By Steven van der Plas
Diplomatic relations between the EU and Russia have been increasingly strained during the past decade. A number of incidents, such as Russia’s annexation of the Crimea peninsula, its intervention in the Syrian civil war and the poisoning and subsequent detainment of Russian opposition leader Alexei Navalny have put the EU in a difficult position. The EU aims to condemn Russia’s new assertiveness as a unified block, but some EU member states are reluctant to sacrifice their bilateral economic relations with Russia to do so. The most prominent example of this dilemma in practise is the case of the Nord Stream 2 gas pipeline between Germany and Russia. Contentious since before its construction began in 2018, the ambitious project has divided EU member states against each other and has recently been the target of US sanctions to delay its completion [1]. What is exactly at stake with Nord Stream 2 and why has this project become so controversial? In order to understand this, a look at the pipeline itself and its geopolitical significance is necessary.
The project and its economic significance
Nord Stream 2 is a 1230 kilometre-long twin pipeline that runs through the Baltic Sea from Russia through Germany. Construction started in 2018 and around 94 percent of the pipeline is finished as of March 2021. Nord Stream 2 runs mostly parallel to the already finished Nord Stream pipeline, which was completed in 2012. This original pipeline currently transports 55 billion cubic metres of gas per year to Germany. It is expected that Nord Stream 2, when operational, will double this amount. Half of the cost of the Nord Stream 2 project, which is estimated to be around 9,5 billion euros, is financed by Russia’s Gazprom, while the rest of the funding is provided by a number of European gas companies.
The economic necessity of Nord Stream 2 for Germany is the source of some dispute. Proponents of the project argue that the reliable and cheap gas the pipeline will transport to Germany is necessary, as domestic gas production will cease entirely in the next decade. Additionally, Nord Stream 2 would further position Germany as an important transit country that provides the rest of the EU, most notably Austria and the Czech Republic, with cheap gas in the future [1]. Nord Stream 2 will most likely decrease gas prices for Germany and the rest of the EU, as gas imported through the pipeline is much cheaper than Liquefied Natural Gas (LNG) from countries such as the US. However, some studies raise doubt to the claim that additional gas imports, through pipelines like Nord Stream 2, are needed. Predictions for Germany and the EU’s future gas demand vary widely, with some studies concluding that existing supply routes and pipelines are sufficient to fulfil future gas demands. Despite this, the completion of Nord Stream 2 would be extremely lucrative for both Germany and Russia.
Security and geopolitical concerns
Not all EU member states share Germany’s enthusiasm for Nord Stream 2, however. Poland and the Baltic states are especially wary of Russia as a security threat and its growing influence on Europe’s energy market when the project will be finished. Ukraine, while not an EU member state, has also protested the construction of the pipeline together with Poland. What is more pressing to these states is that most of the existing gas network from Russia to the EU goes through their sovereign territories, which provides them with income in the form of transit fees and gives them certain leverage over Russia in the energy market. A completed Nord Stream 2 would allow Russia to eventually bypass Ukraine and Poland altogether by exporting gas directly to Germany, severely impacting the geopolitical power of these states [1]. Ukraine would also be opened to new Russian threats if its pipeline infrastructure is made obsolete, as it will no longer have the leverage to cut off a major source of Russian income.
The Nord Stream 2 pipeline is also viewed as problematic in a wider European context. The European Commission has unsuccessfully attempted to block the pipeline because it does not align with the EU’s objectives to diversify its energy suppliers and to become an energy union, as the EU would become too reliant on a single gas supplier [2]. There is also a political character to these objections, as Nord Stream 2 undermines a joint EU policy on Ukraine and a unified response to Russia’s undemocratic activities [3]. Additionally, the project has become more controversial as EU-Russia relations have deteriorated. Calls to end Nord Stream 2 reached a boiling point after the poisoning and subsequent arrest of Russian opposition leader Navalny, but Germany remained in support of the pipeline.
The final noteworthy opponent to Nord Stream 2 is the US, which sees the pipeline as a direct threat to its interests. The US views Nord Stream 2 as a Russian geopolitical project, aimed at weakening European solidarity and transatlantic cooperation. However, there is also an economic dimension to the US’s protests, as it directly competes with Russia as an energy supplier to the EU. Nord Stream 2 would offer the EU gas at substantially lower prices than the US’s LNG exports. To this end, the US has threatened to sanction European companies that were involved with laying the pipeline. Consequently, dozens of companies withdrew from the project in early 2021, causing significant delays in the completion of Nord Stream 2.
The consequences of Nord Stream 2
Despite Nord Stream 2’s controversial nature and the many objections from both EU and non-EU states, it still seems likely that the pipeline will be completed within the coming years. The US sanctions have not stopped the completion of the project but only delayed it. Furthermore, Germany has reiterated its support for the pipeline even after the Navalny crisis, but it pays an increasingly high political cost to do so. The backing of Nord Stream 2 impacts its relationship with the US, the Baltic states and Eastern Europe and limits the policy options for an EU-wide response to Russian assertiveness. In the end, Nord Stream 2 shows that in a multipolar world, EU member states have to make increasingly difficult choices between their own bilateral interests and the strategic values and objectives of a wider transatlantic block.
References
[1] Jacobsen, R. (2021, January). US Sanctions on Nord Stream 2. Institute for politics and society. Policy Brief January 2021.
[2] De Jong, M. & Van de Graaf, T. (2020). Lost in Regulation: Nord Stream 2 and the Limits of the European Commission’s Geo-Economic Power. Journal of European Integration, 21(1), 1-16.
[3] Gens, B. (2019). Germany’s Russia policy and geo-economics: Nord Stream 2, sanctions and the question of EU leadership towards Russia. Global Affairs, 5(4-5), 315-334.