Explained | The importance of the Nord Stream pipeline

How is the pipeline causing geo-political tensions? Is the U.S. planning sanctions on it?

January 31, 2022 03:44 pm | Updated February 01, 2022 07:43 am IST

The story so far: The Nord Stream pipeline is back in the news following the renewed tensions between the West and Russia over Ukraine. Owned by the Russian energy giant, Gazprom, Nord Stream the longest subsea pipeline, is an export gas pipeline which runs under the Baltic Sea carrying gas from Russia to Europe. The gas for Nord Steam comes mainly from the Bovanenkovo oil and gas condensate deposit in Western Siberia. The pipeline’s significance comes from the fact that it bypasses transit countries, making it highly reliable for European customers.

What is the Nord Stream Pipeline?

Nordstream consists of two pipelines, which have two lines each. Nord Stream 1 was completed in 2011 and runs from Vyborg in Leningrad to Lubmin near Greifswald, Germany. Nord Stream 2 which runs from Ust-Luga in Leningrad to Lubmin was completed in September 2021 and has the capacity to handle 55 billion cubic meters of gas per year once it becomes operational. The twin pipelines together can transport a combined total of 110 billion cubic metres (bcm) of gas a year to Europe for at least 50 years. The Nord Stream crosses the Exclusive Economic Zones (EEZs) of several countries including Russia, Finland, Sweden, Denmark and Germany, and the territorial waters of Russia, Denmark, and Germany. In Germany, the pipeline connects to the OPAL (Baltic Sea Pipeline) and NEL (North European Pipeline) which further connects to the European grid.

What are the objections to the pipeline?

The pipeline has run into trouble from environmentalists who argue that it does not fit in with German efforts to cut dependence on fossil fuels and fight climate change. The $11 billion-worth Nord Stream 2 has not yet started operating because Germany says it does not comply with German law and has suspended its approval. The project is also awaiting approval from the European Commission.

The strategic objection, particularly from the U.S., is that it will make Europe too dependent on Russia, increasing Russia’s influence in Europe. Moreover, there is concern that Russia could use it as a geopolitical weapon. Ukraine has objected because it will lose around $2 billion in transit fees once the pipeline becomes operational. Moreover, so long as Russian gas transits through Ukraine, Russia is unlikely to intervene and cause instability in Ukraine and Europe will stay invested in its security. Countries like Poland and Belarus also stand to lose transit fees and hence oppose the pipeline as it will bypass existing pipelines running through them.

In light of the tensions over Ukraine, the U.S. has said it will stop the Nord Stream if Russia attacks Ukraine. But European countries, led by Germany, seemed reluctant initially to impose sanctions on the Nord Stream though it has now said sanctions are not off the table. This reluctance stems from the pipeline’s importance to Europe.

Why is it important for Europe and Russia?

Europe requires more than 100 billion cubic metres (bcm) of natural gas each year and around 40% of its gas comes from Russia. This gas is used for heating homes, factories, and offices in the harsh, long European winters and also for power generation. Over the last few years, Europe has become more dependent on gas imports because of a decrease in domestic gas production. Reducing dependence on Russian gas is difficult as there are no easy replacements. There is no infrastructure to import LNG from exporters like Qatar and the U.S. and there are question marks over the desirability of shipping gas. The U.S. has said that it is in talks with gas-producing countries to secure back-up supplies for Europe if Russia stops sending gas. But this does not look like a feasible option in the short term due to current shortages in global supplies. Moreover, Germany’s transition to cleaner fuels by phasing out nuclear power and cutting reliance on coal has increased its dependence on Russian gas as gas is seen as a cleaner fuel. Many European businesses have large investments in Nord Stream 2 and there is pressure on governments from these businesses. Finally, a reduction in gas from Russia would increase already high gas prices and that would not be popular domestically.

As for Russia, which has the largest natural gas reserves in the world, around 40% of its budget comes from sales of gas and oil. Nord Stream 2 is important because it eliminates the risks related with sending gas through transit countries, cuts operating costs by doing away with transit fees and gives direct access to its most important European customer, Germany. It increases Europe’s dependence on Russia while giving it a reliable customer.

What next?

The Nord Stream 2 is being used as a bargaining chip by the West to force Russia to de-escalate tensions with Ukraine. However, the kerfuffle over it has also brought out in the open the discord between the U.S. and its allies within Europe. For now, the fate of the $11 billion pipeline hangs in a balance.

Uma Purushothaman is Assistant Professor at the Department of International Relations, Central University of Kerala .

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