Is Nord Stream 2 at Risk?

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

The prospects for completing the construction of the Russian Nord Stream 2 gas pipeline have deteriorated significantly. After the poisoning of opposition politician Alexei Navalny in Russia with the Novichok chemical warfare agent, which the German government no longer doubts, numerous calls have been heard in the EU countries and in Germany itself to stop this already controversial project.

True, Chancellor Angela Merkel continues to support him so far, including because he cannot afford to succumb to pressure from the United States. At the same time, she is demanding an explanation from the Russian authorities in the Navalny case.

So now a lot will depend on Moscow's reaction. However, further developments in Belarus can play a decisive role. In the event of direct intervention by Russia and / or large-scale violence against the Belarusian population, it is difficult to imagine the consent of Germany and the European Union to the commissioning of the gas pipeline.

The main task of the project is to put an end to Ukrainian transit

To predict the likely consequences of a possible final halt in the construction of Nord Stream 2, it is necessary to return to the origins of this project. The Russian side began to lobby for the idea of a second powerful gas pipeline in the Baltic as early as 2011-2012, in parallel with the completion of the construction of the Nord Stream, the first underwater gas pipeline directly connecting Russia and Germany.

Compressor station near Kiev. Ukraine has been and remains the largest transit country for Russian gas

However, the formal start to the Nord Stream 2 project was given only in September 2015 against the background of a sharp aggravation of Russian-Ukrainian relations due to the transition of Crimea to Russia and an attempt to create Novorossiya on the territory of Ukraine. At that time, Moscow directly said that the task of the second gas pipeline in the Baltic and the Turkish Stream, which is being built in parallel, is to stop the transit of Russian gas through Ukraine. That is why both projects were originally planned to be completed in December 2019. By this time, the ten-year agreement between Moscow and Kiev on gas transit expired.

So initially, Nord Stream 2 was faced with a political task, although then the Russian side and the European companies participating in the project began persistently repeating that this was an economic project, and over time Angela Merkel adopted this argumentation.

Angela Merkel fears worsening relations with Russia

But the essence of Nord Stream 2 does not change from this. And since this is primarily a political project, then the consequences of stopping it will be mainly political in nature.

Since the new gas pipeline in the Baltic has become a kind of beloved brainchild for Vladimir Putin, the final stop of construction and the associated image losses for the Russian president could cause a very painful reaction in the Kremlin and lead to a further deterioration in Russian-German and Russian-European relations in general, and so badly spoiled already.

Caricature by Sergei Elkin

This is what Angela Merkel seems to fear. These fears are perhaps excessive if you look at the fate of Vladimir Putin's other favorite gas transportation brainchild, the Turkish Stream.

In December 2014, the President of Russia personally negotiated with the President of Turkey on the construction of this gas pipeline, after which Recep Tayyip Erdogan first reduced four agreed lines to two, then bargained for discounts for Russian gas, and now generally reduced its imports to a minimum, so that construction at the beginning of the year, the pipe is simply empty at the moment.

However, such a dismissive attitude to this project did not seem to cause a significant deterioration in relations between Moscow and Ankara.

Therefore, it is possible that in the event the European Union refuses from Nord Stream 2, Moscow will also not sharply sever political and economic ties with the main market for its energy resources and the source of currency, especially now, when Turkey, as a major buyer of gas in the western direction, has disappeared. and in the east, Gazprom's hopes for China are not even close to being met.

Nord Stream 2 gas is not needed to supply Germany

As for the possible economic consequences of the EU's abandonment of the new gas pipeline, it should first of all be borne in mind that it is not being built at all to supply Germany. It is already fully provided with transport facilities for importing gas, including Russian.

Lubmin, Germany, November 2011. Commissioning of the first string of Nord Stream

According to Gazprom, the concern supplied 44.9 billion cubic meters of gas to Germany last year. At the same time, the capacity of Nord Stream alone is 55 billion cubic meters per year. But Germany is also supplied with Russian gas through the Yamal-Europe gas pipeline (33 billion cubic meters) through Belarus and Poland, and through the Megal gas pipeline (22 billion cubic meters), which supplies blue fuel from Russia through Austria and the Czech Republic. …

So the final buyer of gas from Nord Stream 2 would not be Germany. Therefore, the arguments that are very popular in Russian social networks that "the Germans will freeze" without a new gas pipeline are just a replicated myth. Moreover, the FRG imports natural gas from a number of other countries, primarily from Norway, and it comes through pipelines from the Netherlands and Belgium.

Gas would go through the Eugal pipeline to Austrian Baumgarten

The true purpose of Nord Stream 2 (55 billion cubic meters) is evidenced by the fact that its continuation in Germany, the currently being completed Eugal gas pipeline running from the Baltic coast to the south to the Czech border, is designed for 51 billion cubic meters. m per year, and its capacity for the long term is fully booked by Gazprom.

Thus, almost 90% of the gas from the future pipeline would only go in transit through Germany to the Czech Republic and then to Austria. There, in Baumgarten, there is a traditional point for the transfer of Russian gas to European buyers, including Italian ones. In other words, Nord Stream 2 is being built to a large extent to supply Italy, Gazprom's second largest client in the EU. But why is it necessary to pump gas through the Baltic for this? And in order not to pump it through Ukraine! This, again, is the original goal of the entire project.

If the EU abandons Nord Stream 2, neither Italy nor Gazprom's other clients in Central and Eastern Europe will lose out, since they will simply continue to take gas from Baumgarten as before, where it will continue to flow through Ukraine. … Indeed, in December 2019, Moscow, which was unable to complete the construction of either the gas pipeline in the Baltic Sea or the second string of the Turkish Stream, had to conclude an agreement with Kiev for 5 years on the continuation of Ukrainian transit.

If the construction of Nord Stream 2 is finally stopped, then it will be Ukraine that will benefit, since Gazprom will have to continue pumping gas through its territory, in case of growing demand in Europe, to book additional capacities and to renew the contract in four years.

Gazprom and five European companies will lose investments

The main loser of the disruption of the Nord Stream 2 project from an economic point of view will, of course, be the Russian state concern Gazprom, which will have about 10 billion euros of investments at the bottom of the Baltic Sea.

True, almost half of this money was invested by European private energy companies - financial investors in the project: French Engie, Austrian OMV, British-Dutch Shell, German Uniper and Wintershall Dea. Each of them may suffer losses in the range of 950 million euros.

Paris, 2017. Former German Chancellor Gerhard Schroeder (center) facilitated the joining of Engie to Nord Stream 2

When Uniper recently warned its shareholders that it would have to write off losses if the Nord Stream 2 project failed, it did not say a word about its intention to try to demand compensation. Nevertheless, if the EU or Germany block construction, lawsuits against them are not excluded, but it is extremely difficult to assess their legal chances of success.

But the participants in the Eugal project, including Wintershall Dea, will be able to earn money even if the Nord Stream 2 stops. As already noted, Gazprom has fully booked the capacities of this transit gas pipeline in Germany for the long term and will pay for them, regardless of whether gas flows through two lines or not. Actually, it is precisely because of such unusually favorable conditions that the Russian state concern offered its Western partners that they participate so willingly in this project.