Russia has long been a major gas supplier to Europe, particularly Germany. Nord Stream 1 and Nord Stream 2 have been built in line with that policy.

Yes, that’s true. Nord Stream is a corporate whose main shareholder is Russia’s Gazprom. In other words, Gazprom is the largest gas company in the world to have the majority of Nord Stream’s shares. The project is registered in Switzerland with European companies accounting for 50% of financing. Five companies, each holding 10% of shares – Nord Stream. Royal Dutch Shell, Austria’s OMV, France’s Engie and Germany’s Uniper and Wintershall – are financing the project. Gazprom delivers gas from the North Sea and Russia to Europe. Although Nord Stream pipes have reached their maximum capacity, Europe needs more gas. That is why in parallel with the Nord Stream activities, the Nord Stream 2 pipe-laying began with a 10-billion-euro investment. The project has had 94% progress now and the remaining 6% is under the impact of US sanctions. Once operational, the project would let Russia deliver 55 bcm more gas to Europe, particularly to Germany.

Why is Europe such dependent on gas resources?

Europe’s dependence on gas stems from EU energy and environmental policies. Based on EU objectives, greenhouse gas emissions must mitigate significantly in coming years. The EU has set some criteria for member states, requiring that all coal-fired and nuclear power plants be shut down quickly as possible. Germany has already shut down coal-fired power plants. But each country has its own plans and policies. In the wake of the Fukushima Nuclear Power Plant explosion in 2009, Germany is determined to halt the operation of all of its power plants on schedule. However, you may know that it would be difficult for European nations, particularly 80-million-strong Germany with no fossil resources. Germany is currently generating 45% of its electricity from renewable energies, but this figure has reached its peak and is no longer cost-effective. Renewables should supply all such need. Gas is a key element. The EU’s daily increasing demand for Russia’s gas and new pipelines like Nord Stream 1 and Nord Stream 2 are due to the same reason. With sanctions effective against Nord Stream 2, this project could no longer be operated. The White House has adopted a law about Europe’s energy security, which drew harsh criticism from European nations. The Europeans maintain that Europe’s energy security policy should be adopted within the continent itself and not in Washington. However, the White House law which targets Nord Stream 2 is similar to US sanctions imposed on Iran. The US is firm about sanctions on the Nord Stream 2 project and is likely to keep the project from moving ahead despite 94% progress. Unlike the JCPOA which Democrats favor the US’s return to the deal, Democrats and Republicans both support sanctions on Nord Stream 2.

Has the US sanctioned Nord Stream 2 for political or economic reasons?

First and foremost, the US does not want Europe to be more dependent upon Russia. Currently, Russia is supplying one-third of Europe’s energy needs. Meantime, a new source of income is being created for the Russians to invest in their defense sector, which goes against US interests. These are the political aspects of opposition to the Nord Stream 2 project from Democrats and Republicans. And economically speaking, the US has become the world's largest shale gas producer and is willing to export gas to Europe. The US has in a way or other forced Germany to build infrastructure for LNG terminals. Germany also agreed in a show of compromise to say it was building two terminals aimed at diversifying its energy mix. One LNG terminal is under construction in northeast and another one is in northeast Germany.US oil lobbyist Senator Ted Cruz is following up on this issue seriously.

Weren’t Germany’s concessions convincing enough to dissuade the Americans from sanctioning the Nord Stream 2 project?

No compromise was reached. Of course, the Germans first thought the White House would let the project ahead in return for their concessions, but the US was basically opposed to the Nord Stream 2 project. When Trump came to power, all comprises including the Nord Stream 2 project and even the JCPOA were hindered and we have such experience. Another reason for the halt in the Nord Stream 2 project was the poisoning of Russian opposition figurehead Alexy Navalny. Navalny survived after he was moved to Germany. The opposition in Germany called for the government to sanction Russia. The EU imposed sanction on Russia; however, the Nord Stream 2 project was not specifically sanctioned. Debates are also under way in the European Parliament on whether or not the Nord Stream 2 project could be used as a foreign trade tool. Many journalists believe that this infrastructure project has to be looked on in the long-term because it would not be easy to create a safe business environment in Europe.

Will the Nord Stream 2 project become operational amid opposition from both Democrats and Republicans?

Responding to this question is not so easy. Now, this project has had 94% progress. Europe currently needs the gas resources of this project, but many European companies fear US reprisal. To compare it with the JCPOA, it is noted that European firms left Iran immediately after the US quit the JCPOA, but in Germany, some companies are still resisting pressure against cooperation with Russia because of economic interests. These companies have also influential lobbies within the US. Of course, East Europe nations like Ukraine and Poland have no good ties with Russia and are already critics of the Nord Stream 2 gas project and they are making efforts to stop it because with Nord Stream 2 they would be put aside from Central Asian and Russian gas exports to Europe. The delivery of Central Asian gas to Europe would have to stop, once Nord Stream 2 becomes operational.

Are the Germans after diversity in their energy mix?

Germany has already started diversifying its energy mix, including nations from the Middle East, Central Asia, Russia and the US, in a bid to reduce its dependence. Azerbaijan and Kazakhstan are currently among exporters of oil to Germany. Regarding LNG gas terminals, Qatar has invested abundantly.

Courtesy of Iran Petroleum

by Ameneh Mousavi