Everyone weighs in on Nord Stream 2
July and August have seen some interesting manoeuvres on the western political stage.
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On 11 July, US President Donald Trump – in Europe for a whistlestop tour and in Brussels to attend a NATO summit – took a breakfast meeting by surprise when he lambasted NATO Secretary General Jens Stoltenburg and other officials about Germany being “captive to Russia”. Trump was referring to the Nord Stream 2 pipelines and he criticised the German government for its plan to double export volume from Russia with the construction of new twin lines under the Baltic Sea. Trump’s aim for the NATO meeting was to demand that European members boosted their defence spending, to fall in line with US spending. During the televised breakfast, he made his point to Germany, saying that “we have to talk about the billions and billions of dollars that’s being paid to the country we’re supposed to be protecting you against.”
German Chancellor Angela Merkel insists that the project will create mutual dependency on both sides, has been structured according to European law and can be sufficiently justified in economic terms alone. She argues that Nord Stream 2 engages Russia in a significant multi-nation project, from which many will profit. In response to Trump’s comments, Merkel (who grew up in East Germany) said: “I’ve experienced myself a part of Germany controlled by the Soviet Union and I’m very happy today that we are united in freedom.”
Trump disagrees with the project on a few levels. Commercial interests certainly play a part, given that a recent glut of US gas means that it needs new foreign markets for export opportunities. Global diplomacy must also be on his mind, as this huge geo-economic project is forged between two major world powers. As evidenced in another meeting on Trump’s agenda for that week in July, in Helsinki, it is not altogether clear who Trump considers his ally. Following face-to-face talks with Russian President Vladimir Putin, the two held a press conference in which Trump denied Russian involvement in the 2016 US election (something the US intelligence agencies are rather convinced about to the contrary). Standing beside Putin, Trump also said US-Russian relations have never been worse, but he believed that “changed as of about four hours ago.”
Trump is hardly alone in his opposition to Nord Stream 2. Poland and Ukraine fear being left out of the political equation when it comes to oil and gas transit, because pipelines that travel under the Baltic Sea do not require negotiations with (and massive fees paid to) transit countries such as themselves. In August, the UK expressed implicit opposition to the project on grounds of the risk to European energy security and potential harm caused to Ukraine. Sweden, Denmark and Finland have expressed concerns about ecological matters.
Despite this opposition, all important permits for the project have been granted. US sanctions pose the only serious threat to the project, as senators move on a bill that would penalise European companies that are involved in the pipeline, these include: Wintershall, Uniper, OMV, Shell and Engie.
Trump has previously promoted US LNG exports as an alternative to Nord Stream 2 (in Helsinki he declared that the US will compete for market share with Nord Stream 2) but many obstacles exist, not least the reality that Europe has limited import facilities (about 24 in total, most running at a quarter of their capacity). Despite vague plans from the European Commission to build several more terminals across Europe, at present the price differentials don’t work in favour of potential European LNG buyers. Russian gas is significantly cheaper than LNG.
Meanwhile, out east, dredging work for Nord Stream 2 started in the spring, pipelaying is scheduled over the summer months and the twin pipelines are expected to be operational by the end of 2019. Will the project change the face of European-Russian-US relations? Trump’s final word on the subject at the tense breakfast in Brussels was: “Trade is wonderful, energy is a whole different story.”