{"id":205292,"date":"2022-02-21T12:00:19","date_gmt":"2022-02-21T12:00:19","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=205292"},"modified":"2022-02-16T06:22:55","modified_gmt":"2022-02-16T06:22:55","slug":"pipeline-politics-and-the-ukraine-crisis","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2022\/02\/pipeline-politics-and-the-ukraine-crisis\/","title":{"rendered":"Pipeline Politics and the Ukraine Crisis"},"content":{"rendered":"

Why Nord Stream 2 Is a Key Part of the Impasse<\/em><\/strong><\/p>\n

\"\"<\/a>

Nord Stream 2 pipe-laying in Swedish waters in the Baltic Sea.
Photo by Axel Schmidt<\/p><\/div>\n

\u201cCanada is supporting Ukraine \u2026 because we have a clear and urgent national interest in the situation there.<\/em>\u201d
\n\u2014Canadian Deputy Prime Minister Chrystia Freeland, January 26, 2022<\/p><\/blockquote>\n

6 Feb 2022 – <\/em>Amid escalating tensions between the United States, NATO and Russia, all eyes are on Ukraine. Canada\u2019s Deputy Prime Minister Chrystia Freeland describes it as \u201ca struggle between democracy and authoritarianism.\u201d But Nord Stream 2, a pipeline built to bring Russian gas under the Baltic Sea directly to Germany, is an integral part of the story.<\/p>\n

On January 27, US Under Secretary for Political Affairs, Victoria Nuland, asserted<\/a>, \u201cIf Russia invades Ukraine one way or another \u2026 we will work with Germany to ensure it [the pipeline] does not move forward.\u201d Delayed by US threats and sanctions, Nord Stream 2 highlights why countries are challenging the leadership of the Biden administration.<\/p>\n

Since the 1960s when Europe first began importing Russian gas, Washington perceived Russian energy as a threat to US leadership and Europe\u2019s energy security. More recently, with fracking, the US has become the world\u2019s largest gas producer and a major exporter of LNG (liquefied natural gas). It wants to muscle in on Europe\u2019s huge market, displacing Russian gas. With Nord Stream 2 completed and filled while it awaits German regulatory approval, the stakes are high.<\/p>\n

Soon after pipeline construction began in 2018, the US passed a law threatening sanctions on the Swiss ship laying the pipe. The Swiss pulled out and two Russian vessels completed the line despite sanctions. The US threatened German contractors too, but Germany stood firm.<\/p>\n

In 2021, with construction almost complete, German Chancellor Angela Merkel visited the White House, insisting on Nord Stream 2. President Biden gave way<\/a>. He wanted to mend relations with Germany\u2014the European Union\u2019s most powerful country.<\/p>\n

Nord Stream 2, like its predecessor Nord Stream 1, began as a joint venture (51 percent Russia\u2019s Gazprom, 49 percent Royal Dutch Shell as well as Austrian, French and German companies). Then Poland\u2019s government agency responsible for monopoly regulation forced<\/a> European partners to relinquish their share, creating another delay. The European companies gave up their shareholding but remained as equivalent financial investors<\/a> in the pipeline.<\/p>\n

Upon the Europeans relinquishing their shareholding, Gazprom became the sole pipeline owner. It is also the world\u2019s largest gas supplier, with a gas pipeline monopoly in Russia. Gazprom wants to deliver its own gas via its pipeline to Europe. The EU has maintained since 2009 that pipeline operators, in order to encourage market competition, cannot own the gas they carry. After construction of Nord Stream 2 began, the EU extended its rules to new marine pipelines originating abroad.<\/p>\n

Nord Stream 2 was the only pipeline affected. While those pipelines completed prior to May 2019 were exempt, its completion was delayed by US sanctions on pipelaying. Gazprom claimed discrimination and appealed. In August 2021, a German court rejected<\/a> the appeal. Gazprom then appealed to Germany\u2019s Supreme Court.<\/p>\n

\"\"<\/a>

Map of the proposed Nord Stream 2 pipeline route.
Image courtesy Lorimer Books<\/p><\/div>\n

German industrialists are desperate for Russian gas. Germany has only 17 days<\/a> of gas supply in storage. Volatile short-term spot prices have compounded their woes. EU gas imports have increasingly shifted from long-term contracts with prices indexed to crude oil toward short-term deals by multiple traders in spot markets.<\/p>\n

In 2020, spot prices were roughly half those of Gazprom\u2019s long-term contracts. They surged as much as sevenfold in 2021, reflecting a mix of factors. On the demand side, economic revival from the pandemic boosted demand for gas in Asia as well as Europe. On the supply side, green sources of energy diminished in central Europe because of cloudy windless days. With the decommissioning of coal and nuclear power stations, utilities turned to natural gas.<\/p>\n

European politicians blamed Russia for high gas prices, but Gazprom affirmed it was supplying the amounts stipulated in its long-term contracts. Gazprom wants long-term contracts to underpin the huge capital costs of gas field and pipeline investments.<\/p>\n

Russia is a petro-state. It\u2019s the world\u2019s single largest exporter of natural gas, and the second largest oil exporter\u2014just behind Saudi Arabia. Pipelines and sea routes to market are vital to its economy. Russia wants to sell oil and gas in Asia and Europe, and they want to buy it. Nord Stream 2 makes commercial sense. It incurs no transit fees. The route to market is much shorter than aging pipelines via Ukraine. For its part, Ukraine depends on transit fees from gas shipped through these pipelines.<\/p>\n

Nord Stream 2 remains controversial, bitterly opposed by Poland and Ukraine who presume it will reduce volumes and transit fees on pipelines through their countries. Others (notably Germany<\/a>, Austria<\/a>, Croatia<\/a>, Czech Republic<\/a>, Hungary<\/a>, Italy<\/a>) want it. Germany, which carries huge weight in the EU, sees gas as a transition fuel after phasing out nuclear and coal. As Canadian foreign minister, Freeland voiced \u201csignificant concerns<\/a>\u201d about Nord Stream 2.<\/p>\n

Numerous hurdles during and since construction have delayed the pipeline\u2019s certification. The most recent forced its Swiss operating company to form a German subsidiary for the section in German waters. Upon eventual certification, Germany will become Europe\u2019s main entry point for Russian gas.<\/p>\n

The current crisis between Russia and the US\/NATO has been brewing for many years. With the dissolution of the Soviet Union, NATO expanded membership to Eastern Europe. NATO facilitates US leadership, keeping European countries on its side against Russia. From a Russian viewpoint, NATO is provocative and threatening.<\/p>\n

Part of the agreement underpinning the USSR\u2019s dissolution was Western assurance that it would not expand into Russia\u2019s sphere of influence, a pledge NATO most recently violated by stationing troops, ships and planes along Russia\u2019s borders. The West accuses Russia of interference in Ukraine. Russia points to a 2014 Western-inspired coup in Ukraine and legitimate grievances of Russian-speakers in the breakaway Donbas republics. I document the two narratives in my book Oil and World Politics<\/em><\/a>.<\/p>\n

In December 2021, Russia presented draft treaties to the US and <\/a>NATO<\/a>, demanding a complete overhaul of Europe\u2019s security architecture. Russia stressed the principle of indivisible and equal security for all countries, as agreed by all 56 members of the Organization for Security and Co-operation in Europe (OSCE) at Istanbul<\/a> (1999) and reaffirmed at Astana<\/a> (2010). Countries expressly agreed not to strengthen their security at the expense of others. In January, Russia wrote<\/a> to all signatory countries, including Canada, demanding clear answers on how they each intended to fulfil these obligations in the current circumstances.<\/p>\n

\"\"<\/a>

Map of transit pipelines through Poland and Ukraine.
Image courtesy Lorimer Books<\/p><\/div>\n

Russian President Vladimir Putin warned<\/a> that if the West continued its aggressive policies (NATO\u2019s expansion and missile deployment in eastern Europe), Russia would take \u2018military-technical\u2019 reciprocal measures. In his words<\/a>, \u201cThey have pushed us to a line that we can\u2019t cross.\u201d<\/p>\n

Russia\u2019s initiative put the cat among the pigeons. A succession of high-level meetings occurred between Russia and the US, NATO and OSCE. On January 26, Washington presented written responses, seeking to narrow the debate to Ukraine and alleging the Russians were poised to invade it. Russia insisted repeatedly it would not initiate an invasion but would support Donbas if the latter were attacked.<\/p>\n

The US escalated tensions by repeating claims of an \u201cimminent\u201d Russian invasion, even as Ukraine\u2019s leaders expressed doubts. Washington threatened new sanctions of unprecedented severity, including major Russian banks, high-tech goods, the SWIFT financial messaging system, and Nord Stream 2. Britain and Canada followed suit. On January 11, Prime Minister Justin Trudeau asserted any Russian incursion into Ukraine would have \u201cserious consequences,\u201d including sanctions.<\/p>\n

France, Germany and Italy balked because the sanctions would backfire on their economies. They appeared unconvinced Russia intended to attack unless provoked. A flurry of high-level bilateral discussions with Russia followed.<\/p>\n

Significantly, on January 26, representatives of France, Germany, Russia and Ukraine confirmed support for the 2015 Minsk II agreement and an unconditional ceasefire. Minsk-II requires Ukraine to negotiate with the two Donbas republics on autonomy within a federalized Ukraine but, thus far, no negotiations have been held.<\/p>\n

The EU imports 40 percent of its gas from Russia. For Russia, the routes through Ukraine and Poland are unreliable, because of hostility in both countries. Ukraine has a long-term deal with Gazprom for gas transit until 2024. Ukraine earns big transit fees, roughly US$2 billion per year, and desperately wants to keep them. For its internal market, Ukraine buys Russian gas indirectly from Poland, Romania and Slovakia.<\/p>\n

Whatever happens with Western sanctions, Russia has a strategic new market in China. Russia\u2019s Power of Siberia pipeline began exporting gas from east Siberia to northeast China two years ago. The two countries have agreed to build a second line, Power of Siberia 2. It will bring gas from the Yamal Peninsula in the Russian Arctic to China\u2019s northeast. That means Yamal gas will be able to flow to China as easily as to Europe.<\/p>\n

The current situation is dangerous and could easily escalate. Nord Stream 2 is critically important but national security trumps all. Security can only be achieved if it is universal. US efforts to contain Russia and maintain leadership over Europe are not working. It\u2019s wake-up time for Canada, too. The world has become multi-polar and Nord Stream 2 is a fulcrum at the centre of the current crisis.<\/p>\n

_______________________________________<\/p>\n

John Foster is the author of <\/em>Oil and World Politics: The Real Story of Today\u2019s Conflict Zones<\/a> (Lorimer Books, 2018).<\/em><\/p>\n

Go to Original \u2013 canadiandimension.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

6 Feb 2022 – Amid escalating tensions, all eyes are on Ukraine. Canada\u2019s Deputy PM Chrystia Freeland describes it as \u201ca struggle between democracy and authoritarianism.\u201d But Nord Stream 2, a pipeline built to bring Russian gas directly to Germany, is an integral part of the story.<\/p>\n","protected":false},"author":4,"featured_media":205295,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[225],"tags":[2197,1035,1268,1284,818,253,278,961,70,92],"class_list":["post-205292","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-spotlight","tag-biden","tag-eastern-europe","tag-european-union","tag-false-flag","tag-proxy-war","tag-putin","tag-russia","tag-ukraine","tag-usa","tag-violent-conflict"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/205292","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=205292"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/205292\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media\/205295"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=205292"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=205292"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=205292"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}