What is "Nord Stream 2" and how it alarmed the United States so much

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

The gas pipeline from Russia to Germany under construction along the bottom of the Baltic Sea has shaken geopolitics. Nord Stream 2 is fueling fears in the United States and other countries that the pipeline will give the Kremlin new leverage over Germany and other NATO allies.

Construction on the pipeline came to a halt in 2019 but resumed in December 2020, but US sanctions still threaten to stall the project backed by Russia's Gazprom.

1. What is Nord Stream 2?

This 1,230 km gas pipeline will double the capacity of the existing underwater route from Russian fields to Europe, the first string of Nord Stream, opened in 2011. The operator of the project is Russia's Gazprom, and Royal Dutch Shell and four other investors contributed half of the total cost of € 9.5 billion ($ 11.6 billion).

The pipe was originally expected to be operational by the end of 2019, but construction was delayed due to US sanctions that forced the Swiss contractor Allseas Group SA to recall its pipe-lay vessels. At that time, only a 160-kilometer section remained unfinished.

When the construction of Nord Stream 2 resumed, Russian ships were thrown to lay a 2, 6-kilometer section in the exclusive economic zone of Germany. In January 2021, work resumed on the Danish section.

2. Why is it so important?

The pipeline will provide Germany with relatively inexpensive gas supplies amid falling production in Europe. It is also part of Gazprom's long-term strategy to diversify export opportunities to Europe as it moves away from nuclear energy and coal.

Before the opening of the first Nord Stream, Russia supplied about two-thirds of its gas to Europe via pipelines through Ukraine. Difficult relations between the two countries after the collapse of the Soviet Union, Gazprom faced disruptions: in 2009, due to a price dispute, the flow of gas through Ukraine was interrupted for 13 days. Since then, relations between the two countries have deteriorated, culminating in an uprising against the pro-Russian president and Russia's takeover of the Crimean peninsula.

3. Who is against Nord Stream 2?

German Chancellor Angela Merkel is being pressured by German lawmakers and the opposition to abandon the project, tensions exacerbated by the poisoning of Russian politician Alexei Navalny in August 2020. Germany condemned Russia's decision to detain Navalny in mid-January upon returning to Moscow, but the Merkel administration supports Nord Stream 2, according to her press service.

As a result, Navalny was sentenced to 2.5 years. The Baltic pipe is opposed by Ukraine, Poland and Slovakia - these countries charge for gas transit through their territory between Russia and Germany. Their fears were partially allayed by the Gazprom deal to continue gas transit through Ukraine until at least 2024.

4. Why is the US involved in this?

As president, Donald Trump, backed by the US Congress, said that Nord Stream 2 would make Europe overly dependent on Russian energy supplies and warned that Germany was at risk of becoming a "captive of Russia." It is just as obvious that the United States is seeking to increase its own sales of what they call “freedom gas” to Europe.

In June, a bipartisan group of senators proposed extending sanctions against Nord Stream 2 to insurers, certification bodies and others involved in the project. The restrictions under the US Defense Act 2021 already went into effect at the beginning of the year.

5. What to expect under Biden?

The administration of President Joe Biden has confirmed sanctions against the pipe-laying vessel Fortuna, which is to complete at least one of the lines, as well as against its alleged owner, the Russian company KVT-RUS. The US State Department announced this on January 19, the day before Trump left office.

A February 19 report to Congress lists 18 organizations that are exempt from sanctions because they have curtailed work on Nord Stream 2. The absence of German and other European organizations in this list is noteworthy. Germany is looking to strike a deal with the United States to complete the project and could theoretically propose some kind of regulatory mechanism that would limit Russia's ability to manipulate the energy market.

6. What do obstacles promise to Nord Stream 2?

The project operator expects to complete one of the twin lines of Nord Stream 2 by July, in accordance with the construction schedule. Based on the construction of the first Nord Stream, pressure testing, cleaning and filling the line with buffer gas may take another six to seven weeks.

However, its launch is threatened to be delayed by US sanctions against insurers and certifiers. Due to the risks that have arisen, the Norwegian certification company Det Norske Veritas AS has already withdrawn from the project. In addition, the Swiss Zurich Insurance Group AG and the German Munich Re decided to stop covering the construction risks of Nord Stream 2. Since there are no restrictions on the nationality of insurers and certifiers, Gazprom can turn to Russia for their services.

7. Is Europe a prisoner of Russian gas?

The European gas market has become more competitive: Liquefied natural gas (LNG) is replacing the declining production in the North Sea and the Netherlands. According to Gazprom's estimates, in 2020 its share in the European market was about 33%. Its Russian competitor Novatek is also expanding LNG sales in Europe.

But not all countries are equally dependent on Russian imports. Gazprom traditionally remains a key supplier to Finland, Latvia, Belarus and the Balkan countries, but Western Europe receives gas from sources such as Norway, Qatar, Africa and Trinidad. More and more countries (including Germany) are building LNG import terminals in order to receive supplies from all over the world. Croatia commissioned a new import base in January.

8. Is the US going to sell more gas to Europe?

The United States transports gas to Europe by tankers, but for this it has to be cooled to a liquid state, and this is expensive. Russia supplies most of its gas through the world's largest pipeline network, which has been in existence for several decades. In the summer of 2020, transatlantic LNG shipments rose in price, although they subsequently regained their position.

Freezing temperatures in Asia in early 2021 pulled off some of the shipments to more expensive markets like Japan and South Korea, causing LNG shortages in Europe. US suppliers are long-term and have already had some success with a deal with Poland, but have suffered a series of setbacks from Ireland to France, mostly for environmental reasons. The International Energy Agency expects the United States to become the world's largest LNG supplier in 2025.