EconoMatters

North Stream 2: Continental Divider, Not a Uniter

The pipeline has less to do with energy supply and a lot more to do with dividing the EU.

Credit: Alistair Hamilton www.flickr.com

Takeaways


  • Nord Stream 2 is not is a project to deliver additional gas supplies to the EU. The project has one principal object alone -- division.
  • The overall aim of Nord Stream 2 is to drive Ukraine away from Europe and back into the Russian sphere of influence.
  • When it comes to energy security, the EU Member States have to understand that they either hang together, or they will hang separately.
  • Were it not for Brexit, Nord Stream 2 would already count as the greatest geopolitical misstep of any EU Member State this decade.

Famously in films like The 39 Steps Alfred Hitchcock used a plot device — a MacGuffin — to get the film moving but which was essentially irrelevant to the plot.

Nord Stream 2 is the energy MacGuffin. What Nord Stream 2 is not is a project to deliver additional gas supplies to the EU. The project has one principal object, and one principal object alone — division.

Dividing Ukraine from the EU, dividing the EU, dividing Germany from the rest of the EU and dividing the EU from the United States.

With Ukraine, the aim is clear — to close the existing Brotherhood transit pipeline route across Ukraine.

The loss of the pipeline will have the effect of removing transit fees from the Ukrainian state budget, increasing Ukrainian energy dependence on Russia and isolating Ukraine from the European Union (Kyiv is less relevant to Brussels if it no longer has a major energy transit role).

The overall aim is to drive Ukraine away from Europe and back into the Russian sphere of influence.

Transit security

In Central and Eastern Europe, the Ukrainian transit route currently gives those states some degree of “transit security” and energy connection with the rest of Europe.

This is because if natural gas flows on into Western Europe through the CEE states it is difficult to make credible threats to CEE gas supply.

With the termination of the Ukrainian supply route the CEE states lose their transit security.

Most of those states now face supply routes which run from Western Europe. These routes are largely in the hands of Gazprom and its allies.

With Gazprom able to control and influence gas flows along these routes, supplies can be reduced or cut.

In this Gazprom controlled market, prices are likely to rise and Russian influence will increase. The CEE states will be cut off from the more liberal and open energy markets of Western Europe.

Even Germany is isolated

Even Germany is left isolated and divided from the rest of the EU by Nord Stream 2. German government support for Nord Stream 2 has undermined support for Germany across a swathe of EU Member States, not just in CEE Europe.

This is demonstrated by the willingness of 24 Member States to vote together to adopt an amendment to the Gas Directive of 2009 in February, which would extend EU law to import pipelines such as Nord Stream 2.

Germany found itself in the unusual position of being entirely isolated, and unable to form a legislative blocking minority in the EU Council. Were it not for Brexit, Nord Stream 2 would already count as the greatest geopolitical misstep of any Member State this decade.

Dividing the U.S. and the EU

The other major target of the Nord Stream 2 division project is to divide the United States from the EU.

The division operation here can achieve its objectives in multiple ways, for example by encouraging the United States to overreact to Nord Stream 2 as a means to cause division between it and the EU.

When they do not overreact, as with Senator Cruz’s targeted sanctions bill which is targeted solely against seabed pipeline laying operations of Russian export pipelines, Moscow can pretend it is an overreaction-and then seek to cause discord between the EU and the United States

How do we react?

The first step is for all EU member states to actually recognise the geopolitical context of the project so eagerly pushed by the Russian state-owned gas supplier and its Western allies.

Nord Stream 2 is not a commercial project, it is merely a means of dividing and undermining the EU and the transatlantic relationship.

The second step is to begin to revive solidarity. Member States cannot go around undertaking energy projects which have the effect of undermining the supply security of other EU states.

EU legislation is required to impose a solidarity obligation on all Member States, a dispute resolution system in case of conflict and provide for common EU negotiation with external energy suppliers.

A third step is to practically examine the EU’s practical means of reducing the threat of division from Nord Stream 2.

One way to mitigate the threat is by investments in European domestic gas networks, gas supply guarantees to the most vulnerable EU member states and financial support for Ukraine if Gazprom decides to abandon Brotherhood pipeline.

Greater use of LNG

Another approach is to encourage greater use of LNG. However, there is a lack of infrastructure to import it, and transporting degasified LNG makes this option viable only for Western EU members states (for instance the UK has 51 bcm and Spain 61 bcm of LNG capacity).

There are only two LNG terminals in Central and Eastern Europe, a 4.5bcm capacity terminal at Swinoujscie on the Polish Baltic coast and a second floating LNG terminal with 4bcm at Klaipeda in Lithuania.

The small capacity of both terminals and remaining isolation of Baltic countries as an “energy island” demonstrates the core problem of the EU single energy market – the lack of infrastructure both to freely transport gas eastwards and import more LNG.

When it comes to energy security, the EU Member States have to understand that they either hang together, or they will hang separately.

In energy security terms, solidarity and collective action pay huge dividends. Division, in contrast, carries huge losses, even for those who think they can gain by such division.

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About Anna Bulakh

Anna Bulakh is Senior Associate Research Fellow at the Center for Defense Studies in Kyiv, Ukraine.

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