taking a cohesive action on Russia. With reports of 18 European companies withdrawing or in the process of withdrawing from the project due to the threat of US sanctions, the internal divisions within the EU and transatlantic partnership over pipeline project remain visible. To address some of the concerns of EU member states and the US, Germany is expected to offer some regulatory mechanisms which could include first, a mechanism that allows Germany to ‘shut-off’ Nord Stream-2 in case Russia puts pressure on Ukraine by cutting transit supplies or breach its treaty with Ukraine over energy supplies. Second, it could support the construction of LNG terminals for US LNG import to Europe as an alternate energy supplier. However, the questions remain if these mechanisms will deliver in practice.
*Dr. Ankita Dutta, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.
[i]Nord Stream 2, https://www.nord-stream2.com/media-info/facts-myths/#one-of-the-longest-offshore-gas-pipelines-in-the-world, Accessed on 3 March 2021
[ii]‘Nord Stream 2 spells pain for Ukraine’, Global Trade Review, 14 January 2020, https://www.gtreview.com/magazine/volume-18-issue-1/nord-stream-2-spells-pain-ukraine/, Accessed on 3 March 2021
[iii]CNBC, 21 May 2019, https://www.cnbc.com/2019/05/21/nord-stream-2-explained-what-it-is-and-why-its-proving-controversial.html, Accessed on 3 March 2021
[iv]EU-27 imports of natural gas from main trading partners, 2019 and first semester 2020’, Eurostat, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:Extra_EU-27_imports_of_natural_gas_from_main_trading_partners,_2019_and_first_semester_2020.png, Accessed on 3 March 2021
[v]‘Council conclusions on Energy Diplomacy’, European Council, 2015, https://data.consilium.europa.eu/doc/document/ST-10995-2015-INIT/en/pdf, Accessed on 4 March 2021
[vi] ‘Energy as a tool of foreign policy of authoritarian states, in particular Russia’, Study by AFET Committee, European Parliament, 2018, https://www.europarl.europa.eu/RegData/etudes/STUD/2018/603868/EXPO_STU(2018)603868_EN.pdf, Accessed on 4 March 2021
[viii]‘Nord Stream 2 and Climate Protection’, Nord Stream 2-AG, 2017, https://www.nord-stream2.com/media/documents/pdf/en/2017/12/nsp2-nord-stream-2-and-climate-protection-eng-20171222_pFIJzN4.pdf, Accessed on 4 March 2021
[ix]DW, 3 July 2018, https://www.dw.com/en/nord-stream-2-german-environmentalists-sue-to-halt-construction-of-controversial-gas-pipeline/a-44507377-0, Accessed on 4 March 2021
[x]DW, 30 January 2021, https://www.dw.com/en/nord-stream-2-dead-in-the-water-despite-construction-reboot/a-56388253, Accessed on 4 March 2021
[xi]Climatechange News, 20 April 2017, https://www.climatechangenews.com/2017/04/20/eu-block-nord-stream-2-climate-grounds/, Accessed on 5 March 2021
[xii]Nuclear Energy, Energy, The Federal Government, Germany, https://www.bundesregierung.de/breg-de/themen/energiewende/fragen-und-antworten/kernkraft, Accessed on 5 March 2021
[xiii]‘The Energy of the Future - The Energy of the Future Fourth “Energy Transition” Monitoring Report – Summary’, Federal Ministry for Economic Affairs and Energy, 2015, https://www.bmwi.de/Redaktion/EN/Publikationen/vierter-monitoring-bericht-energie-der-zukunft-kurzfassung.pdf?__blob=publicationFile&v=16, Accessed on 5 March 2021
[xiv]‘Nord Stream 2: Leverage Against Russia?’, SWP, 14 September 2020, https://www.swp-berlin.org/en/publication/nord-stream-2-leverage-against-russia/, Accessed on 5 March 2021
[xv]Signed by the prime ministers of the Czech Republic, Estonia, Hungary, Latvia, Poland, Slovakia and Romania and the president of Lithuania
[xvi]Reuters, 16 March 2016, https://www.reuters.com/article/uk-eu-energy-nordstream/eu-leaders-sign-letter-objecting-to-nord-stream-2-gas-link-idUKKCN0WI1YV, Accessed on 6 March 2021
[xvii]Giovanna De Maio, ‘Nord Stream 2: A failed test for EU unity and trans-Atlantic coordination’, Brookings, 22 April 2019, https://www.brookings.edu/blog/order-from-chaos/2019/04/22/nord-stream-2-a-failed-test-for-eu-unity-and-trans-atlantic-coordination/
[xviii]DW, 30 January 2021, https://www.dw.com/en/nord-stream-2-dead-in-the-water-despite-construction-reboot/a-56388253, Accessed on 6 March 2021
[xix]“Parliament demands significantly tighter EU sanctions against Russia”, European Parliament Press Room, 21 January 2021, https://www.europarl.europa.eu/news/en/press-room/20210119IPR95904/parliament-demands-significantly-tighter-eu-sanctions-against-russia, Accessed on 6 March 2021
[xx]DW, 1 February 2021, https://www.dw.com/en/france-presses-germany-to-ditch-nord-stream-2-over-navalny/a-56411291, Accessed on 6 March 2021
[xxi]ZweitesDeutschesFernsehen (ZDF), 2 March 2021, https://www.zdf.de/nachrichten/wirtschaft/baerbock-nord-stream-2-russland-100.html, Accessed on 7 March 2021
[xxii]Euractiv, 24 February 2021, https://www.euractiv.com/section/global-europe/news/eu-says-it-does-not-need-nord-stream-2-but-only-germany-can-block-it/, Accessed on 7 March 2021
[xxiii]Reuters, 19 January 2021, https://www.reuters.com/article/us-usa-nordstream-sanctions-idUSKBN29O1XL, Accessed on 7 March 2021
[xxiv]Reuters, 16 February 2021, https://www.reuters.com/article/us-nordstream-usa-biden-idUSKBN2AG29A, Accessed on 7 March 2021
[xxv]Remarks by President Biden at 2021 Munich Security Council, The White House, 19 February 2021, https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/19/remarks-by-president-biden-at-the-2021-virtual-munich-security-conference/, Accessed on 7 March 2021
[xxvi] NBC News, 2 March 2021, https://www.nbcnews.com/news/world/u-s-eu-set-impose-sanctions-russia-n1259249, Accessed on 7 March 2021
[xxvii]Established in 2015, the Three Seas Initiative aims to promote cooperation between the member states for the development of infrastructure in the energy, transport, and digital sector. It brings together 12 EU Members between Baltic, Black and Adriatic Seas – Austria, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia
[xxviii]DW, 23 February 2021, https://www.dw.com/en/european-companies-back-out-of-nord-stream-2-us-report/a-56658814, Accessed on 7 March 2021
[xxix]Financial Times, 16 February 2021, https://www.ft.com/content/548067b9-2ff0-4a2a-94af-b74d763f4561; Bloomberg, 16 February 2021 https://www.bloomberg.com/news/articles/2021-02-16/germany-seeks-deal-with-biden-on-controversial-russian-pipeline, Accessed on 7 March 2021