A whiff of trouble in the Nord Stream Pipeline

What is the issue?

What was meant to be an ordinary energy project from Russia to Germany is now a powerful geopolitical tool.

It is a natural gas pipeline project (1,225 km ) under the Baltic Sea from the Russian city of Ust-Luga to the German city of Lubmin
The construction began in 2015 by Russia.
This avoids transit through Ukraine and other European countries.
Russia’s main energy company Gazprom took ownership of the project’s operator, the Switzerland-based company Nord Stream 2 AG.
The project was expected to double the capacity of the existing pipeline, Nord Stream 1.

There is a strong opposition from USA and European countries of Austria, Germany, Hungary and the Netherlands.
They view the project as a political weapon.
They believe that it would render more bargaining power to Russia while dealing with Europe and its energy market.
E.g Russia is blamed for an intentional decrease in gas supplies to Europe during winter, aiming to speed up the Nord Stream 2 pipeline by European Union (EU) market regulators.
However, Russia says that project is purely a commercial, which is shorter, cheaper, and economically more viable, compared to the gas transit through multiple European countries.

In 2019, U.S. President Donald Trump had signed a law that imposed sanctions on any EU company that was involved in completing the Nord Stream 2 pipeline.
USA fears the pipeline would reduce its own share in the lucrative European market for American liquefied natural gas (LNG).

Germany opposed the US sanctions, stating that they were able to decide their own energy policies without an interference.
So, in May 2021, US decided to issue a national security waiver for the Nord Stream 2 AG.
The main reason was apparently to restore trust and close cooperation between the U.S. and Germany.
Besides, the agreement aimed to invest more than €200 million in energy security in Ukraine, as well as sustainable energy across Europe

Germany imported about 40% of natural gas from Russia, 34% from Norway, 29% from the Netherlands, with only around 10% from Germany’s own gas fields.
Of Germany’s electricity production
- 25% comes from coal
- 25% from renewable sources,
- 16% from natural gas
- 11% from nuclear energy.
The dispute takes place at a time when Germany is gradually moving towards renewable sources of energy.
Germany plans to shut down its nuclear and coal power plants.
This winter Europe is facing a huge demand in its energy market
The wholesale energy prices have more than doubled in 2021, and there is a limited supply of fossil fuels altogether.

In November 2021, Germany suspended the certification procedure for Nord Stream 2.
The suspension comes as Nord Stream 2 AG plans to establish a subsidiary under German law only for the German section of the pipeline.
According to Germany's Federal Network Agency the company fails to meet conditions to be an "independent transmissions operator"
It could be certified only if that operator was organized in a legal form under German law.
This means further delays in project commencement.
Meanwhile, tensions have been growing between Russia and the NATO allies, amidst fears of Russia’s invasion into Ukrainian territories
The new German Chancellor will have to make difficult choices going forward.
Some EU leaders have called for termination of project from Germany in the event of further military escalation.
What was meant to be an ordinary energy project has transformed itself into a powerful geopolitical tool, available to every stakeholder involved, and even beyond.

Reference