How To Solve The Nord Stream 2 Dilemma
Source: Brookings Institution
- Russia is about to complete the Nord Stream 2 pipeline across the Baltic Sea to Germany
- Congress and the Washington foreign policy establishment are opposed
- However, the Biden administration does not want to pick a fight with the Merkel administration in Berlin
- On February 18, the Biden administration announced that it was sanctioning the ship laying the pipeline and its owners
- These sanctions will probably have no effect, and will probably not mollify Congressional proponents of a tougher line on Nord Stream 2
- When completed, Nord Stream 2 will bring up to 55 billion cubic meters of natural gas per year from Russia to Germany
- Total German consumption of natural gas: 95 billion cubic meters
- Nord Stream 2 can bring a significant fraction of Germany's total gas consumption
A Geopolitical or Commercial Project?
- Americans and Europeans outside of Germany see Nord Stream 2 as a geopolitical project
- If the goal was just to get more gas into Germany, Germany could have paid Ukraine to upgrade its pipelines at a far lower cost than what it paid for Nord Stream 2
- Nord Stream 2 is not an adjunct to Ukrainian pipelines, it is a replacement for them
- From Moscow's perspective, the point of Nord Stream 2 is to give Russian gas a route into Europe that does not involve crossing Ukraine
- Because of this, the US Congress has a bipartisan consensus in favor of imposing sanctions on all the entities, German and Russian, involved with Nord Stream 2
- In a February 17th letter to the Biden administration Congress stated that it stands read to work with the Biden administration to counter Russian influence by working to ensure that Nord Stream 2 is never completed
Germany's Dilemma: Finish the Pipeline While Avoiding Sanctions
- Germany hopes to persuade the US that it can "safely" receive gas without becoming overly subject to Russian influence
- Regulatory mechanisms to block Russian market manipulation
- Build terminals to accept American LNG exports
- Set out red lines that would shut down Nord Stream 2 if Russia was found to be in violation
- These measures are unlikely to mollify Congress
- Regulatory mechanisms make sense, but how would they work in practice?
- American LNG is unlikely to ever be economically competitive with gas from Nord Stream 2 simply because of the cost differential between pipeline transport and shipping
- Some in the German government have proposed a moratorium
- Two variants
- Impose a moratorium now
- Finish the pipeline and impose a moratorium on starting gas flow through the pipeline until American, Ukrainian and Polish concerns are satisfied
- The second variant is unlikely to be acceptable in the United States -- what prevents Germany and Russia from bilaterally starting gas deliveries if moratorium talks become deadlocked?
- Two variants
Wanted: A Creative Way Forward
- What if Germany insisted that Russia commit to increasing the amount of gas that it ships through Ukraine
- Tangible benefit to Ukraine
- Is likely to mollify Congress
My thoughts
- But why would Russia agree to this?
- From the Russian perspective, the entire point of Nord Stream 2 is to reduce dependence on Ukrainian gas transit
- Furthermore, this proposed solution overlooks the biggest problem with any kind of agreement with Russia, which is that Russia lies
- What happens when Russia agrees to increase transit through Ukraine, but then doesn't actually do so?
- What will the consequences for Russia be?
- How will those consequences be enforced?
- Will a future German government have the political will to declare Russia in abrogation of its agreements and begin the enforcement process?
- Stop pretending that Russia is a liberal democracy that actually abides by commitments in the absence of inspection and enforcement mechanisms