On Friday, the Chairman of Gazprom’s management committee, Alexey Miller, announced during the company’s morning briefing that the construction of the gas pipeline had been fully completed at 8:45am Moscow time. Shares in Russia’s state-run energy giant Gazprom pushed higher on the Moscow share exchange after the company announced that the final sections of the controversial Nord Stream 2 gas pipeline, which will transport gas, have been completed. Gazprom stock increased in value by 1.48% to more than 329 roubles (US$ 4.52) per share shortly after, news was revealed.
In the opening trade, the share price gained 0.81% to 327.2 roubles per note. Nord Stream 2 has finally been completed, Russia’s Gazprom announces, despite US efforts to block major European gas pipeline. Earlier this month, Russian Energy Minister Nikolai Shulginov said that gas pumping via Nord Stream 2 is expected to start by the end of this year. Recently, the US had approved the Germany – Russia Nord Stream 2 Pipeline (NS2P) project – which significantly increases Europe’s energy dependence on Russia. Russia has the largest known natural gas reserves of any state on earth. This is the 32% of world proven natural gas reserves mainly owned and operated by the Russian monopoly Gazprom, which produces 94% of Russia’s natural gas Production.
In the latest development, the US gave its approval for the completion of Nord 2 Pipeline, a major new gas pipeline project between Russia and Germany. The US, which had previously imposed trade sanctions to prevent the completion of a major new gas pipeline between Russia and Germany, has now signaled its approval for the project.
Russia is set to increase natural gas exports to China over the next five years as additional supply and more infrastructure come on line. The Russian gas is sent to China via a 2200 kilometer long transnational gas pipeline that runs eastward from Gazprom’s Chayanda fields to the Chinese border in the Heilongjiang province.
Where does Britain get its gas from? The UK has been a big producer of gas since the mid-1960s – but output has fallen since the year 2000 and usage continue to rise. UK now imports more than half the requirement of gas – much of it from Norway, and a considerable amount from the Netherlands and Belgium.
British and Norwegian economy picked up due to the North Sea oil fields and technologists developed software tools to design and launch rigs in the high seas. In order to design floating pipelines in the sea bed, technology was developed in Norway. The British and Norwegian sectors hold most of the large oil reserves. It is estimated that the Norwegian sector alone contains 54% of the sea’s oil reserves and 45% of its gas reserves. More than half of the North Sea oil reserves have been extracted, according to the official sources in both Norway and the UK.
In August 2021, the US and Germany reached a deal on the Nord Stream 2 pipeline – which significantly increases Europe’s energy dependence on Russia – under which Berlin will respond to stop Moscow should the latter use the strategically critical gas system as a political leverage weapon. The agreement is being interpreted as a tightrope walk for the West, which on one hand wants access to Russia’s hydrocarbons, but on the other hand distrusts President Vladimir Putin, who is held responsible for a series of affronts, such as the Crimean conflict of 2014 and the alleged interference in the US elections of 2016 and 2020. The US and Germany said in a joint statement that they were “united in their determination to hold Russia to account for its aggression and maligned activities by imposing costs via sanctions and other tools.”
But what is the Nord Stream 2 pipeline? In 2015, the Russian energy major Gazprom and five other European firms decided to build Nord Stream 2, valued at around US$ 11 Billion. The 1,230 km pipeline will run from Ust-Luga in Russia to Greifswald in Germany, it is to follow the route of the existing Nord Stream twin pipeline underneath the Baltic Sea. It will carry 55 billion cubic meter of gas per year. The pipeline crosses into the exclusive economic zones of five countries: Russia, Germany, Denmark, Finland, and Sweden. Russia, Germany, Finland, Denmark and Sweden have granted all the permits necessary for construction of the planned pipeline within their jurisdictions. After entering into the Gulf of Finland, the pipeline is to re-emerge on land in north-eastern Germany, near Greifswald.
The under-construction pipeline, which got completed, will run along with the already completed Nord Stream 1 system, and the two together will supply an aggregate of 110 billion cubic metres of gas to Germany per year. The pipeline falls in the territory of EU members Germany and Denmark. Natural gas is a lower-carbon fuel that can replace other fossil fuels in the energy mix and deliver a reliable output to complement intermittent renewable energy.
So, why is the pipeline controversial? Since it was first planned, Nord Stream 2 has drawn criticism from the US, where both the Democratic and Republican parties believe that the project would increase Europe’s dependence on Russia for the natural gas, thus emboldening President Vladimir Putin. Currently, EU countries already rely on Russia for 40% of their gas needs. The project also has opponents in the Eastern Europe, especially Ukraine, whose ties with Russia have seriously deteriorated in the aftermath of the Crimean conflict in 2014.
There is an existing land pipeline between Russia and Europe that runs through Ukraine. Ukraine feels that once Nord Storm 2 is completed, Russia could bypass the Ukrainian pipeline, and deprive it of lucrative transit fees of around US$ 3 Billion per year. Ukraine also fears another invasion by Russia once the new pipeline is operational. It also feels that Russia may apply new sanctions.
Russia, on its part, has dismissed these fears. Germany, too, has solidly stood behind the Nord Stream 2, despite opposition from its allies, with Chancellor Angela Merkel’s government insisting that it is a commercially beneficial project and ‘win win’ situation for both Germany and Russia.
And, why has the US position changed? In December 2019, work on the project was suspended due to the threat of the US sanctions, and in January this year, Washington actually carried out its threat – imposing sanctions on a Russian ship tasked with laying pipes for the project. The pipe laying exercise is a technical marvel, where pipeline is laid on the bed of the sea and bolted firmly to the sea bed. Analysis includes both geometric and material non-linearity and involves non-linear analysis and may have undergone analysis by specialised tool – FENRIS system developed in Norway.
Many had then predicted that the punitive action could prove to be the pipeline’s death knell. The US had imposed sanctions on thirteen vessels involved in the construction of the Nord Stream 2 gas pipeline from Russia to Germany, shortly after exempting the pipeline’s Russian operator and the CEO. The US Treasury Department added two more Russian – flagged AHTS vessels Vladislav Strizhov and the Yury Topchev to the ‘sanction list’, and prohibited their dealings with US banks and companies.
The pipeline had also cast a shadow on US-Germany relations, with former President Donald Trump saying that it could turn Germany into a “hostage of Russia”. The relations between Donald Trump and Angela Merkel soured so much that the Chancellor refused to shook hands with Potus in a G 7 meeting. The administration of Democrat Joe Biden, however, has decided not to kill the energy system with sanctions. It has instead gone with the softer option of threatening Russia with consequences should it use the pipeline to harm Ukraine or any other country in the Eastern Europe.
The US-Germany deal lays out that if Russia attempts to “use energy as a weapon or commit further aggressive acts against Ukraine,” Germany will take steps on its own and push for actions at the EU, including sanctions, “to limit Russian export capabilities to Europe in the energy sector”. The agreement also requires Germany to “utilise all available leverage” to extend by 10 years the current Russia-Ukraine gas transit agreement, which expires in the year 2024, and a contribution of at least US$ 175 million to a new US$ 1 Billion “Green Fund for Ukraine” that aims at improving the country’s energy independence.
Needless to say, the green signal by Biden has provoked an angry response from Republicans, with the GOP’s top leader Ted Cruz denouncing the agreement as “a generational geopolitical win for Putin and a catastrophe for the United States and our allies.” Democrat Senator Jeanne Shaheen also expressed reservations, saying that the agreement was insufficient in dealing with the impact of the pipeline, which she said “empowers the Kremlin to spread its malign influence throughout Eastern Europe.”
Ukraine, too, is unhappy with the project receiving Washington’s blessings, with President Volodymyr Zelenskiy saying he wants a “frank and vibrant” discussion with Biden over the Nord Stream 2 when the two leaders meet next month in the US. It has instead gone with the softer option of threatening Russia with consequences should it use the pipeline to harm Ukraine or other countries in Eastern Europe. The joint statement of US and Germany states that “united in their determination to hold Russia to account for its aggression and malign activities by imposing cost via sanction and other tools”.
What is Nord Stream 2 Pipeline Project? Nord Stream 2 is an underwater twin pipeline that would transport natural gas from Russia directly to Germany. At a length of 1,230 kilometres, it would transport natural gas from Russia directly to Germany. The pipeline will help Germany secure a relatively low-cost supply of gas amid falling European production. It is also part of Gazprom’s decade long efforts to diversify its export options to Europe as a region moves away from nuclear and coal.
Getting the go-ahead for the pipeline’s completion is, of course, is good news for Russia. It will not only increase Europe’s dependence on Moscow, but will also make Germany and other Western European countries economically stronger. Eventually, in turn, it will boost their ability to promote democratic values. The US had previously imposed sanctions to prevent the completion of this gas pipeline between Russia and Germany.
This pipeline line is a great geopolitical win for Russia. It can be a generational geopolitical win for Russia and a catastrophe for the United States and its allies. The US has gone with the softer option of threatening Russia with consequences should it use the pipeline to harm Ukraine or other countries in the Eastern Europe.
The project consists of two pipelines aimed at boosting annual deliveries of natural gas up to 55 billion cubic meters from the Siberian fields in Russia via the Baltic Sea, straight to Germany. The US$ 12 Billion pipeline is set to improve Berlin’s energy security and lower gas prices by making the process less dependent on third-party countries transiting the fuel.
The Nord Stream 2 pipeline project encountered numerous roadblocks, with the US government threatening companies and states involved in the construction with sanctions. The White House repeatedly slammed the German government, claiming that the project would undermine Europe’s energy security and stability.
EU rules block Nord Stream 2 owner from exclusive access to its own pipeline. EU member states such as Poland, Latvia, Lithuania, Romania and Hungary also persistently expressed disapproval of Nord Stream 2. Ukraine, which used to benefit from the transit of gas from Russia to Europe, is also opposing the project, as its successful implementation will inevitably deprive the country’s budget of transit fees.
In July, Washington and Berlin reached a new deal, with the US offering to drop sanctions and cease its interference in the final stages of the pipeline setup. In exchange, it asked Germany to invest in Ukraine and help Kiev maintain its supposed right to transit fees for Russian gas, a hefty proportion of which is currently delivered to Europe via a Soviet-era pipeline going through Ukraine’s territory.
Gas prices in Europe surged past US$ 590 for 1,000 cubic meters. Meanwhile, Brussels approved new amendments to the EU Gas Directive in February 2019. The rules require companies that produce, transport and distribute gas within the bloc to be separate to ensure fair competition in the market and to prevent companies from possibly obstructing competitors’ access to infrastructure. In August, a Gazprom subsidiary involved in constructing the Nord Stream 2 pipeline lost a court battle over exclusive access to the project’s infrastructure. The ruling may force the company to sell the pipeline to an EU-based operator.
Whatever may be the big games between different nations, the common man will smile as energy prices will reduce and enhance the image of Angela, as she lays down office on 26th September, as Germans vote for new government.
It is also proving that both France and Germany will join together to make EU a new prosperous region to live and prosperous, with tacit support from Moscow.
Muscovites will say loudly Shastlivai Moment or Bolshoi Moment or Historicheskoi Moment or Bolshoi uspekh Moment!