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Analytics: The Political Significance of Nord Stream 2

by Artem Rovniy
February 23, 2021
in Opinion
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The official position of Russia and Germany is that Nord Stream 2 is a purely economic project
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The official position of Russia and Germany is that Nord Stream 2 is a purely economic project.

The United States claims that Potok has an exclusively political load and allows Russia to sharply strengthen its position in Europe (both Western, which is the main consumer of Russian gas, and Eastern, through which Russian gas is transited).

The absurdity of this American statement is obvious if we consider that it was the Americans, and precisely for political purposes, who did everything to first prevent the modernization of the onshore gas pipelines going from Russia to Western Europe through Poland, and then, not without some (albeit not absolute) success, tried to and completely block land transit.

At the same time, the United States and its Eastern European allies were confident that the Streams would never be built, they declared at every corner that the projects were a bluff, and the money allocated for them would, at best, simply be stolen.

However, after the launch of Nord Stream-1, the situation changed dramatically. The Ukrainians and Poles have forgotten that “Streams” are a bluff, and began to demand that the West refuse to cooperate with Russia in this area and block the construction of “Streams”, which take away their transit. The United States, in turn, is concerned about imposing sanctions. Moreover, for the sake of joining the sanctions mechanisms of Europe, they even went to the provocation of the Russian-Ukrainian armed conflict with the prospect of its transformation into a pan-European one.

An official war between Russia and Ukraine would give the latter an argument for a complete cessation of the transit of Russian gas. In turn, Europe would not have been able to evade sanctions against gas pipelines even if hostilities had quickly ended in the complete defeat of Ukraine. In this case, Russia would be accused of occupying all or part of the territory of Ukraine and planting a puppet regime in Kiev, which would make a full-scale break in relations with Europe inevitable already in 2014.

This provocation failed in the United States, but they worked tirelessly against Nord Stream 2, forgetting that “this is a bluff.” They managed to postpone its commissioning, and now they still continue to make efforts to ensure that the gas pipeline, even after being completed, could not start work.

In fact, thanks to the efforts of the United States, the Nord Stream 2 problem has ceased to be purely economic and has indeed acquired a political significance. At the same time, the political load on the project is constantly increasing, and if it has not yet begun to exceed the economic one, it may soon surpass it.

Let’s pay attention to the fact that Russia in strategic matters never puts eggs in one basket. The gas problem was also solved by the Kremlin in a comprehensive manner.

First, in addition to gas pipelines bypassing Eastern Europe, gas pipelines were built leading Russia to the Asian market (China, in the future, Japan).
Second, Russia has dramatically increased its gas processing capacity on its territory. Several large gas processing plants have been built. Several more are planned.

Third, Russian gas production companies have dramatically (tripled in just the last three years) their LNG production and continue to increase their capacity and build a fleet of gas carriers capable of delivering LNG to consumers all year round using the Northern Sea Route.

All this together provides an opportunity for prompt maneuver with gas supplies to a more profitable market. While only Gazprom’s pipelines to Europe were in operation, Asia (where spot prices periodically rise above European ones) was inaccessible to Russia. Now gas carriers can be directed to where the price is higher. Moreover, the total volume of gas flowing along alternative routes, consumed domestically and delivered to LNG terminals, allows Russia to abandon Nord Stream 2 without significant losses, giving Europeans the opportunity to buy the same Russian gas (LNG) on the spot market. but more expensive than pipeline under long-term contracts.

Russia is currently capable of draining the Ukrainian pipe without SP-2. Moreover, due to the drop in production as a result of the systemic crisis complicated by the coronavirus infection, Europe has reduced gas consumption. And it is not known whether a rapid increase will follow this, since the EU is actively adopting regulations blocking hydrocarbon energy, and declares its stake on the development of hydrogen and other types of “green” energy.

At the moment, Europe, having no alternative to hydrocarbon energy sources, nevertheless erects artificial obstacles on their way to the European market. If this suicidal policy continues, then some of the existing and emerging gas delivery capacities may turn out to be superfluous.

In this sense, LNG, although more expensive than pipeline gas, makes it easier to maneuver in directions and volumes of supply. In addition, Russian LNG is still cheaper than competitors.

Not everyone will delve into the essence of the changing circumstances that determine the possibility of abandoning the project. The only thing that will remain on the surface is the fact that a practically finished gas pipeline is frozen under American pressure. Moreover, if the construction is frozen on the initiative of the Russian side, then many will think that Russia has broken down under US pressure. If it turns out that the gas pipeline still has to be frozen, but at the initiative of the Europeans, then Europe will appear broken under pressure.

This is an important point. When deciding with whom to enter into strategically important contracts, both the state and private companies take into account possible political risks. If you fulfill your contractual obligations, no matter what, and the project breaks down due to the political vulnerability of your partners, then contracts will be concluded with you. If you seem to be politically vulnerable, then preference will be given to someone else.

For the United States, the issue is also fundamental. If they fail to stop the project (at least to postpone it for another three years), then the whole world will see that all the power of America was only enough to delay the commissioning of SP-2 for a year. After that, her recommendations and wishes will be much less reckoned with.

So the project has outgrown the pure economy and carries significant political risks for both sides. And this raises the cost of the issue and, consequently, the intensity of the struggle. It is no coincidence that, since last year, the ships of the Russian Navy have provided support to the ships that are building the stream, protecting them from provocations by the United States and its allies.

Author: Rostislav Ischenko, President of the Center for Systems Analysis and Forecasting

Source: Ukraina.ru
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