Workers at a Nord Stream 2 gas pipeline construction site, near the town of Kingisepp, in Russia, on June 5, 2019.Anton Vaganov/Reuters
German Chancellor Olaf Scholz, apparently eager to shed the accusation that his country is the “weak link” in the anti-Russia Western alliance, has stopped the approval process for the Nord Stream 2 pipeline that would have made Germany more reliant than ever on Russian natural gas.
His decision to block the pipeline’s certification came the morning after Russian President Vladimir Putin formally recognized the independence of two self-proclaimed republics in eastern Ukraine, Lugansk and Donetsk, and sent Russian troops and their armour to occupy them.
On Tuesday morning, German Energy Minister Robert Habeck withdrew the regulatory approval process for the US$11-billion pipeline. The move signals that Germany, the biggest foreign client of Russian gas giant Gazprom, is prepared to pay a heavy economic price to punish Russia for its incursion into Ukraine.
Russia-Ukraine crisis live updates: Germany halts Nord Stream 2 gas pipeline
“Without this certification, Nord Stream 2 cannot go into operation,” Mr. Scholz said at a news conference in Berlin, describing Mr. Putin’s recognition of the Russian-controlled regions as a “grave breach” of international law.
The heightened geo-economic tensions between Russia and the West sent gas and oil prices higher Tuesday by about 1.5 per cent each. Brent crude, the international benchmark, closed at US$96.53 a barrel, for a one-year gain of 46.7 per cent. Oil’s recent high was US$99.50, and many energy analysts think it will burst through US$100 as the sanctions war, which could see Russia retaliate by reducing oil and gas exports to Europe, intensifies.
The Nord Stream 2 pipeline travels under the Baltic Sea from Russia to an import terminal in northwest Germany. Putting it in regulatory limbo does not mean Germany will suffer gas shortages. The pipeline, though completed, had yet to deliver any gas. The parallel Nord Stream 1 pipeline, which has been delivering Russian gas to Germany for almost two decades and accounts for two-thirds of its imported supplies, is not affected by Mr. Scholz’s decision.
Nord Stream 2 would have doubled Germany’s import capacity to 110 billion cubic metres a year.
Stopping its certification is a blow to Kremlin-controlled Gazprom and the Russian treasury, which makes a fortune from increasingly valuable oil and gas exports, giving the country a big trade surplus and one of the lowest debt-to-GDP ratios in the developed world.
Europe’s gas pipelines
Gas pipelines
Entry stations
RUSSIA
Nord Stream 2
NETH.
Yamal
BRITAIN
Sudzha
Mallnow
BEL.
POLAND
UKRAINE
Sokhranovka
FRANCE
CZECH REP.
Russia exports around
16 billion cubic feet
per day (bcfd) of
natural gas to Europe
ITALY
TURKEY
GRAphic news, Sources: BP Review of world
energy; Reuters
Europe’s gas pipelines
Gas pipelines
Entry stations
RUSSIA
Nord Stream 2
NETH.
Yamal
BRITAIN
Sudzha
Mallnow
BEL.
POLAND
UKRAINE
Sokhranovka
FRANCE
CZECH REP.
Russia exports around
16 billion cubic feet
per day (bcfd) of
natural gas to Europe
ITALY
TURKEY
GRAphic news, Sources: BP Review of world
energy; Reuters
Europe’s gas pipelines
Gas pipelines
Entry stations
Nord Stream 2
RUSSIA
NETH.
Yamal
BRITAIN
Sudzha
Mallnow
BEL.
GERMANY
POLAND
UKRAINE
Sokhranovka
CZECH REP.
FRANCE
ITALY
Russia exports around 16 billion
cubic feet per day (bcfd) of
natural gas to Europe
TURKEY
GRAphic news, Sources: BP Review of world energy; Reuters
But Russian Foreign Affairs Minister Sergey Lavrov shrugged off Germany’s move. “They are already threatening us with all manner of sanctions or, as they say now, ‘the mother of all sanctions,’” he said. “Well, we’re used to it.”
Russia is gambling that its gas will remain in high demand in Europe and elsewhere as countries pledge net-zero carbon emissions by 2050 or 2060. Gas is seen as a crucial “transition fuel” to a renewable energy system as dirty coal burners are shut down.
Mr. Scholz became Chancellor in December, replacing Angela Merkel, just as the Ukraine crisis was heating up. A lawyer specializing in employment law, he is a member of the Social Democratic Party and heads a three-party coalition with the Greens and the liberal Free Democratic Party.
At first, as he was trying to give his new government its strategic direction and dealing with the Omicron wave, he seemed to pay little attention to the Ukraine crisis. He even declined to mention Nord Stream 2 as a feature in the possible sanctions package, triggering accusations that Germany would not stand with the rest of Europe in punishing Russia were it to invade Ukraine.
Later, he became more engaged, holding meetings with Mr. Putin and U.S. President Joe Biden and visiting Ukraine. Still, he never specifically said he was prepared to stop Nord Stream 2. Some analysts suggested he knew Germany needed the extra Russian gas to power Europe’s biggest economy and could not risk angering Mr. Putin.
His stand changed Tuesday. “I think what we are seeing now is that Germany is no longer the ‘weak link’ – Scholz has returned Germany to the international framework,” said Florian Ranft, head of international affairs for the German think tank Das Progressive Zentrum. “There was never any doubt that he would eventually show a united front.”
While Nord Stream 2′s certification has been stopped, it doesn’t mean it is dead, Mr. Ranft said.
If Russia does not invade the rest of Ukraine, and the geopolitical tensions cool, there is some chance Russia could persuade Germany to approve the pipeline. In the meantime, Germany will examine its energy supply strategy, including opening its market to imports of liquefied natural gas.
Germany is one of the few European coastal countries without an LNG import terminal – the superchilled gas is delivered by tanker ships from the United States and Qatar – but plans to open two terminals in the next few years after years of project delays.
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Eric Reguly