The United States is about to introduce sanctions against companies involved in building the gas pipeline Nord Stream 2. The Trump administration and the U.S. Congress want to block the Nord Stream 2 project because they think that it will make European countries too dependent on Russian energy and damage Ukraine by depriving it of transit fees. However, it’s unlikely that the U.S. will succeed in its aim, writes Todd Prince in an article for Radio Free Europe/Radio Liberty.
by Todd Prince
The 1,220-kilometer-long pipeline - which extends from Russia's Leningrad region along the Baltic Sea floor to the northern German resort of Lubmin - will double Germany's imports of Russian natural gas. 'It really makes Germany a hostage of Russia if things ever happened that were bad,' Trump said at a June 12 meeting in Washington with Polish President Andrzej Duda, also a fierce opponent of the pipeline.
Pipes for Nord Stream 2 being layed in German waters. Photo Gazprom.com
Using its political and economic influence with European allies, the United States has repeatedly tried to halt Kremlin energy projects in the past - such as the Friendship (Druzhba) oil pipeline in the 1960s and the Brotherhood (Bratstvo) gas pipeline in the 1980s. Those previous attempts not only failed, they raised the hackles of European leaders who accused the United States of interfering in their internal affairs. Some analysts say the U.S. effort to block Nord Stream 2 is headed down that same path.
'It is about European sovereignty and that is not understood in Washington,' says Josef Braml, head of the USA-Transatlantic relations program at Deutsche Gesellschaft fur Auswartige Politik in Berlin. Nord Stream 2 'can be delayed and made more expensive, but it can't be stopped. The train is gone.'
Russia is hoping to complete the project by the end of the year. That timeline depends on Denmark as well as the impact of any possible U.S. sanctions. The Danish Energy Agency is considering the project's two proposed routes through its exclusive economic zone, which includes a review of environmental and security-related impacts.
'It is not currently possible to say how long this process will take,' the agency said in a statement to RFE/RL on August 8. Two days earlier, Jens Mueller, a spokesman for Nord Stream 2, told RFE/RL that more than 70 percent of the project had been completed.
Gas pipelines to Europe. Graphics RFE/RL
Trump recommends American LNG
With time running out, Congress seems to be moving fast. On July 31, the Senate Foreign Relations Committee approved a bill that would impose sanctions on vessels building the pipeline as well as their owners. The Senate could vote on the bill in September after its summer recess. Republican senators introduced a separate bill in June aimed at imposing sanctions on investment, goods, and services that facilitate the development of Russian energy-export projects such as Nord Stream 2.
Trump has recommended Germany buy U.S. liquefied natural gas (LNG) instead of Russian gas. 'We have something much better. We have tremendous LNG. And I think that's really the way,' Trump said on June 12 before announcing that Poland would buy another $8 billion worth of U.S. LNG. Though the cost of delivering U.S. LNG to Europe is higher than that of Russian pipeline gas, factors including different pricing formulas mean European consumers may not end up paying more for U.S. energy, says Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies in Washington.
Still, there is no sign yet that European companies are stepping back from Nord Stream 2. Shell, OMV, and Wintershall are among European companies financing the project, which is owned by state-controlled Russian giant Gazprom. No vessel operators have backed out of the project, spokesman Mueller says. 'More than 1,000 companies from 25 countries work on it and are fully committed to seeing the project completed,' he adds.
Meanwhile, Moscow is not happy with the opposition to Nord Stream 2. Igor Sechin, head of state oil giant Rosneft and a close confidant of President Vladimir Putin, in June accused the United States of imposing sanctions on energy-producing countries - such as Russia and Iran - to make room for its own growing output of oil and gas.
The United States will account for slightly more than half the world's growth in gas exports through 2024, with a portion going to Europe, according to the International Energy Agency (IEA).
Kennedy and Reagan failed
Scraps over Soviet pipelines were a feature of the Cold War. In the early 1960s, Kennedy sought to halt the Friendship (Druzhba) oil pipeline leading from the Tatarstan region to Europe by pushing West Germany to cancel steel-pipe contracts with Moscow. Critics of the policy said that the sanctions drove the Soviet Union, which completed the project, to become self-sufficient in wide-diameter pipe production, hurting Western manufacturers.
About two decades later, Reagan used a similar tactic in a bid to block the more than 4,000-kilometer-long Brotherhood (Bratstvo) pipeline, which was being built to bring natural gas from Urengoi in Siberia to Western Europe. In December 1981, he prohibited U.S. companies from selling products and technology to the Soviets for the project. Like Trump today, Reagan offered U.S. energy, including coal. In 1982 he extended the embargo to include European subsidiaries of U.S. companies as well as equipment manufactured in Europe under U.S. license, such as compressors. Reagan imposed the sanctions after Poland declared martial law, a move he pointed out was supported by the Soviet Union. Members of his administration indicated one of its motives was to reduce funding for the Soviet military.
George Ball, a senior State Department official during the administrations of Kennedy and Lyndon Johnson, both Democrats, asserted at the time that the Republican Reagan's policy would serve Moscow's interests by sowing division in the Western alliance. 'The Reagan administration's frenetic efforts to obstruct the building of the Soviet-European natural gas pipeline are marked by hypocrisy, self-deception and an astonishing ignorance of the past,' he said in an editorial in The New York times in September 1982. 'No matter how much we bludgeon our friends, we will not stop the Soviet pipeline any more effectively than the Kennedy administration was able to block' the Friendship oil pipeline.
Ball also argued that the notion that the Kremlin would cut a dollar from the military budget for each dollar it lost in foreign-currency receipts ignored how the Soviet Union operated: 'Unlike the leaders of democracies, the masters of the Kremlin can largely ignore public opinion in allocating resources.'
Trump and members of Congress have suggested that depriving Russia of income it might spend on the military is among the reasons for stopping Nord Stream 2. 'We're protecting Germany from Russia. And Russia is getting billions and billions of dollars of money from Germany,' Trump said on June 12.
Gas market changes
Meanwhile, the view that Nord Stream 2 threatens European energy security is not universally agreed upon. Europe's gas markets have changed significantly over the past decade due to the growth of LNG, development of non-Russian export pipelines, and greater connectivity between European states.
The Trans-Adriatic Pipeline will next year begin carrying natural gas from the Azerbaijani section of the Caspian Sea to Europe for the first time. The pipeline will have an initial capacity of 10 billion cubic meters that can be doubled. The discovery of major gas fields off the coasts of Egypt, Cyprus, and Israel and development in the Black Sea off Romania potentially increases the number of European suppliers in the coming years.
'The proposed sanctions goal of protecting Europe from Russian energy blackmail is based on an obsolete understanding of energy markets,' Eugene Rumer, director of the Russia and Eurasia program at the Carnegie Endowment for International Peace, wrote this month. 'Thanks to these new discoveries, the shale-gas revolution in the United States and construction of LNG terminals, more suppliers will be competing for a share of Europe's burgeoning gas market,' he said.
In fact, the IEA forecasts Russian piped gas to Europe will remain flat over the next six years following a record high of about 200 billion cubic meters in 2018. Russia's share of total European gas demand will decline slightly from 37 percent to between 33 and 36 percent through 2024, the agency predicts.
Tsafos says that those concerned about the impact of Nord Stream 2 need only to look at its predecessor, Nord Stream. Nord Stream, which began operation in 2011, did not so much hurt European gas security as reroute how Europe receives Russian gas, he explains. While it cut some transit through Ukraine, Nord Stream allowed Kyiv to receive gas imports from its western neighbors, improving its security, something few predicted at the time, Tsafos adds. 'You have to think about this as a dynamic system. The gas transportation network can adjust and adapt over time. Therefore, a lot of the concerns that people have might sometimes be overstated,' he says.
This article was originally published at rferl.org