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  • Bálint Áron Ferenczi

Need to Know: The Nord Stream 2 Pipeline

As featured in Edition 40, available here.

BY BÁLINT ÁRON FERENCZI (2nd year - PPE - Budapest, Hungary)

What is the Nord Stream 2 pipeline?

Nord Stream 2 is a natural gas pipeline built under the Baltic Sea connecting the western coast of Russia to Germany, which plans to expand the direct transfer of natural gas from Russia to Europe. It would supplement the already existing Nord Stream 1 pipeline, almost doubling the capacity of gas supply. Nord Stream 2, once put to use, would be able to transfer 55 billion cubic metres of natural gas a year. This amount of gas, which equates to 10% of Europe’s current gas consumption, could be used to heat 26 million homes in Germany and therefore mitigate Europe’s current energy crisis. The £8.3 billion pipeline – on which construction work finished in September 2020 – is owned by Gazprom, a state-owned Russian gas company.

Why is it so controversial?

The new pipeline bypasses Ukraine and Poland, two traditional transit countries for Russian natural gas, weakening their geopolitical status since, with the completion of the pipeline, Russia could supply Western Europe with gas even if it shuts down transport through these countries. This risks a loss of $1.2 billion transit fees a year for Ukraine. Besides this, the biggest fears around the project concern Europe’s reliance on Russian gas imports. Russian gas already accounts for around 40-50% of the continent’s gas consumption. Critics warn that since Russia uses gas as a geopolitical weapon, a further rise in this ratio could increase Russian dominance within the EU, with Russia being capable of influencing European energy prices based on its own political interests.

How does the new German government relate to the project?

The German government has long referred to the project as a solely economic and commercial issue without considering that gas transits are one of Russia’s most important political weapons and not acknowledging the potential increase of Russian influence as a result of the project. German Chancellor Olaf Scholz even emphasised this as late as December 2020, claiming the approval of the pipeline will happen in a “completely non-political way”. As Russian military preparation went forward, tensions increased within the new German government between the SPD and the Greens, as Vice-Chancellor Robert Habeck claimed that from a geopolitical viewpoint, the pipeline is a mistake. In the past few weeks, Scholz eased his position claiming Germany will consider sanctions on the pipeline in case of a Russian invasion of Ukraine.

How does the project stand in light of the current war in Ukraine?

The current war between Russia and Ukraine once again placed the project in the spotlight of international politics as a potential subject of sanctions against Russia. As Nord Stream 2 is fully built and currently awaits approval from German authorities, potential sanctions could not only affect the amount of gas transported to Germany, but could even go as far as preventing the pipeline from being put to use at all. Following Russia’s recognition of two Moscow-backed separatist regions in east Ukraine, German Chancellor Scholz claimed the approval process for the pipeline had been put to a halt, while the US imposed sanctions on the company building the pipeline and its officers. The long-term prospect of these sanctions and the future of the pipeline is uncertain.

What will most likely happen?

As Europe is facing a severe energy crisis, with constantly rising energy prices contributing to an increase in inflation rates, the German government faces domestic pressure to use supplementary sources of energy, for which the new pipeline could be a solution. However, with Russia’s invasion of Ukraine, the future of the pipeline might depend on larger geopolitical factors. Western countries so far have responded quickly by halting the project and sanctioning Russian actors. In the long run, the future of the project therefore will depend on the decision Western powers make between reducing energy prices by putting the pipeline to use, or continuing the geopolitical pressure on Russia through sanctions on the pipeline.

Image - Flickr (Dirk Vorderstraße)



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