Nord Stream 2: Implications and Outcomes for US-German Relations and the NATO Alliance

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A white paper produced by members of the NATO Science and Technology Organization’s Systems Analysis and Studies (SAS)-163, “Energy Security in the Era of Hybrid Warfare.”

Margarita Assenova, Senior Fellow, Jamestown Foundation

John R. Deni, PhD, Research Professor, Strategic Studies Institute, US Army War College

David R. Dorondo, D.Phil., Associate Professor, Western Carolina University

Arnold C. Dupuy, PhD, Chair, SAS-163; Senior Analyst, SAIC

Ion Iftimie, PhD, Researcher, Central European University, Vienna, Austria

Daniel Nussbaum, PhD, Mentor, SAS-163; Director, Energy Academic Group, Naval Post-graduate School

Paul Michael Wihbey, Director, George Washington University/Institute on the Geopolitics of Energy

 Abstract[1]: Resolving the areas of contention between Germany and the United States is of the utmost importance early in President Joe Biden’s term. One of these disputes is the ongoing disagreements on the Nord Stream 2 undersea natural gas pipeline. This issue comes at a difficult time as Berlin is in a precarious position regarding its energy security outlook. To meet economic and environmental obligations after the shutdown of its nuclear power plants, Germany will depend on steady imports of natural gas; and Nord Stream 2 will secure additional volumes from Russia. Ironically, this will also increase Russia’s political and economic leverage over Ukraine as well as several Central and Eastern European Allies dependent on Russian gas. The US has voiced strong opposition to Nord Stream 2, but Germany is determined to proceed with its construction, further complicating efforts to normalize relations between the two nations. This position paper provides three potential scenarios on Nord Stream 2, discussing the implications of each for US-German relations, as well as for the NATO Alliance. Ultimately, careful diplomacy and compromise solutions from Washington and Berlin offer the best potential for ameliorating trans-Atlantic relations during a fraught election year in Germany. 

Introduction

Berlin’s commitment to shut down its nuclear power plants by 2022[2] and cease coal-fired electricity generation by 2038,[3] has placed the Federal Republic of Germany in a challenging energy security environment. Through its Energiewende (Energy Transition), Chancellor Angela Merkel’s government is committed to carbon-free energy generation by 2050.[4] However, with a raft of regional and national elections in 2021, and important economic, environmental and geostrategic considerations, the government also remains committed to completion of the Nord Stream 2 (NS 2) pipeline from Russia. In its pursuit of Russian gas, Berlin is at odds with the United States and/or other NATO/EU member that argue that NS 2: 1) fails to diversify gas

[1] This white paper was written in preparation for a March 3, 2021 brief to USSTRATCOM.

[2] https://www.dw.com/en/germanys-nuclear-phaseout-explained/a-39171204

[3] https://www.energydigital.com/sustainability/germany-energy-regulator-close-4788mw-coal-plants

[4] Ibid.

supply sources to Europe; 2) as a diversionary pipeline does not provide new volumes of Russian natural gas; 3) leaves Ukraine vulnerable to further Russian aggression; 4) fails to “safeguard the security of gas supply” to the Baltic States and Poland (as directed by EU Regulation 2017/1938); and 5) obstructs developing “a truly interconnected internal energy market with multiple entry points and reverse flows [by] completing the North-South and Southern Gas corridors”.[1] While much has been written about the pipeline politics in Europe, this paper outlines three potential scenarios regarding NS 2, while discussing the implications to US-German relations and the NATO Alliance.

 Revision or Status Quo: Pipeline Politics in Europe

Background

According to the European Energy Security Strategy, in 2013 the EU imported 66% of the natural gas it consumed, and the Russian Federation accounted for 39% of the gas imported by the EU.[2] By 2019, EU net gas imports amounted to 82.6 % of total gas consumption, while Russia accounted for 46% of the natural gas imported by the EU.[3] These figures demonstrate the EU’s increasing dependence on Russian gas.

From the proponents’ perspective, [4] NS 2 is “purely economic and purely commercial,” based on expected increases in gas demand and diminishing natural gas production in Europe.[5]

[1] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:32017R1938

[2] European Commission. 2014. Communication from the Commission to the European Parliament and the Council: European Energy Security Strategy. COM/2014/0330 final. https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A52014DC0330. Accessed on January 6, 2021.

[3] https://ec.europa.eu/energy/sites/ener/files/quarterly_report_on_european_gas_markets_q4_2019_final.pdf

[4] Gazprom, BASF, Uniper, ENGIE, OMV, and Shell

[5] “Putin: Nord Stream-2 Not an Alternative to Ukrainian Transit Route,” TASS, February 28, 2018, http://tass.com/economy/991997.

NS 2 opponents claim it is a diversionary pipeline that would not bring new gas to Europe but would divert Russian gas from Ukrainian pipelines. Therefore, it is a Russian political venture to control the European energy market and exert dominance over Eastern European countries, notably Ukraine, Poland and the Baltic States.

Key EU-Russia Energy Co-dependencies: National and Regional Perspectives

As Germany is the main consumer of Russian natural gas within the EU,[1] the energy codependency implications to the NATO Alliance must be addressed. Our paper recognizes the perspectives of key NS 2 stakeholders, notably the European Union, Germany, Russia, the United States, other member states in Central and Eastern Europe, Ukraine and NATO.

Germany

Natural gas is perceived as a ‘bridge’ fuel taking Germany to full reliance on renewables, bio-gas, hydrogen, and/or fusion.[2] Therefore, from the German perspective, increased levels of natural gas must be imported for domestic consumption and transshipment to other countries. The questions become, with COVID-19-induced budgetary pressures, from where will the gas be imported and at what cost? From Germany’s view, completion of NS 2 is of vital importance, and impacts the 2021 regional and federal elections, as well as Berlin’s ambitions as a regional hub for natural gas[3] and hydrogen.[4]

Other considerations include whether Germany doubles down on Energiewende, and the impact on local, regional and global energy prices and competitiveness? Would Germany support other pipeline projects in North Africa or elsewhere, or the possibility to source non-Russian gas? Finally, there is the option to invest in liquified natural gas (LNG) facilities and import from US, Qatar and Australia.

Russia

As a result of the 2006 and 2009 gas crises, Russia declares Ukraine as an unreliable transit country and views NS 2 as a vital national interest and economic priority, thereby justifying the Kremlin’s push for the pipeline’s completion. From a political perspective, increasing Germany’s dependency on Russian natural gas also 1) undermines EU energy security strategy; 2) provides Russia with military freedom of maneuver in eastern Ukraine, and 3) weakens NATO’s cohesion. 

United States

These benefits to Moscow are not lost on Germany’s allies, particularly in the United States. The Obama, Trump, and now the Biden, Administrations have opposed NS 2, and Senators Ted Cruz (R-TX) and Jeanne Shaheen (D-NH) co-authored the 2020 sanctions packages aimed at the project. The 2021 National Defense Authorization Act (NDAA) imposes even stronger sanctions, notably on financial institutions, insurers, port facilities, and certifying companies. This is in addition to the 2019 sanctions, which targeted pipelaying companies. In July 2020 the State Department also lifted restrictions on NS2 under the Countering America’s Adversaries

[1] https://www.statista.com/statistics/353622/natural-gas-sales-top-customers-of-gazprom/

[2] https://www.ipp.mpg.de/4887650/010_Juli_2020_dt.pdf

[3] https://www.argusmedia.com/en/blog/2020/july/15/germanys-new-gas-hub-faces-uphill-fight-for-liquidity

[4] https://www.cleanenergywire.org/factsheets/germanys-national-hydrogen-strategy

Read entire text NESA-NS2_Interim White Paper_29 January 2021

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