Putin & Merkel could stick it to Trump as they look to bring Nord Stream 2 over the line
The Kremlin and the Federal Government office have both confirmed that the €9.5 billion ($10.8 billion) project will be a key talking point – along with Syria and Ukraine – when the chancellor hosts the Russian leader at the Schloss Meseberg palace outside Berlin, during a surprise visit announced earlier this week. And while trench-lines are unlikely to shift on the status of Crimea or Bashar Assad’s future, the Nord Stream 2 issue is a live one.
On paper, there shouldn’t be much to talk about at all. The first part of the joint project between Gazprom and Western European energy giants has functioned without a hitch since 2011. The two new 1,200km-long underwater lines, doubling previous capacity, have been issued with permits by every country en-route from northern Russia to the German coast, apart from Denmark, whose parliamentary dithering over abstract “security concerns” is unlikely to delay completion beyond its scheduled date in 2020. In fact, dredging in preparation for laying the pipes already began back in May.
‘What about Ukraine?’ EU asks
For all this, that the project is alive at all in the current political climate is a miracle of slick personal diplomacy and cool-headed self-interest.
Its enemies are legion, powerful and growing louder.
The European Union tried to wean itself off Russian energy even before the two Ukraine-related supply disputes in 2005/06 and 2008/09 that left parts of the continent freezing, and has been successful through a combination of its own structural market reforms, emergence of alternative energy sources and falling prices. Nonetheless, in 2017, more than a third of all energy to the EU still came from Russia.
The European Council president, Donald Tusk, has campaigned endlessly for the destruction of Nord Stream 2, ever since it was announced three years ago. Last month, he described it, yet again, as a “geopolitical project” of “no economic importance” that threatens the energy security of Europe by giving Moscow excessive political leverage (though in actual fact Nord Stream was conceived exactly to counter politically motivated disruptions that were costly to the export state both in lost reputation and essential foreign currency.)
A principal preoccupation of Tusk and other EU officials remains, with the €2.5 billion (€10.8 billion) in annual transit fees that Ukraine receives from the current pipeline. While there is no doubt that Kiev is closer to Brussels than Moscow, it remains an odd moral and political expectation that Russia should in perpetuity bolster the coffers of its principal regional adversary. And if Europe is so worried about Ukraine, it could always make up the shortfall itself.
An alliance of individual states has coalesced in opposition to the project. Predictably, the weightiest and most vocal objector has been Poland, with the Baltic states emitting a more plaintive sigh of powerlessness.
‘Buy our LNG instead,’ says US
While all the above are reprises, however, the biggest game-changer has undoubtedly been the US.
Specifically, Donald Trump. As frequently mentioned about the current US president, once an issue is lodged in his mind, he rarely lets go – and opposition to Nord Stream has become a favorite.
In July, he deployed a double combo, using this pet topic to push another perennial fixation – Berlin failing to fulfill its NATO obligations – when he argued that Germany has become unworthy of US military protection, as it is “totally controlled” by Russia, turning into its “captive” after agreeing to the “inappropriate” Nord Stream project.
But where Trump leads with rhetorical devices and negotiating tactics, others follow with deadly serious intent.
The EU already pushed for a grandfather clause that allowed Nord Stream 2 to avoid the previous round of US sanctions last year, but in July the catchily-acronymed ESCAPE Act was submitted to the Senate by two Republicans, specifically targeting corporations involved in the project with new sanctions.
Most notably, while most anti-Russia legislation dresses itself up in terms of moral punishment, this particular document makes it explicit that the United States plans to replace the Nord Stream volumes with its own liquefied natural gas (LNG).
Trump himself has made no secret of American ambitions either, promising during his last whirlwind tour of Europe that the locals would be buying “vast amounts” of US-produced LNG (alongside soybeans from America’s “great farmers”).
But if necessary, a more respectable – if less plausible – line of attack can be found. Back in May, Sandra Oudkirk, a senior State Department official, claimed that the pipeline should be blocked because Russia would place sophisticated spying devices along its length that would pose a “threat” to NATO security. She also staunchly denied that Washington was driven by commercial interests.
Merkel’s compromise for Moscow
For long enough, Angela Merkel was able to elide any international objections to Nord Stream 2, by portraying it as a purely “commercial project,” something that also suited Moscow and Berlin, allowing them to divorce the straightforward energy discussions from the tangle of their own sanctions and counter-sanctions.
But that has become more difficult, and not just due to external pressure – the pipeline became an issue during last year’s domestic election campaign, the results of which left the chancellor in her most precarious position since assuming office in 2005. Not to say that Merkel is swimming against the tide: while some inside her party have criticized cooperating with the Kremlin; politicians and businesses, already battered by the country’s misadventures in alternative energy and nuclear reluctance, have stepped up – not least because they resent having their policy dictated by the White House.
Nonetheless, by April, Merkel had to concede that Nord Stream was both a “strategic” and a “political” endeavor. In an epitome of her governing style, the chancellor then suggested a compromise, whereby Russia would guarantee that some of its gas would continue to flow through Ukrainian pipelines.
What form these assurances take is likely to be the crux of the two leaders’ negotiations this week, and it will not be surprising if specific numbers start to emerge following the Berlin talks. As this is not a unilateral concession, nor does Russia lose face by simply continuing to export some of its gas through Ukraine, Putin may be amenable to a deal.
Will Nord Stream 2 be built?
Whatever is discussed behind closed doors, observers should not expect any dramatic, definitive or specific statements when the two leaders emerge again before the media. Merkel will likely remain diplomatically platitudinous, while Putin will assure journalists that the project is on course, and keep his cards close to his chest.
So the bigger question is bound to remain: will Nord Stream 2 actually be constructed?
With all the obstacles around it, there is actually one fundamental reason why it likely will, and it is not just a question of how well Putin and Merkel can talk to each other in German. While it has been branded a geopolitical project from the start – and there is no denying Moscow’s strategic interests – ironically, it is the alternatives that now all look politically motivated. Continuing to insist that Ukrainian pipelines must be used above all others is geopolitics, as is constructing an underused LNG terminal in Poland, as is insisting that Europe purchase America’s gas, paying 25 percent more for it than for the Russian alternative. Nord Stream 2 might not be the most profit-driven enterprise in the world, but it certainly makes more sense than any of those.
Yet what if the US tries to derail it with more sanctions? These are likely, at least in some nominal form. But if Washington tries to go against Berlin’s will on the issue, it will likely achieve not acquiescence, but resistance, and further destabilize a tottering relationship. Is it really in US interests to push Merkel towards Putin, and see Russia still build the pipeline, while smugly watching Europe and America engage in another spat. More likely Trump will back down, and make new exemptions for the project, particularly as it is so close to a fait accompli.
So, the odds are that by the start of the next decade, Europeans will still be grumbling about Russia as they turn on the heat in their homes, while Nord Stream 2 will continue to pump more gas to the continent, oblivious to all the fuss.