Russia's link to Germany - the Nord Stream 2 Pipeline

The oil and gas links between Russia and Europe deepened, with the new project getting completed.

 Russia's link to Germany - the Nord Stream 2 Pipeline

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Read more on - Polity | Economy | Schemes | S&T | Environment

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• The story: Europe relies on Russia for its natural gas and oil needs. The European Union (EU) imports 67% of its natural gas from abroad, and Russia makes close to 40% of those. In 2016, around 30% of the EU’s total oil imports came from Russia, and it has not reduced since. The share of imported Russian crude oil and gas imports are even higher in certain countries. A network of intricate gas pipelines ensure a constant flow of Russian gas from the northern and eastern parts of the country to consumers and businesses in Europe. While the EU has been importing gas from Russia for decades, it is the construction of Nord Steam 2 pipeline that made America very anxious.
• Details of Nord Stream 2 (NS2): It is running from Russia to Germany across the Baltic Sea, and is now completed.

1. The NS 2 is an expansion of Russia’s existing Nord Stream gas pipeline to Germany across the Baltic Sea. The total capacity of two strings of Nord Stream 2 is 55 billion cubic meters of gas per year.
2. NS2’s manufacture began in 2016 and construction in 2018. The 1,224 km, $11-billion underwater link is the shortest, most economical and environment-friendly route to double Russia’s gas export to Germany.
3. Nord Stream 2 route and logic - Running parallel to the existing Nord Stream pipeline, built in 2011, the Nord Stream 2 can double its existing capacity. Further, Europe’s gas production, which is currently concentrated in the Netherlands, Norway, and the United Kingdom, is expected to decrease in future as North Sea gas runs out; Nord Sea 2 aims to fill the gap between decreasing supply and steady demand by supplying Russian gas in a cost-efficient way. Indeed, the shorter route of Nord Stream 2 provides for cheaper transportation costs, and the promoters of the pipeline predict that it will lower European gas prices by some 32%.

• Importance: European gas prices have broken records in 2021, getting close to an unprecedented $1,000 per thousand cubic meters. Due to lack of viable alternatives to gas, low storage levels because of a severe winter and the post-COVID-19 economic surge, NS-2 is of greater significance. It provides Russia with more direct access to the European gas market. National governments are set to benefit economically from investment and employment in the pipeline.

1. Russia was the largest supplier of natural gas to the EU, both in 2019 and 2020; the only other partners with a significant share in total extra EU imports were Norway and, at some distance Algeria.
2. The global share of all the other countries exporting natural gas to the EU was 20.2 % in 2019 and 24.6 % in 2020 in terms of trade value.
3. Russia was less dominant in petroleum oils than in natural gas but still far ahead of the second largest supplier, the United States. They were followed by Kazakhstan, Nigeria, Norway and Saudi Arabia. The share of the top six decreased from 67.7 % in 2019 to 67.3 % in 2020.

• Controversial project: Many countries in the region are quite apprehensive.

1. Ukraine - It offered extra transit capacity for Russian gas to Europe but Russia booked only 4.3% of it, citing domestic demand. It believes the pipeline is a Russian geopolitical weapon aimed at depriving Ukraine of crucial revenue. If Russia cuts its transportation of gas through Ukraine, it would lose billions of dollars in transit fees. Ukraine's viability is dependent on Russian fossil fuels through its territory, now fears that Russia could reduce energy supplies by cutting those needed for Ukraine’s consumption. It may also give Russia a freer hand for military actions in Ukraine.
2. Poland - It says that that gasline project is anti-competitive, and alleges that NS2 is Russia’s most daring attempt to break up the EU.
3. USA - It opposes the pipeline, arguing that it would increase Moscow’s leverage over European countries. It strengthened the Western Alliance by sanctioning NS2.
4. Germany – Angela Merkel has steadily supported the project as dozens of German businesses have invested in this project, and rejected American attempts to dump the project.
5. EU – In NS2, Gazprom is the gas producer and supplier and this violates the market-oriented EU energy policy that mandates auctioning the transportation to third parties.

• Viability: To enable a consensus on NS2, Germany has promised assistance to Ukraine for development of hydrogen energy. This environmentally friendly hydrogen option presents scope for accommodating the requirements of German coalition politics and support for the Ukraine turning NS2 into a win-win proposition.
• Summary: The project's successful completion has strengthened the hand of Vladimir Putin, and seems at odds with the human rights demands of the EU as a bloc, given the autocratic functioning and crushing of democracy internally in Russia.
• EXAM QUESTIONS: (1) Despite a poor human rights record of Russia, Germany did not scrap the oil and gas pipeline project. Why not? Analyse. (2) What are the levers that Russia uses in its relationship with the EU? Explain. (3) What are the American concerns on oil and gas business that Russia does? Explain.

Read more on - Polity | Economy | Schemes | S&T | Environment

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