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 (e.g., Ukraine, Syria, poisonings).
In delivering natural gas directly from Russia to Germany, Nord Stream 2 would bypass Central and Eastern European nations (e.g., Poland and Ukraine), eliminating their pipeline-related leverage and allowing Russia to shut their gas without impacting Germany and the rest of Western Europe.
Nord Stream 2 would leave Central and Eastern Europe vulnerable to Russia’s economic and political pressure.
Many Poles refer to Nord Stream 2 as the “Molotov-Ribbentrop 2 Pipeline,” a reference to the Russian-German pact which divided up Poland in 1939.
Nord Stream 2 threatens to undermine EU/NATO cohesion.
Differing views on Nord Stream 2 are exacerbating the divide between more established Western Europe and newly independent Central and Eastern Europe.
The United States opposes Nord Stream 2.
Other energy options include building the Baltic Pipe (from Norway to Denmark to Poland and points south, with east/west pipes branching off to Ukraine, Slovakia, etc.) and importing LNG from friendlier countries (e.g., US, Qatar, Algeria).
BACKGROUND AND STATISTICS
The current Nord Stream pipelines (two parallel pipes) run underneath the Baltic Sea from Vyborg, Russia to Greifswald, Germany.
Spanning a total of 1,222 kilometers (759 miles), the Nord Stream pipes are the world’s longest sub-sea pipelines. They were opened in 2011 and 2012, after more than a decade of feasibility studies, negotiations, and construction.
If built, Nord Stream 2 would supplement Nord Stream with two additional pipes.
Russia’s state-controlled gas giant Gazprom holds a 51 percent 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%).
Gazprom is the sole shareholder of Nord Stream 2, committed to funding half of the 9.5 billion euro ($11.7 billion) project costs.
As per an agreement signed on April 24, 2017, the other half of the project costs are being financed by a group of five Western European companies that includes two of the original Nord Stream AG shareholders (Germany’s Wintershall and France’s Engie) and 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 ($1.17 billion) loan.
Nord Stream’s annual capacity is 55 billion cubic meters (bcm). The goal of the Nord Stream 2 expansion is to double the capacity of the Russia-Germany pipes to 110 bcm by the end of 2019.
Russia’s gas exports to Europe rose over 8% in 2017 to a record high of 194 billion cubic meters. Almost 40% of Europe’s natural gas imports come from Russia.
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.
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 Holman W. Jenkins writing 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.”
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.
Poland, Ukraine, Hungary, Romania, the Czech Republic, Slovakia, and the Baltic States are among the EU countries that oppose the building of Nord Stream 2.
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.
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.
If Nord Stream 2 and TurkStream (the proposed sub-sea 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.
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 needing to rely on Russia. Additionally, Poland and Lithuania have LNG terminals, allowing them to purchase liquefied gas from friendlier nations such as the US, Qatar, and Algeria.
In November 2017, Denmark passed a law that would allow it to ban Nord Stream 2 from traversing its waters. 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.
Since Nord Stream 2 can easily circumvent Danish water, Danish approval or disapproval is unlikely to have a significant impact on the project.
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. 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.
The United States opposes Nord Stream 2. On March 20, 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 Russa “another tool to pressure European countries”. Recent US sanctions on Russian oligarchs, officials, and companies might cause some of Nord Stream 2’s financial backers to abandon the project.
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.
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.” 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.
Despite the opposition from the US and many EU countries, Nord Stream 2 construction continues. The pipeline could be operational by the end of 2019. TurkStream is also slated to open in late 2019.
The Baltic pipeline likely won’t open until 2022. Poland’s existing gas contract with Russia’s Gazprom expires in 2022.