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From Russia with gas

By Lise Hindsgaul


Nord Stream 2 is one of the latest gas pipeline projects of Russia, which seeks to export gas to Europe through the Baltic Sea. After the successful experience from Nord Stream, European companies agreed to build the second version with the Russian partner Gazprom in 2017. Since then, the pipeline has been in limelight because of US threat of sanctions as they fear Russian involvement will endanger European security. However, the European Union (EU) members who are participating in the pipeline project have differed from the American view and have already initiated the construction process. The dynamics of the Nord Stream 2 is very much relevant to the contemporary European geopolitical affairs, and hence a rational analysis is the need of the hour.


Energy concerns in Europe


The EU has called for its members to expand the diversity of their gas supply options and liberalize the energy market, so as to avoid monopoly and sole dependency on a single player, for example the US which has significantly increased their gas sales in Europe since the last decade. According to the ‘Quarterly Report on European Gas Markets’, the American share of gas exports has increased with 9% in the last quarter of 2019, while Norway dropped with 8%. It is widely anticipated that Norway will export less gas in the next 20 years, therefore EU members and especially Germany have been looking for other natural gas suppliers to the fulfill the 30% domestic shortage.


Pivot to Russia


The United States is one of the major gas exporters to Europe, but its expensive Liquefied Natural Gas (LNG) can fill only 7-8% of the total energy shortage. For that reason, European countries started diversifying their partners, and to their rescue came Russia which has some of the world’s largest oil and gas fields. Gazprom, one of the largest state-owned energy companies of Russia is now regarded as the largest natural gas exporter to the European Market. In 2018, Gazprom’s gas exports to Europe recorded the highest growth at 201.9 billion cubic meters.


According to the fact sheet on Nord Stream 2, from the perspective of the EU there are numerous benefits which can be achieved from the pipeline project. The project has already provided a lot of jobs to the European community and has also involved local shipping companies like the Blue Water Shipping, a Danish logistics company which has obtained a contract of 40 million euros to transport the pipes for the construction of the Nord Stream 2 pipeline.


American Sanctions and European reactions


The US administration had appealed to Germany to back out from all dealings with the major shareholder Gazprom, as they were seeking to impose sanctions on their activities. However, Germany rejected the idea of sanctions and even called out for a joint European defence against draconian American measures, and accused the Washington for interfering in the internal affairs of European countries, since the sanctions also threatened the European companies involved in the pipeline. Niels Annen, the German Minister of State at the Federal Foreign Office, had made some remarks relating to the U.S. sanctions: “If we want to maintain strong unity of purpose in dealing with Russia, extraterritorial and unintended consequences of US sanctions on European companies must be avoided”.

Nevertheless, Washington still argues that imposing sanctions is a justified measure toward “protecting Ukrainian interests”, since it is alleged that the Nord Stream 2 would replace the dependency on Ukrainian gas exports. However, the reality of sanctions is something different. First, the legislation made by the United States Congress Committee has not been proceeded yet, and while the pipeline is expected to be completed by the end of 2020, therefore it is the European companies which will face the wrath of the sanctions, without actually stopping the construction process of the pipeline.


Another major argument which the Washington has used to justify the sanctions is a peculiar concern that Moscow may take advantage of energy-dependent Germany, and can use gas exports as a “raw material blackmail”, by giving threats of limiting the exports if Berlin doesn’t agree with the political positions of the Kremlin. However, this is actually a win-win situation both for Russia and Germany, where Germany will be able to satisfy the growing domestic demands of energy and for Russia the income from the gas will help in soothing its fluctuating economy.


The Danish factor


To begin the construction phase of the Nord Stream 2 without any legal hurdles, a request to all Baltic and Nordic countries was sent in April 2017. At the outset, Denmark hesitated to allow because of some internal political concerns, however it later approved when another request was sent for an alternative route, but a more expensive one, which would be built south of the Bornholm Island. Finally in 2019, the Danish Energy Agency granted Nord Stream 2 a construction permit for the South-Eastern Route, which would stretch 147 kilometres in the Danish Exclusive Economic Zone (EEZ).


According to Hans Mouritzen, Senior Researcher at Danish Institute for International Studies (DIIS), it was highly recommended to approve of the pipeline going through Danish waters, south of the island, Bornholm. A pipeline drawn north of Bornholm would delay the project with 3 to 4 months and the extra expenses would be around $114 million, a bill that would be for European consumers to pay, had Denmark not agreed to the request.


Future Possibilities


The future scenario of Nord Stream 2 can go one in two ways from a European point of view. First, by being a part of NATO, European countries will be compelled to act in accordance with the multilateral agreements and thereby granting the US their global sovereignty, where they will be able to control and manipulate the economic cooperation between Europe and Russia, and Washington will not miss any opportunity to jeopardize the operations of Nord Stream 2. With the possibility of increased cooperation towards the US and decreased cooperation with Russia, the European countries will have more to lose in the long run.

In the second scenario, Europe cooperating more closely with Russia will bring additional trade opportunities in numerous areas, where Nord Stream 2 is just the beginning. Bringing economic stability to Russia will benefit in thwarting unilateral hegemonic interests of a single country in the world order. Pending that the US keeps Ukraine as a hostage of justice by sanctioning Russia, it vehemently prevents Europe and Russia to develop closer ties. While it is difficult to even imagine the US withdrawing sanctions from Russia, nevertheless it is possible to imagine that European countries will not abide by the external pressures. A better trading balance between Russia and the US in contemporary times will heal the historical wounds of Europe.


© Lise Hindsgavl





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