The crisis surrounding Ukraine has become a harsh reminder to Europeans of just how dependent they are on Russian energy supplies.
While the European Union weighs its options for a united and robust response to Russia if Vladimir Putin decides to invade Ukraine, the bloc is feeling a new sense of unease over its dependence on Russian oil and gas.
Mounting tensions over a Russian troop buildup along the Ukrainian border has turned the spotlight back onto the controversial Nord Stream 2 project, a more than 1,200-kilometre gas pipeline running from western Russia to northeastern Germany under the Baltic Sea, which was completed in late 2021.
If the pipeline, a joint project involving a consortium of Russian, German, Dutch and French energy companies, is given the green light from Brussels to become operational, it will be able to pump 55 billion cubic metres of gas to Germany each year.
But the current diplomatic crisis with Russia is complicating the pipeline’s future. If Russia invades Ukraine, “the decision to halt Nord Stream 2 would be part of the EU’s political or military strategy”, Anna Creti, Director of the Climate Economics Department of Paris Dauphine University, said in an interview. “But it cannot be done unilaterally; it would need the agreement of the entire consortium.”
In the long-term contract concerning Nord Stream 2, “we have Russia’s national company Gazprom on one side, and on the other we have several European companies that have to bargain, gain or modify clauses”, Creti said. Adding that “the EU is not just one stakeholder and Russia can bargain with the [respective] companies, and possibly play one against the other.”
Signal that Supplies are at risk
On the other hand, “if Russia decides to stop the flow of gas to Europe, it wouldn’t be overnight”, said Creti, adding that a complete interruption of energy supplies would be unlikely given the safety risks of suddenly stopping gas flows.
A more likely scenario would be for Russia to further decrease the flow of gas over a few weeks, sending a very clear signal to Europeans that their supply is in danger, according to Creti.
Something similar happened in 2008, when a disagreement between Moscow and Kyiv over energy payments, and accusations that Ukraine was siphoning gas, prompted Moscow to halt energy flows, leaving parts of Europe without Russian energy for more than two weeks in January 2008.
According to Eurostat, more than half of the EU’s energy needs, summing 61 percent, were supplied by imports in 2019. The EU mainly depends on Russia for imports of crude oil, natural gas (35 percent of the EU’s supply) and solid fuels, followed by Norway.
If Europe were to wean itself off Russian gas, what are the alternatives? “This is where the role of the US as exporters of gas comes into play,” said Creti.
The United States is an important producer of liquefied natural gas (LNG), which can be transported by sea to regasification terminals. LNG is a convenient alternative to classic gas, an energy source that can only be transported through pipelines. US authorities announced Tuesday, January 25, 2022, that they were in negotiations with suppliers in the Middle East and North Africa to increase LNG deliveries to Europe.
“LNG diversions can also come from southern Europe and Asia, although these are last-minute supplies that are bought at a high price,” Creti noted.
As part of its pressure campaign against the Ukrainian government, Russia has reduced the number of energy supplies traversing Ukraine into Europe by about 50 percent, The New York Times reported.
The future of the Nord Stream 2 will remain uncertain as long as the verbal jousting between Moscow and the West continues.
The pipeline must clear two more hurdles before becoming fully operational: safety certification and regulatory approval. Authorities in Brussels are currently deciding whether the pipeline is in line with European energy regulations. While the decision may appear purely technical, in the end, “the Commission will have to decide if it’s going to give too much power to Russia,” said Creti.
A high-level German diplomat, in an interview, downplayed the potential hazards, noting that Russia also relies on Europe.
“Of course there is some interdependence – we get a lot of gas from Russia, and the EU is the biggest gas market for Russia. A large part of Russian income comes from gas exports. As far as gas is concerned, there is currently a security of supply,” said the diplomat, who asked not to be mentioned.
Germany has been accused in recent weeks of wavering in its response to aggressive Russian posturing, breaking ranks with EU partners by ruling out arms exports to Kyiv and saying Nord Stream 2 should be considered separately from the Ukraine issue since it is a “private-sector project”.
For the German diplomat, Berlin’s position has been unequivocal. “We have been very clear that Russian threats are unacceptable and we have been fully aligned with our partners in NATO and the EU. There has not been any hesitation.”
Within Germany’s new coalition government, the Green party has been a strong advocate for adopting a hard-line approach towards Russia. Annalena Baerbock, the new minister of foreign affairs and member of the Green party, recently demonstrated a willingness to stand up to Putin, saying Nord Stream 2 should be included in the arsenal of sanctions being prepared against Russia.
After meetings with officials in Kyiv, Baerbock arrived in Moscow on January 18 for a high-stakes meeting with Russian Foreign Minister Sergei Lavrov.
In the joint press conference that followed talks with Lavrov, Baerbock held her ground, warning that if Russia invaded Ukraine, the Nord Stream 2 pipeline would not go forward. A few hours later, German Chancellor Olaf Scholz restated this position, declaring that Germany would consider halting Nord Stream 2 operations if Russia attacked Ukraine.
While the pipeline is currently on standby, the Kremlin announced last Friday, January 28, 2022, that Putin was scheduled to meet with German business leaders.
Asked to speculate on the content of the talks, Creti offered: “The Russians could say, ‘We have to stop losing time,’ and threaten the European companies with penalties” if the pipeline does not become operational, she said.
The Europeans could also seek to level the playing field in the gas wars, opening up the Nord Stream tap or closing it again based on the current state of Russia’s relations with Europe.
For the moment, she said, “there is a 50/50 chance” of continuing cooperation on the pipeline.
