Why a dispute between the US and the EU is likely to go from bad to worse
LONDON – A latent dispute over an undersea pipeline that would bring gas from Russia to Germany is set to intensify in the coming weeks, with increasing pressure on President Joe Biden to do more to stop the project almost finished.
If completed, the 1,230 kilometer (764 mile) Nord Stream 2 pipeline will become one of the longest offshore pipelines in the world. He is designed deliver Russian gas directly to Germany under the Baltic Sea, bypassing Ukraine.
Along with several European countries, the United States opposes the pipeline, calling it “bad business“for European energy security.
Critics also argue that the pipeline is incompatible with European climate goals and will most likely strengthen Russian President Vladimir Putin’s economic and political influence in the region.
Led by Russian Gazprom, the state gas giant has claims Nord Stream 2 is “particularly important” at a time when Europe is experiencing a decline in national gas production. Advocates of the pipeline also condemn tries “to influence or stop the project for political reasons”.
The bumpy road ahead for the project includes the threat of new targeted US-led sanctions, German federal elections in late September and a continuous backlash on the poisoning and arrest of Russian opposition politician Alexei Navalny.
âThe reason why this is so geopolitically controversial is not necessarily about the pipeline or the molecules themselves. It has everything to do with the timing and what it says about Europe’s relationship with the Russia, Germany’s relations with Russia and transatlantic relations, “said Kristine Berzina. , a senior member of the Alliance for Securing Democracy, a national security advocacy group.
“The pipeline will be built or it won’t be built. Germany has a role to play in its potential elimination. Russia is finding alternatives to bypass sanctions so that it can be completed, but there is only one big left. part of that pipeline, âBerzina told CNBC.
The project is 94% complete, with over 1,000 kilometers of pipeline in place and less than 150 kilometers to go before Gazprom can then turn on the taps.
Chancellor Angela Merkel attends the 215th session of the Bundestag. Topics include the national epidemic situation and the effects of the lockdown on the economy.
Kay Nietfeld | image alliance | Getty Images
Analysts said a potential stumbling block could be the prospect of a German government opposing the pipeline. The next general elections, which are to be held on September 26, will determine who will succeed Angela Merkel as Chancellor of the country.
The problem, however, is that the project is so close to completion that September may be too late to scrap the pipeline.
âWe may well be done with the pipeline by September and, if the pipeline is finished, the gas will flow and I think it will be particularly difficult to shut off the gas once the pipeline is finished. at a point a very few months, if not a few critical weeks, to determine whether this product will continue or not, âBerzina said.
Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, told CNBC that the potential for further interventionist measures could still prevent the delivery of Russian gas to Europe through Nord Stream 2.
When asked if the completion of the pipeline was inevitable, Ash replied: âIt appears to be the case, although given the threat of sanctions on insurance contracts, I wonder if gas will be able to circulate (through) the pipeline.
A worker adjusts a pipeline valve at the Gazprom PJSC Slavyanskaya compressor station, the starting point of the Nord Stream 2 gas pipeline, in Ust-Luga, Russia on Thursday, January 28, 2021. Nord Stream 2 is a 1,230 kilometer (gas pipeline) 764 miles) which will double the capacity of the existing submarine route between Russian fields and Europe – the original Nord Stream – which opened in 2011.
Andrei Rudakov | Bloomberg | Getty Images
The nature of the dispute, Ash said, was in part about gas supply to Europe, given that the United States âclearlyâ wants to supply the continent with liquefied natural gas, but broader geopolitical concerns are at stake. .
“It is also the feeling of the United States, that Europe does not respect its commitments in terms of security. It asks the United States for security guarantees, but at the first opportunity, it sells to Russia”, he added.
James Waddell, senior global gas analyst at Energy Aspects, told CNBC that US sanctions would be “one of the main obstacles” to completing Nord Stream 2.
Waddell cited actions taken last month when the United States announced targeted sanctions against Russian pipelaying vessel Fortuna in an attempt to delay the project. Notably, the measures did not punish German or European companies that helped build the pipeline.
Nonetheless, Russia has tried to “make Russia” out of the project, Waddell said, effectively trying to isolate companies that have no relations with the United States, have no American employees and do not do not need to access dollar loans. .
In practice, this means that Russia finds its own ships to do the physical work of laying the pipeline and transfer pipeline assets and vessels to Russian-owned companies.
Passers-by take photos of the Russian pipelayer “Fortuna” on the pier, which is being towed out of the port on the Baltic Sea by tugs. The special vessel is used for construction work on the German-Russian Nord Stream 2 gas pipeline in the Baltic Sea.
Jens Buttner | image alliance | Getty Images
Waddell said he doubted Moscow could isolate the project “in its entirety” as many European companies are already linked to the project and other international companies are likely to think twice about their involvement to avoid ending up. on an American sanctions list. .
In addition, analysts at Energy Aspects said that the withdrawal of the main certification company from the project in December was another “major” issue.
Norway-based DNV was due to verify the safety and technical integrity of the gas pipeline system upon completion, but the risk management and quality assurance company suspended work on the project at the end of the year. last, fearing to be sanctioned by the United States.
âThis project was all built to the standards of this certification company and it may be difficult to find another internationally recognized certification company to step in and certify this project as ready,â said Waddell. “And we believe that without this type of certification it can become difficult for any European regulator to actually allow flows through this pipeline.”
– CNBC’s Tom Chitty contributed to this article.