‘An empty, rusty pipe at the bottom of the Baltic Sea’: The end of Nord Stream 2?

Non-committal for weeks, Germany acted swiftly following Russia’s invasion of Ukraine to announce that it was pulling the plug on the Nord Stream 2 gas pipeline.

German Chancellor Olaf Scholz said on February 22 that his government had taken steps to halt the approval process for the Nord Stream 2 gas pipeline from Russia following its invasion of Ukraine.

Speaking to reporters in Berlin, Scholz said he had asked Germany’s economy ministry “to withdraw the report on security of supply with our federal networks agency”, calling this “the first step to make sure the pipeline cannot be certified at this point”.

“Without certification the Nord Stream 2 can’t operate,” he added. “We will reassess the situation that has evolved over the past few days. It’s important to launch new sanctions now to prevent an escalation and a disaster.”

Bypassing Ukraine

The pipeline, completed in September 2021, links Russia with Germany via the Baltic Sea – bypassing Ukraine – and will double Russia’s existing direct gas export capacity to Western Europe, to 110 billion cubic metres. Germany relies on Russia for as much as 40 per cent of its gas.

Work on the 1,225 kilometre pipeline took five years, at a cost of around 9.5 billion euros. It has yet to deliver any gas, however. Germany’s energy regulator halted its certification process of the pipeline in November, saying its operator was based in Switzerland, not Germany.

“Following a thorough examination of the documentation, we concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organised in a legal form under German law,” the German regulator said at the time.

German businesses have invested heavily the Gazprom-led project, including Uniper and BASF’s Wintershall unit, while other European firms also have stakes, including Anglo-Dutch Shell, OMV of Austria and Engie of France.

While the United States has long opposed Nord Stream 2, in May last year President Joe Biden agreed to waive sanctions against firms building the pipeline in order to improve its relationship with Germany.

Under the terms of the deal with Germany, the Biden administration received commitments from Berlin to invest in Ukraine’s energy industry and push the Kremlin to continue to export at least some gas through the country.

The agreement also stipulated that Russia could be sanctioned should Nord Stream 2 be used to apply political pressure on Ukraine or Western Europe.

Ukraine – hitherto the main route for the transportation of Russian gas to Western Europe – is set to lose out on transit fees worth up to two billion US dollars per year if Nord Stream 2 ever begins operating.

‘An empty, rusty pipe’

Scholz’s decision to halt the project will be viewed as vindication in a number of central and eastern European capitals, not least in Kyiv.

Ukrainian Foreign Minister Dmytro Kuleba called it an example of true leadership.

“This is a morally, politically and practically correct step in the current circumstances,” he said. “True leadership means tough decisions in difficult times. Germany’s move proves just that.”

In Warsaw, where the government has long been one of the most vocal opponents of the pipeline – Mateusz Morawiecki, Poland’s prime minister, earlier this month called it a “powerful threat to peace” and “a tool of blackmail” – Deputy Minister of the Interior Maciej Wąsik said that he hoped the West had now “finally understood” that Nord Stream 2 “should remain an empty, rusty pipe at the bottom of the Baltic Sea”.

Poland itself took a huge step towards diversifying its energy mix away from Russian gas supplies in November with the completion of the final sea bed section of the Baltic Pipe project.

The pipeline, which connects Poland with Norwegian gas fields via the Baltic Sea and Denmark, will have a capacity of around 10 billion cubic metres per year, roughly equivalent the amount of gas Poland currently imports from Russia.

From Russia, meanwhile, came little more than threats.

“Welcome to the brave new world where Europeans are very soon going to pay 2,000 US dollars for 1,000 cubic metres of natural gas,” said Dimitry Medvedev, a former president and prime minister, currently serving as deputy chairman of Russia’s security council.

This would not appear to be the case, at least not yet.

The president of the European Commission, Ursula von der Leyen, said just last week that even in the case of full disruption of gas supply from Russia, “we are on the safe side for this winter”.

“We would be able to replace the Russian gas with LNG (liquefied natural gas) deliveries that we get from our friends all over the world,” she said.

Renewables now

Nevertheless, given that Europe’s own natural gas production has been in continuous decline because of production limits on the Groningen field in the Netherlands and declines in the mature fields in the North Sea, there remains a reliance on Russia to meet demand.

Pipeline flows of natural gas from Russia decreased slightly during 2021, and while natural gas delivered by pipeline from Norway saw a slight increase, it was not enough to offset the fall in Russian supplies.

While Scholz’s carefully chosen words, “the pipeline cannot be certified at this point”, leave the door open for Nord Stream 2 project to be relaunched at some stage, Germany’s Greens – the second largest party in Scholz’s coalition and long opposed to the pipeline – have lost no time in calling for a faster transition to renewable energy.

“The time to switch to renewables is now,” said Agriculture Minister Cem Özdemir, a Green.

According to European Energy Commissioner Kadri Simson, speaking in December, the EU is aware that it must speed up investment in renewables and not depend on imports of hydrocarbons from other countries, a situation that even before the current crisis had been viewed as unsustainable.

“We should use this moment to push for faster deployment of renewable energy and accelerate the implementation of energy efficiency measures,” she said.

Vladimir Putin may have just forced Europe’s hand.

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