KEY POINTS

  • Nord Stream 2 could jeopardize Europe’s energy security by increasing its dependence on Russia, a country that has often been at odds with the EU and the US (Meduza and The New Federalist).
     

  • In delivering natural gas directly from Russia to Germany, Nord Stream 2 would bypass Central and Eastern European Nations, e.g. Poland and Ukraine (Radio Free Europe), thus eliminating their pipeline-related leverage and allowing Russia to have the same direct bullying capacity over Western Europe that it did over Ukraine (NewStatesman).

    • Nord Stream 2 would leave Central and Eastern Europe vulnerable to Russia’s economic and political pressure (Harvard Political Review).
       

    • Poles have drawn comparisons between Nord Stream 2 and the Molotov-Ribbentrop Pact, the Russian-German pact that divided up Poland in 1939 (Polish American Congress).

  • Nord Stream 2 threatens to undermine EU/NATO cohesion (Klub Jagelloński).

    • Differing views on Nord Stream 2 are exacerbating the divide between more established Western Europe and the newly independent Central and Eastern Europe (Harvard Political Review).
       

    • The US opposes Nord Stream 2 and plans to pass a bill putting sanctions on the project (Reuters).

    • Other energy options include: building the Baltic Pipe, and importing LNG from friendlier countries such as the US and Qatar (Biznes Alert).


BACKGROUND AND STATISTICS

  • The current Nord Stream pipeline consists of two parallel lines that run across the Baltic sea from Vyborg, Russia to Greifswald, Germany (Polish American Congress).
     

    • At 1,222 kilometers (759 miles) in length, it is the longest subsea pipeline in the world. Construction began in 2005 and each conduit was inaugurated in 2011 and 2012, respectively (Wermac).
       

    • If built, Nord Stream 2 would supplement existing Nord Stream with two additional pipes (Polish American Congress).

  • Russia’s state-controlled gas giant, Gazprom, holds a 51% stake in Nord Stream AG, the company that built and operates the first Nord Stream Pipes. The remaining shares are owned by German companies, Wintershall Holding GmbH (15.5%) and PEGI/E.ON (15.5%), Dutch company, N.V. Nederlandse Gasunie (9%), and French company, Engie (9%) (Nord Stream).

  • Gazprom is the sole shareholder of Nord Stream 2, committed to funding half of the 9.5 billion euro project costs (OSW).

    • As per an agreement signed on April 24, 2017, the other half of the project costs are financed by a group of five Western European companies that includes two of the original Nord Stream shareholders, (Germany’s Wintershall and France’s Engie), as well as three additional investors (British-Dutch multinational Royal Dutch Shell, Germany’s Uniper, and Austria-based OMV). Each of these companies is providing a 950 million Euro loan (OSW).

  • Nord Stream’s annual capacity is 55 bcm. The Nord Stream 2 expansion is supposed to double that capacity to 110 bcm by the end of 2019 (Gazprom).

  • Almost 40% of Europe’s natural gas imports come from Russia (The Washington Post).

  • While Nord Stream 2 would double pipeline capacity, it wouldn’t necessarily increase the amount of natural gas pumped into Germany. Instead, it would allow Russia to reroute gas away from the pipelines running through Belarus, Poland, and Ukraine. 

  • Gazprom is a “discriminating monopolist,” charging different prices to its European customers. Poland and Ukraine often pay among the highest prices in the EU; Germany, France, and England often pay among the lowest (Radio Free Europe).


SUPPORT

  • Unsurprisingly, Russia is Nord Stream 2’s biggest proponent.
     

  • As chairman of Nord Stream AG, Nord Stream 2, and Rosneft (Russia’s state-owned oil giant), former German Chancellor, Gerhard Schroeder, has been a powerful advocate for the Nord Stream projects.

    • According to Holmann W. Jenkins in the Wall Street Journal, “Mr. Schroeder has been a one-man Trojan horse against every European Union commitment to curb Russian energy leverage and improve the competitiveness of its gas market” (The Wall Street Journal).
       

  • Germany, Austria, and the Netherlands are the only EU countries actively supporting Nord Stream 2. Each of these countries is home to one or more of the energy companies that are helping to finance the project (DW).


OPPOSITION

Poland, Ukraine, Hungary, Romania, the Czech Republic, Slovakia, and the Baltic States are among the EU countries that oppose construction of Nord Stream 2 (Radio Free Europe).

  • In March 2018, the leaders of parliamentary bodies in Poland, Ukraine, and the Baltic States signed a joint letter saying that they believe Nord Stream 2 is a Russian political instrument intended to make Europe dependent on Russian energy (Unian).

  • Polish Prime Minister Morawiecki has called the project “unnecessary, detrimental, and divisive.”  He has expressed concern that the new pipelines could embolden Russia to escalate the conflict in Ukraine (EU Observer).
     

  • If Nord Stream 2 and TurkStream (the proposed subsea gas pipeline from Russia to Greece via Turkey) are completed as planned, Russia will no longer need to use the Brotherhood and Northern Lights pipelines that cross Central & Eastern Europe (including Ukraine) by land.  This will reduce transit fees paid to those countries and leave them vulnerable to Russian energy blackmail and/or attack (Congressional Research Service and Reuters).
     

  • The proposed Baltic Pipe from Norway to Poland via Denmark would provide Poland, and the rest of Central & Eastern Europe, with abundant natural gas without reliance on Russia (The Jamestown Foundation). Additionally, Poland and Lithuania have LNG terminals, allowing them to purchase liquefied gas from friendlier nations such as the US, Qatar, and Algeria (Center on Global Energy Policy).

  • In November 2017, Denmark passed a law that would allow it to ban Nord Stream 2 from traversing its waters (Reuters).  The Danish Prime Minister Lars Rasmussen has indicated that Denmark would allow the pipeline in its territory if Russia guarantees that gas will continue to flow through the Ukraine pipeline as well (UAWire).

    • Denmark’s reluctance to approve Nord Stream 2 threatens to delay its construction (Unian).

  • Also in November 2017, the European Commission attempted to extend the EU’s internal energy market regulations to pipelines to and from non-EU countries (Reuters).

    • This would have subjected Nord Stream 2 to the EU’s Third Energy Package rules that prevent suppliers from owning pipes, prohibit discriminatory tariffs, and insist on granting access to other parties. 

    • The Commission proposal was a direct challenge to Germany and the other countries whose companies would benefit from Nord Stream 2’s completion.

    • On March 1, 2018, an EU legal opinion rejected the Commission’s proposal (Council of the European Union).
       

  • The United States opposes Nord Stream 2. In March 2018, US State Department Spokesperson Heather Nauert said that the US government believes that Nord Stream 2 “would undermine Europe’s overall energy security and stability” and give Russia “another tool to pressure European countries” (Radio Poland). Recent US sanctions on Russian oligarchs, officials, and companies (US Department of the Treasury) might cause some of Nord Stream 2’s financial backers to abandon the project (Handelsblatt).
     

  • Environmentalists have been outspoken in their opposition to Nord Stream 2. They are concerned that its construction will disrupt WW2 munitions on the floor of the Baltic Sea, damage the Kurgalsky Nature Reserve in northwest Russia, and extend Europe’s dependence on fossil fuels (Biznes Alert).

  • On April 10, 2018, at a press conference with Ukrainian President Petro Poroshenko, German Chancellor Angela Merkel said: “[A] Nord Stream 2 project is not possible without clarity on the future transit role of Ukraine...it is not just an economic issue but there are also political considerations” (Reuters).

    • This stance is at odds with her earlier statements on Nord Stream 2. It is unclear how this possible shift will affect Nord Stream 2.


FINAL NOTES

  • Despite the opposition from the US, including potential gas sanctions (RealClearEnergy), and many EU countries, Nord Stream 2 construction continues.  It is estimated the pipeline will be operational in early 2020 (CNBC). TurkStream is also slated to open in late 2019 (The Moscow Times).    
     

  • The Baltic pipeline likely won’t open until 2022 (Baltic Pipe Project). Poland’s existing gas contract with Russia’s Gazprom expires in 2022 (Reuters).