A contribution by Leah Nölke,
Bachelor student from the University of Bayreuth, Germany,
on Erasmus exchange at ESSCA in autumn 2018.
In recent months, the new Nord Stream 2 gas pipeline has developed into a highly explosive political project. The German government and, in particular, Angela Merkel are now being criticized and urged to stop the project shortly before its completion. However, is this still possible? And what is the controversy surrounding this pipeline in the first place?
In 2011, Nord Stream AG, an international consortium, began evaluating the prospects of a second pipeline, which will run parallel to Nord Stream 1 through the Baltic Sea. The aim is to double the volume of gas delivered from Russia directly to Germany. Nord Stream 2, to be completed by 2019, will thus transport 55 billion cubic meters of gas per year from St. Petersburg, Russia, to Greifswald, in Northern Germany. In addition to Russia, the German groups Eon and BASF as well as the British-Dutch company Shell, the Austrian OMV and the French Engie Group are involved in the plans. But the 8-billion-euro project is politically splitting the EU.
Source: European Network of Transmission System Operators for Gas, July 2017
Criticism from all sides
With Nord Stream 2, Russia wants to bypass the land pipeline via Ukraine again. As a result, Ukraine is estimated to lose a very large part of the $2 billion in annual transit charges. It would also make Ukraine more vulnerable to Russian gas closures and thus even more dependent, allowing the Kremlin to potentially demand territorial concessions from Kiev. Even Angela Merkel’s own party expresses concern. In a CDU/CSU position paper, it is written that Nord Stream 2 is seen as a danger because Russia could use this project to expand its possibilities for destabilizing Ukraine.
Also, Poland, Slovakia, Denmark and Sweden see their energy supply security threatened directly or indirectly by the project. Furthermore, Nord Stream 2 runs counter to the objectives of the European Union. Considering these points, it is clear that Europe must make itself independent in terms of energy policy. Instead, the new project is characterized by its increased dependence on Russia and the clear circumvention of existing gas pipelines via Poland and the Ukraine. In the meantime, Italy and Hungary are also against this project because, in return, the planned South Stream pipeline project will not come into being, which should have supplied Russian gas to South-Eastern European countries. France, the UK, Sweden and Canada have expressed concern, and in November, legislators in the German and European Parliament signed a letter to Angela Merkel urging her to stop pipeline construction.
Russian President Vladimir Putin and German Chancellor Angela Merkel attend their meeting at Meseberg governmental house August 18, 2018 in Gransee, Germany. (Bundesregierung/ Steffen Kugler)
Is Germany dependent on Russian gas?
The USA are already preparing sanctions against Nord Stream 2 and German companies involved in the pipeline. One alleged reason for this is, among other things, that the USA would like to sell more of its liquid gas from fracking to Germany or the EU, which, however, the US government denies. US Ambassador Sondland said in Brussels that the US has not yet used all instruments to seriously undermine or stop the project. Washington still hopes that « the opposition to the project will work organically ».
Donald Trump also criticized at this year’s NATO summit that Germany was already dependent on Russian gas. But if you have a closer look at the details, you see that although Russia is the largest German gas supplier, it only delivers slightly more than the other two main suppliers, Norway and the Netherlands. In addition, gas accounts for only 23% of Germany’s primary energy consumption – and only 13.5% of the electricity generated in power plants. This means that Russian gas accounts for only 4.3% of German electricity generation.
This being said, Germany could become much more dependent on Russia in the future due to the phase-out of nuclear and coal-fired power plants. Although pressure is being exerted to expand renewable energies and currently more than 40% of the German energy mix is accounted for by renewable energies, the changeover is not fast enough to close the gap that the decommissioning will create. It is likely that gas will fill this gap, which could quickly get Germany into a dependency on the Kremlin.
No gas demand on the international markets
The German Institute for Economic Research (DIW) also criticized the construction project. DIW economist Claudia Kemfert said on NDR 1 Radio: « Our economy does not need gas. We have a surplus of gas on the international markets. This project cannot be justified from the point of view of the energy industry ».
Is a U-turn still possible?
Despite all facts, why is the German government not stopping this project? Or is it already too late for that? The Gazprom subsidiary has already started building the pipeline through the Baltic Sea. The German government would lose its credibility because of the stop, as it had argued for years that the EU Commission was not competent in this matter and, therefore, could not ban anything. All permits for Nord Stream 2 have been granted, all complaints against it have failed. If the German government were to suddenly stop the project, this would possibly also result in expensive resource claims.
The Nord Stream 2 project is clearly a foreign policy dilemma. On the one hand, the German government could pursue the project and ignore all criticism and defend itself by saying that the gas would be needed for the energy transition. The other possibility would be to stop the project on the last few inches before completion. The reason for such a turnaround could be that Germany would have to give in to pressure from the USA so that German companies would not suffer any significant damage from American sanctions. In addition, this would also help to maintain overall stability and security in Europe, as EU competition rules would not be blocked in order to ensure Europe’s economic independence. Of course, stopping Nord Stream 2 would undoubtedly be unpleasant for the German government and Angela Merkel, but Germany’s intangible assets such as trust, credibility and reliability towards its democratic partners, the USA and the EU, should be more important than a gas deal with Russia.
