Nord Stream 2: Why Europe Still Can’t Risk With Russian Gas Supply

The German government has not rejected the results of the Nord Stream 2 pipeline as it moves to suppress the Kremlin for information about the toxicity, but analysts say such a move would pose a number of legal challenges. And there will be a threat to Europe’s cheapest supply of gas. Navalny is undergoing treatment at a hospital in Berlin after flowing from the Siberian city of Omsk.

According to the European Commission, Russia was the largest supplier of natural gas last year, accounting for 38%. Experts say banning supplies will increase prices for consumers across the European Union.

The European Union has been here before. Moscow promised to cut its dependence on Russian gas after destroying part of Ukraine in 2014, but Imports increased between 2016 and 2018 before falling slightly last year. Germany still imports more than half of natural gas from Russia, which is also the major supplier of crude oil and coal to the European Union.

Russia has the largest natural gas reserves in the world and is the world’s largest gas exporter. The primary purpose of Nord Stream 2, which connects Russia to Germany via the Baltic Sea, is to reduce dependence on transit routes through Ukraine, which has been difficult to negotiate due to armed conflict in that country.

According to the Nord Stream 2 website the new Baltic pipeline will have the capacity to meet approximately one third of the EU’s future gas import requirements. The Russian state-controlled gas giant Gazprom is the sole shareholder of the project.

While Europe has many other sources of gas supply, including liquid natural gas (LNG) from the United States, “Russia is a very big and a very competitive one, which is why people buy it,” James Henderson, Director of the Natural Gas Research Program at the Oxford Institute for Energy Studies.

Europe may decide to stop buying gas entirely from Russia, as Poland and Lithuania are trying to do, but prices will go up, Henderson said. Nord Stream 2’s plan to come online next year could reduce gas costs in Europe by about 25%, compared to a scenario where the project is abandoned, according to a Wood McKenzie estimate.

“This would be good news for European gas consumers, obviously, but less welcome for companies seeking export of LNG from the US,” said Ed Mook, America’s vice president of wood McKenzie.

Stacked pipes for Nord Stream 2 on the German island of Rügen, where ships are prepared for further construction of the pipeline.

Business interest at stake

America is already banned The entities associated with Nord Stream 2, which say it is harmful to the EU’s energy security.

It is concerned that the pipeline will increase Russia’s dominance in the European gas market, causing undue influence in the region and squeezing American LNG exporters.

Ukraine is also a major US ally and collects gas transit fees from Russia, raising concerns that the pipeline may destabilize the country and weaken the development of the gas market in Central and Eastern Europe.
A bipartisan bill introduced in the US Congress in June aims to expand restrictions on companies involved in the project, which is nearly 90 million complete.

Germany, which has historically argued against the US position, could threaten sanctions on companies involved in Nord Stream 2 as a bargaining chip in a naval investigation, Henderson said, but doing so would be negative for many European businesses There will be consequences.

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These include the two major German firms, utility company Uniper and energy group Wintershall DEA, which have financed the pipeline. Other lenders include French utilities company Angie, Austrian industrial firm OMV (OMVJF) And Royal Dutch Shell (RDSA).
According to the German Eastern Business Association, European companies have already invested € 5 billion ($ 5.9 billion) in the project and if any effort attempts to prevent it from being completed, substantial losses could occur.

“Political interests on this particular front could be strong,” said Carole Nakhle, CEO of London energy consultant Christol Energy.

Approving the pipeline will also be politically difficult, given that its backers have invested in a former pipeline project, Nord Stream, with Gazprom, headed by Gerhard Schröder, the former Chancellor of Germany.

If Europe targets its energy trade, Russia will suffer losses. European Union is Its most important marketplace and Gazprom has worked to maintain market share for many of its customers by offering price discounts and more flexible contracts.

“Gazprom’s pipeline expansion plans, particularly Nord Stream 2, hinge on the perception of competition as well as a strategic desire for more direct access to European main markets,” she said. “However, the flexibility and competitive variable costs of LNG, along with other new pipelines in Europe, are likely to restrict Russian gas’s medium-term role.”

Given the diversity of the European Union’s gas supply, energy security concerns “have become very high.” But “it would be a dramatic step” to cancel the project, “she said.

– John DeTherios contributed reporting.