By: William Fleeson
A subsea natural gas pipeline between Russia and Germany appears likely to become a reality, which could make the project’s geopolitical risks a permanent fixture of relations between Russia and the broader European Union (EU).
The pipeline, called Nord Stream 2, would expand Russia’s ability to ship gas from its own reserves into Europe. The project is inherently political, as it would strengthen Russia’s ability to influence the energy security of the broader EU bloc. Opponents of Nord Stream 2 argue that it flouts EU competition laws and, by expanding the existing Nord Stream 1 line, broadens Russia’s alternatives to shipping gas through Ukraine. Russia seeks to minimize and ultimately stop gas shipments by Ukrainian routes. Ukraine relies on gas transit revenues for two percent of its GDP and is loath to see Russia gain any advantage, not least because of the simmering Russia-Ukraine conflict in Crimea.
In a positive sign for the project’s supporters, Russia and the European Union struck a compromise agreement this month that walks the line between EU regulations and Russia’s determination to get Nord Stream 2 built. According to the deal, EU regulations on competition will apply once the gas enters EU territory, but implementation will be left to German regulators. The accord balances Russian and German interests, but far less so those of other EU countries that shudder at the idea of Russia securing more leverage in the European region.
EU members including Baltic and eastern European states—those that most viscerally suffered under Russian domination in the 20th century—have worked hard in recent years to carve out energy security for themselves. For example, Lithuania’s Klaipeda port for liquefied natural gas (LNG), finished in 2014, marks an explicit move to counter Russian energy dominance. Klaipeda was designed to provide gas access and benefits to other Baltic states as well. The terminal has helped lower gas prices across the Baltic region, whose long and cold winters make energy purchasing an essential part of national budgeting and security. Klaipeda was built with EU support and talks are underway to secure yet more EU funding related to the site’s gas supply contracting. Thus Lithuania, Baltic countries, and other like-minded EU members have every interest in resisting Nord Stream 2’s advance.
Much remains unresolved around Nord Stream 2, and the project still faces serious obstacles. Certain EU countries and the United States are advocating new sanctions on the project, on the Russian company Gazprom that is leading it, and on the plan’s numerous contractors. While sanctions or other acts of resistance seem unfit to halt the pipeline completely, the unpredictable nature of relations among Russian, European, and American actors could yet upend the current forecast of a completed project.
The United States, on top of potential sanctions, has long opposed the pipeline and offered US LNG imports instead. President Donald Trump said so in typically blunt fashion during a 2017 trip to Poland, where he declared, “Whenever you need energy, just give us a call.” An expanded Nord Stream 2 serves neither American interests nor those of its European allies, who see the elements of a geopolitical storm with Russia brewing in their own backyard.
As for Ukraine, even if Nord Stream 2 comes together, the switch away from overland transit would not be an immediate one. According to expert Simon Pirani of the Oxford Institute for Energy Studies, Russia’s Gazprom cannot shut off gas transit through Ukraine completely, given the company’s current capacity needs. Gazprom and Ukraine’s Naftogaz Ukrainy will need to work together into the mid-2020s—a task that risks further delays, given the dismal current state of the Russia-Ukraine relations. Ukraine’s role as a gas transit player cannot be discontinued in the short term, Pirani argues, no matter how much Gazprom may want to do so.
Judging by how conditions look now, Nord Stream 2 is likely to move ahead. But those same conditions create a climate of maximum geopolitical tension for the project’s advocates and opponents alike. Those pressures extend well beyond the line itself, and could fix Nord Stream 2 as a point of enduring contention within and outside the European Union. Europeans, Russians, and Americans will all be watching closely.
William Fleeson is an energy analyst based in Washington, DC. All views expressed here are his own.