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Germany wants its Russian pipeline. German allies aren’t sure it’s a good idea

Scholz’s coalition government includes the
Green Party, whose members are sharp critics of Nord Stream 2. He surprised
many by taking the same stance as his immediate predecessor, Angela Merkel, who
championed the pipeline as a business venture essential for the success of
Germany’s industrial base.

“Nord Stream 2 is a private-sector project,”
the new German chancellor told reporters. The ultimate decision over approval
of the pipeline, he said, will be made by “an agency in Germany, completely
nonpolitically.”

But it’s not that simple. With thousands of
Russian troops massing on the border with Ukraine and a threat of possible US
sanctions against the pipeline, the future of Nord Stream 2 remains anything
but certain.

Adding to the problem are natural gas prices
in Europe, which have broken records in recent weeks because supplies are
tight. These prices are soaring while half of Germany’s six remaining nuclear
reactors are being taken offline and winter is settling in, driving up demand.
Nord Stream 2 was initiated in 2015 to help avoid such energy crunches — now it
appears to be exacerbating them instead.

Then there are the pressures within Scholz’s
own government, where leaders from the Greens have made remarks that support
the European and US push for Germany to use the pipeline as leverage against
President Vladimir Putin of Russia.

Despite all of the conflicts, observers
believe the $11 billion pipeline, designed to deliver Russian gas while
bypassing countries in Russia’s former sphere of influence, will come online
once it passes a final bureaucratic hurdle — certification from the German
regulator.

“I think that ultimately it will be certified,
but there could be conditions attached to it related to continued transit
access across Ukraine,” said Katja Yafimava, a senior research fellow at the
Oxford Institute for Energy Studies. “I think that politics will play a role,
potentially quite a big role.”

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As its name indicates, Nord Stream 2 runs
alongside the original Nord Stream pipeline, which began operation in 2012.
Unlike the older line, Nord Stream 2 is wholly owned by Gazprom, Russia’s giant
state-owned energy company.

Germany’s European partners are most concerned
about a potential loss of billions in annual transit fees for Ukraine and other
countries with pipelines once Nord Stream 2 goes online. The United States
views the project as a threat to European security, handing Putin an easy way
to exert influence over a part of the world where Americans enjoy strategic
partnerships.

“The United States sees the Nord Stream 2 pipeline
as a Russian geopolitical project that undermines the energy security and the
national security of a significant part of the Euro-Atlantic community,” Karen
Donfried, the assistant secretary of state for Europe, recently told reporters.

Critics in Washington, led by Sen. Ted Cruz,
R-Texas, have repeatedly sought to penalise companies involved in the pipeline
project to prevent it from coming online. The Senate recently agreed to hold a
vote in January over Nord Stream sanctions in return for Cruz’s agreeing not to
obstruct the approval of dozens of President Joe Biden’s nominees to State
Department and Treasury Department posts.

Russia is Europe’s chief supplier of natural
gas, but this year import volumes remain lower than average. Analysts said Russia
had been meeting the volumes of gas agreed to in contracts, but appeared
reluctant to offer European customers any further supplies. This is a critical
problem because Europe needs the gas. Storage facilities entered the winter
with unusually low levels of the fuel — partly because of increased global
demand and a cold snap earlier in the year — and prices have soared.

“Russia has been saying that it is delivering
everything according to its contracts, which looks correct,” said James
Waddell, head of the European gas division at Energy Aspects in London. “But
what they are not doing is selling supplementary gas in volumes that we have
seen in previous years.”

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Russia may be motivated by its animosity
toward Ukraine’s leadership. For years Soviet-era pipelines in Ukraine have
served as the main corridor into Europe for Russian gas, generating billions in
transit fee revenue for the government in Kyiv. If Nord Stream 2 were up and
running, with its capacity of 55 billion cubic meters of gas a year, Gazprom
would be able to sell additional gas to European customers without paying
transit fees to Ukraine.

For German businesses, the pipeline is needed
to ensure a reliable energy flow, as the country prepares to take its last
three nuclear power generators offline. The matter also became more urgent for
Germany after the new government announced its intention to bring forward the
date to exit coal by eight years, to 2030.

The need is especially acute in the southern
German states, home to industrial giants like BASF chemicals, automaker Daimler
and conglomerate Siemens. Renewable energy from wind turbines is plentiful in
the north, and the government has pledged to speed up construction of
high-voltage power lines to carry that power to the south, but resistance from
the public has hampered progress.

“We need a secure supply of gas security,
despite all of the clear political differences with Russia,” said Siegfried Russwurm,
president of the Federation of German Industries. He urged the new government
not to mix business with politics, pointing out that Russia began supplying
West Germany with natural gas during the Cold War, when the two countries sat
on opposite sides of the Iron Curtain.

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“There are issues we can approach together;
there are issues where we can work together despite points of difference; and
there are points where we disagree,” Russwurm said, adding that energy supply
belonged in the first category.

For now, the company that owns the pipeline,
which is based in Switzerland but wholly owned by Gazprom, is busy setting up a
subsidiary in Germany, as demanded by the German regulator to bring the
pipeline in line with European Union law. Jochen Homann, the president of the
Federal Network Agency, said this month that he did not expect his agency to
grant approval before the second half of 2022.

After that, the ball will be passed to
Brussels, where officials at the European Commission then have two months —
which can be extended by an additional two months — to reach their own opinion
on the pipeline. Although the commission’s decision is nonbinding, the German
regulator is expected to take it into account, which could add several months.

The idea of Nord Stream 2 is that it act as an
insurance policy in times of high gas prices or an energy crunch, said Jacopo
Maria Pepe, a researcher in energy and climate infrastructure at the German
Institute for International and Security Affairs.

But he warned that while stopping the pipeline
would send a clear diplomatic message to Russia, it could risk Germany’s
position as the strongest power in Europe. It could also cost Berlin the
respect it needs from Moscow as the Germans support Ukraine with diplomatic
efforts and economic investment, which was worth $49 billion in 2020.

“If we will still need gas, we still need
Russia,” Pepe said. “There is no way to escape this reality.”

©2022 The New York Times Company

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