In cutting restrictions, Nord Stream 2 in cross hair

Russia’s attack on Ukraine has triggered “unprecedented” economic sanctions by the United States, although how deeply they damage Russia-Europe energy ties remains to be seen. the speed with which the US declared nord stream 2 pipeline to be “Dead at the bottom of the sea” indicates that it is one of the major issues at the bottom of the massive gas pipeline conflict.

still an important fuel

Despite global efforts to decarbonize energy, natural gas will remain one of the major sources of primary energy until at least 2040. Europe is the world’s second largest market for natural gas, and therefore one of the hydrocarbon energy superpowers, the U.S. There is a battlefield between and Russia. Germany, despite a decade of “Energiewende” (an ‘energy turnaround’ or ‘ongoing transition to a low-carbon, environmentally sound, reliable and cheap energy supply’), is still one of the world’s largest oil and gas importers. is one of It is again at the epicenter, as has been the case in the earlier power pipeline controversies.

The post-war European security order under the North Atlantic Treaty Organization (NATO) and the Warsaw Pact was underpinned by an energy order that sold oil to West Europe from West Asian/Middle Eastern regions controlled by American companies; And from the vast oil fields of the Soviet Union to Eastern Europe. West Germany (the Federal Republic of Germany or FRG) and other European countries had “economic miracles” and were drawn into the dollar-denominated oil business cycle, which supports US global dominance to this day. Problems arose in the 1960s when Soviet production expanded rapidly and their planned “Druzhba” pipeline network went beyond integrating Eastern Europe, providing Western Europe with low prices for oil and large access to specialized pipes and transmission equipment. Order to offer both. The FRG found the proposal compelling and the US struggled to maintain market dominance by banning pipe sales to NATO partners – implemented retroactively. The then 87-year-old chancellor of the FRG, Konrad Adenauer, was finally acquitted after a bitter internal argument. Soviet built the pipeline with an interval of two years; However, they only won a large share of the West European oil market after the West Asia/Middle East oil supply crisis of the 1970s, and declining US domestic production made it an importer.

an energy transition

The European energy transition to natural gas in the 1970s led to the geoeconomic linkage of vast Soviet gas fields to Western European markets via pipelines through Eastern Europe, again making large diameter pipes attractive to German companies. generated sales. The synergy of Germany’s Ostpolitik with the Siberian Pipeline worked during the US-Soviet Detente; But during the 1981–83 crisis over Soviet-backed martial law in Poland, another demonstration took place when the US tried to block the completion of the vast Siberian pipeline. America had no choice but to coal; And the formidable German chancellor, Helmut Schmidt, said in the face of US sanctions, “the pipeline will be built”. It was created, and the US dropped sanctions within six months, switching to other means to win the Cold War. The fall in the price of oil in 1986 may have been one of the reasons for the friendly Saudi Arabia swaying the Soviet economy.

The victorious US then used NATO’s expansion into Eastern Europe and the Baltic states to create a new European security order in the face of less Russia and a risk-averse EU. The breakup of Russia’s good friend Serbia in 1999, 79 days after NATO bombings, was an early success. Plans to conduct further investigations in Georgia and Ukraine, however, have left NATO divided. For the US, maintaining leadership in the face of Russia’s determined pushback now requires easing the growing EU-Russia gas synergy as a strategic objective, combined with a 1960s-style battle over market share. Is.

Effect of Putin’s push

Russian President Vladimir Putin revitalized Russia by taking advantage of oil and gas production that provides 60% of exports, 25% of government revenue, and boosted national reserves to $600 billion. It can and does use gas as a means of influence in its “near abroad”. However, for the European Union (60% of Russia’s gas exports), and its main customer Germany, Russia has been the most reliable supplier through the Cold War, the breakup of the Soviet Union, the divestment of pipeline assets. Network with Ukraine and other successor states, and economic chaos under Russia’s Boris Yeltsin. A new pipeline was built through Belarus and Poland to Germany; And Russia now supplies 35%-40% of the EU’s gas needs. In the early 2000s, the European Union noted the stability of Russia’s gas distribution. However in 2004, political instability in Ukraine began to cause problems for gas flows, and thereafter, plans were made to work on a direct Russia-Germany link via the massive underwater Nord Stream project.

The two Nord Stream pipelines are gamechangers as they can meet almost all of Germany’s import requirements, and are symbols of synergy with Russia. Importantly, however, they deprive Ukraine and Eastern European transit countries of revenue and leave them dependent on Russia for continued supplies. Some have had to get Russian gas from Germany via an eastward flow! Hence, his strong opposition to the Nord Stream project from the start, and with American support he set out to develop north–south gas connectivity using imported liquefied natural gas (LNG) through marine terminals on the Baltic, Adriatic and Black. The Three Seas Initiative has been launched. sea.

America’s strategy

As in the 1950s, the US can now deliver energy – LNG – to strengthen its security umbrella. The shale gas revolution has made the US the world’s largest gas producer; And as production exceeded the peak set in 1973, it has become a major exporter of LNG. Thus the strategy of reducing Russia’s hold on the lucrative EU gas market is being ruthlessly pursued for both strategic and commercial reasons. US LNG exports to the EU are expected to increase sharply to 22 billion cubic meters (BCM) in 2021, worth $12 billion; And will go up rapidly, if Nord Stream 2 remains non-functional and Germany has to install an LNG terminal instead. If “green” activism curbs US shale gas expansion, a geopolitically risky effort to build a long-term Europe-Middle East gas nexus using the vast gas reserves of Iran (and Qatar) could be revived. could.

German Chancellor Olaf Scholz’s support for Nord Stream 2 has been threatened since taking office last December, which coincided with US intelligence leaks about an impending invasion of Ukraine. The troubled leader was also vague in early February, when US President Joe Biden audaciously announced, in Mr Scholz’s presence, that in case of an invasion of Ukraine “there will be no Nord Stream 2 … we will end it.” His hand has now been forced and the pipeline’s regulatory certification has been suspended; and Mr. Scholz announced a U-turn from Ostpolitik for closer coordination with NATO.

Major reasons, looking forward

Nord Stream 2 is a well-chosen target as the recently completed €10 billion asset is wholly owned by Gazprom of Russia, in contrast to Nord Stream 1 (functional for a decade) which is jointly owned by European owned by companies. Mr. Scholz’s Green Coalition allies are also skeptical. The Nord Stream project has a larger potential for China than all existing and planned gas pipelines in Russia; Therefore it is of great importance for Moscow. Nord Stream 1 survives, as Europe would suffer without it, but Russia also needs to flow gas through Ukraine to preserve market share in the EU.

The implications of the US Indo-Pacific strategy to focus on Europe are currently unclear. Much will depend on how Mr Putin’s gamble is played out: ie a pre-emptive strike against Ukraine, not a “minor incursion”, perhaps into the Donbass, which Mr Biden said is about how to respond to NATO. Is. Whether the EU, which has now shunned NATO-inclined Britain, is really enough of a blow to take on a military dimension, is a question for the future. Currently, the US aims to maintain prominence on the western edge of Eurasia with the energy it has in its arsenal.

Ranjan Mathai is the former Foreign Secretary. Views expressed are personal