The Political Significance of Nord Stream 2

The official position of Russia and Germany is that Nord Stream 2 is a purely economic project

The US claims that the “Stream” has an exclusively political burden and allows Russia to dramatically strengthen its position in Europe (both in the west, which is the main consumer of Russian gas, and in the east, through which Russian gas transits).

The absurdity of this American statement is obvious, given that it was the Americans and it was for political purposes that they did everything to first prevent the modernisation of overland gas pipelines running from Russia to western Europe through Poland, and then, not without some (though not absolute) success, they tried to block overland transit altogether. At the same time, the US and its eastern European allies were sure that the “Streams” would never be built, and at every corner they declared that the projects were a bluff, and the money allocated for them would at best be simply stolen.

However, after the launch of Nord Stream 1, the situation changed dramatically. The Ukrainians and Poles forgot that the “Streams” are a bluff, and began to demand that the west abandon cooperation with Russia in this area and block the construction of “Streams” that take away their transit. The US, in turn, took care of the introduction of sanctions. Moreover, for the sake of joining the sanctions mechanisms of Europe, they even opted for a provocation of the Russian-Ukrainian armed conflict with the prospect of its transformation into a pan-European one.

An official war between Russia and Ukraine would give the latter an argument for completely stopping the transit of Russian gas. In turn, Europe would not be able to evade sanctions against gas pipelines even if military actions quickly ended with the complete defeat of Ukraine. In this case, Russia would be accused of occupying all or part of the territory of Ukraine and planting a puppet regime in Kiev, which would make a full-scale break in relations with Europe inevitable in 2014.

This provocation fell through in the US, but they worked tirelessly against Nord Stream 2, forgetting that “this is a bluff”. They managed to delay its commissioning, and now they still continue to make efforts to ensure that the gas pipeline, even when completed, cannot start working.

In fact, thanks to the efforts of the US, the problem of Nord Stream 2 has ceased to be purely economic and has indeed acquired a political burden. At the same time, the political burden on the project is constantly increasing and if it has not yet begun to exceed the economic one, it may soon surpass it.

Let us pay attention to the fact that Russia never puts its eggs in one basket in strategic matters. The gas problem was also solved by the Kremlin comprehensively.

Firstly, in addition to the gas pipelines bypassing eastern Europe, gas pipelines were built that lead Russia to the Asian market (China, in the future Japan).

Secondly, Russia has dramatically increased its gas processing capacity on its territory. Several large gas processing plants have been built. Construction of several more is planned.

Thirdly, Russian gas companies have dramatically (tripled in the last three years alone) increased their LNG production and continue to increase capacity and build a fleet of gas carriers capable of delivering LNG to consumers year-round using the Northern Sea Route.

All this together makes it possible to quickly maneuver gas supplies to a more profitable market. While only Gazprom’s pipelines to Europe were operating, Asia (where spot prices periodically rise above European prices) was inaccessible to Russia. Now gas carriers can be sent to where the price is higher. Moreover, the total volume of gas flowing through alternative routes, consumed within the country and delivered to LNG terminals, allows Russia to abandon Nord Stream 2 without much loss, giving Europeans the opportunity to buy the same Russian gas (LNG) on the spot market, but more expensive than pipeline gas under long-term contracts.

Russia is currently able to drain the Ukrainian pipe without Nord Stream 2 . Moreover, due to the fall in production as a result of the systemic crisis, complicated by the coronavirus infection, Europe has reduced gas consumption. And it is not known whether this will be followed by a rapid increase, since the EU is actively adopting regulations that block hydrocarbon energy, and declares a bet on the development of hydrogen and other types of “green” energy. At the moment, Europe, having no alternative to hydrocarbon energy carriers, nevertheless erects artificial obstacles on their way to the European market. If this suicidal policy continues, some of the existing and emerging gas delivery capacity may be superfluous.

In this sense, LNG, although more expensive than pipeline gas, makes it easier to maneuver in the directions and volumes of supply. In addition, Russian LNG is still cheaper than its competitors’.

Gazprom has already hinted to its European partners that it is ready to abandon “Nord Stream 2”, since the partners themselves treat the project as if it is needed by Gazprom, and not by them. At the state level in the EU, only Germany defends “Nord Stream 2”, and then not always consistently. The others pretend that it is not their business and that not French, Austrian, Italian and other companies are involved in the project.

However, these hints of Gazprom were almost immediately disavowed by Russia at the political level. This, in fact, is a confirmation of the fact that the political and economic components of the project are at least equal in their significance for the participants of the confrontation. If Gazprom has the opportunity to preserve the construction site for today and wait for better times, then such a decision is unacceptable for Russia as a state. In the world, it will be perceived as a defeat for Russia in a direct confrontation with the US. Accordingly, not only the Kremlin’s political authority will be undermined, but also the opportunities for developing trade and economic cooperation, and not only in the European direction.

Not everyone will understand the changing circumstances that make it possible to abandon the project. On the surface, only the fact that the almost finished gas pipeline was frozen under American pressure will remain. At the same time, if the construction is frozen on the initiative of the Russian side, many will decide that Russia caved under the US’ pressure. If it turns out that the gas pipeline will still have to be frozen, but at the initiative of the Europeans, then Europe will look like they caved under pressure.

This is an important point. When deciding who to sign strategically important contracts with, both the state and private companies take into account possible political risks. If you fulfill your contractual obligations, no matter what, and the project is disrupted due to the political vulnerability of your partners, then the contracts will be concluded with you. If you seem to be politically vulnerable, then someone else will be preferred.

For the US, the issue is also fundamental. If they fail to stop the project (at least to postpone it for another three years), then the whole world will see that all the power of America was only enough to delay the commissioning of “Nord Stream 2” for a year. After that, their recommendations and wishes will be much less considered.

So the project has outgrown pure economics and carries significant political risks for both sides. And this increases the price of the issue and, consequently, the intensity of the struggle. It is no coincidence that since last year, Russian Navy ships have almost constantly provided support to the vessels building the stream, protecting them from the provocations of the US and its allies.

Rostislav Ishchenko

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