A complicated relationship: Moscow and Berlin’s affair with Nord Stream 2

Opinion Policy Analysis by Johnny Achkar, Featured Writer

May 3rd, 2021

The relationship that exists between the states of Russia and Germany is a long and complicated one. Although, these two nations underwent similar stages in their respective histories. Both nations came under the rule of monarchies, such as the houses of Hohenzollern and Romanov. The people of both states experienced harsh dictatorships, such as those of Adolf Hitler and Joseph Stalin. In the 18th and 19th centuries, these two nations rose to become global superpowers and often clashed while vying to take control of the continent of Europe.

 Arguably, the lowest point in their respective relationship came when Adolf Hitler launched Operation Barbarossa, which led to a war that resulted in millions of casualties on both sides, but was especially destructive to the Russians. Nonetheless, as a new world was born after the end of World War II, immense clashes like those of the 18th and 19thcenturies have decreased, as economies suffered from recessions and the cost of war increased over time.

Nations figured that it would be easier and cheaper to simply negotiate rather than seek war to solve their problems. Berlin and Moscow have since resorted to ‘toned down’ retaliation such as expelling diplomats. Besides, a simple canine might do the trick these days. President Putin once brought his black lab Koni, to a meeting with Chancellor Merkel; reporters stated that she ‘was visibly frightened’, as Mr. Putin sat back and enjoyed the moment. 

What a cost effective way of intimidating your opponent in order to get what you want! Nowadays, even though Berlin and Moscow often clash over numerous political matters, the basic law of supply and demand forces them to ‘need’ each other. The Nord Stream 2 offshore natural gas pipeline is one such prominent example.  

Via the Warsaw Institute source: https://warsawinstitute.org/nord-stream-2-pipeline-sees-last-minute-sanctions/

Nord Stream 2 is a twin pipeline that will carry natural gas directly from Russia to Germany. It will run for 1,230 kilometers under the Baltic Sea, following the path of the current Nord Stream twin pipeline. The initial Nord Stream pipeline, which had a 55 billion cubic metre (bcm) annual capacity, was completed in late 2012. Following the completion of Nord Stream 2, the pipeline system's total capacity would double to 110 bcm. Gazprom, a state-owned company headquartered in Moscow, is the project's largest shareholder and has committed to supplying up to 50% of the project's funding. 

The pipeline passes through five countries' exclusive economic zones: Russia, Germany, Denmark, Finland, and Sweden. Nord Stream 2 is being developed by Nord Stream 2 AG, a Swiss consortium. Gerhard Schröder, who served as German chancellor from 1998 to 2005 and was widely chastised for his links to Russia, is the company's chairman of the board of directors. Russia, Germany, Finland, Denmark, and Sweden have all issued all proper licenses for the proposed pipeline's construction within their jurisdictions. Nord Stream 2 construction began in Germany in 2016 with the manufacture of steel pipes and ended in May 2018 with the digging of a trench on the seabed. The first steel pipes were installed at Germany's landfall in Lubmin in July 2018.

The pipeline's backers, which include the Russian government, the companies involved, and some German politicians, claim that it would improve supply protection by linking western Europe to the world's largest gas reserves while also supporting sustainability objectives by replacing coal as a less CO2-intensive complement to renewable energies. Germany intends to phase out coal usage in order to achieve its CO2 emissions reduction goals, which proponents of Nord Stream 2 argue would put more pressure on the country's electricity grid. Nord Stream 2 supporters also claim that the project will replace the electricity currently provided by nuclear power plants, which are scheduled to be shut down by 2022. 

Despite geopolitical concerns, supporters of the project argue that Germany needs more gas imports and that the new pipeline will provide secure and inexpensive supplies. The German federal government has maintained for years that Nord Stream 2 is solely an economic initiative in which the government does not intervene. The pipeline, according to the German government, is in line with article 194 of the Treaty on the Functioning of the European Union's objectives of ensuring supply stability, fostering energy network interconnection, and ensuring the functioning of the energy market. 

Chancellor Angela Merkel, however, recognized the Ukrainian government's concerns in April 2018, saying the pipeline "is not only an economic initiative, but that, of course, political considerations must also be taken into account." Despite this, the government continues to support the initiative.

According to the Federal Institute for Geosciences and Resources, Germany is the world's largest natural gas importer, importing almost all of the natural gas it consumes. Domestic natural gas output has been declining since 2004, and will most likely end in the next decade, making further hydraulic fracking exploitation of Germany's natural gas supplies doubtful. It can be safely said that Russia continues to be Germany’s main supplier of energy. Nord Stream 2 will also help lower gas prices in the EU, according to a 2017 report by energy analysis and consulting firm ewi Energy Research & Scenarios. “Once Nord Stream 2 is operational, Russia will be able to supply more gas to the EU, reducing the need for more costly LNG imports. As a result, the import price for remaining LNG volumes falls, lowering the overall EU-28 price level,” ewi wrote.

The pipeline has long been opposed by the United States, and already strained transatlantic ties have worsened as a result of the project. Both Presidents Barack Obama and Donald Trump have stated their opposition to the pipeline, and in December 2019, the country imposed sanctions, causing pipelaying vessels owned by the Swiss company Allseas to stop working on the project, causing a months-long delay. Threats of further sanctions in mid-2020 have placed the pipeline's completion in jeopardy. 

The US government, like others, believes that completing the project will increase Europe's dependence on Russia and jeopardize the continent's security policy at a time when Russia is under fire for alleged interference in Western democracy, violence in Eastern Europe, and support for Syrian President Bashar al-Assad. Nord Stream 2 is one of "Russia's malign influence projects," according to former Secretary of State Mike Pompeo. 

In mid-March, the Biden administration said that it is committed to following the sanctions legislation passed by Congress with bipartisan support, and that companies involved should "immediately abandon work on the pipeline." Furthermore, the geopolitical claim of opponents is based on the assumption that since Gazprom is a state-owned corporation, buying gas from it funnels money directly to the government, which is then used to conduct nefarious activities both at home and abroad. 

Moreover, many Eastern European countries such as Poland, Slovakia, and Ukraine are opposed to Nord Stream 2, partly due to fears of losing transit fees and partly due to concerns about their economic and physical security if the project is completed. Finally, Germany’s commitment to its ‘relationship’ with Nord Stream might come to an abrupt end if the Green Party gains power in coalition government.

In the end, as the Biden Administration  takes a tough stance on Russia, and several European states opposing the pipeline, pressure on Germany may reach a point where Berlin will have to halt the project. Nonetheless, with the projectnearly complete, I highly doubt that Germany will give in now. The question that we must ask ourselves is this: how much leverage will Russia yield over Germany when Nord Stream 2 starts pumping gas to Berlin?