Report

Is Germany Souring on Russia’s Nord Stream?

Merkel now talks of protecting Ukraine’s interests as Russia’s $12 billion gas pipeline seeks to bypass Kiev.

German Chancellor Angela Merkel with Ukraine’s President Petro Poroshenko, in Berlin, Apr. 10, 2018. (Odd Andersen/AFP/Getty Images)
German Chancellor Angela Merkel with Ukraine’s President Petro Poroshenko, in Berlin, Apr. 10, 2018. (Odd Andersen/AFP/Getty Images)

German Chancellor Angela Merkel on Tuesday staked out what appears to be a tougher stance on a huge Russian energy project that’s tearing Europe apart, the Nord Stream 2 pipeline across the Baltic Sea. But with construction set to begin soon after years of political and legal skirmishes, it’s not clear what any German change of heart now could ultimately mean for the $12 billion project.

Speaking at a joint press conference with Ukrainian President Petro Poroshenko, Merkel said that the controversial project, which would bring natural gas from Russia to Europe, could not go ahead if it left Ukraine in the lurch.

“I made very clear that a Nord Stream 2 project is impossible without clarity on the future transit role of Ukraine,” Merkel said in Berlin, referring to Kiev’s lucrative business transshipping Russian gas to countries in Europe.

What’s more, she stressed the “political considerations” of the project, a contrast from her earlier and repeated insistence that the pipeline was purely a business deal.

Nord Stream is a joint venture between Russia’s Gazprom and several major energy companies from Germany, Austria, France, and the Netherlands. But many countries in Central and Eastern Europe, as well as the European Union and the Trump administration, worry the project will redouble Russia’s energy hold over Europe.

Merkel’s comments seemed an abrupt about-face after the Kremlin said on Monday that Moscow and Berlin were on the same page regarding the pipeline.

The question is whether Merkel’s statement represents a true shift in policy for Berlin, or whether the chancellor is simply trying to balance competing pressures from Moscow and much of German industry, which support the project, against those from Kiev and other eastern European capitals, as well as Washington, all of which vocally oppose the new pipe.

“I think it’s too early to say it’s a shift in policy, but there’s definitely a shift in tone,” says Tim Boersma of Columbia University’s Center on Global Energy Policy.

In the past, Merkel had said she wanted to see some sort of solution for Ukraine’s future role as a physical middleman in the Russia-Europe energy trade, which is worth $3 billion a year in fees. But she’d never been so explicit, Boersma says.

What’s less clear is what Merkel can do about it at this point. Late last month, Germany issued all the permits Nord Stream needs to lay pipe in German waters, and it is close to wrapping up Finnish permitting, too. It just needs permits from Denmark and Sweden.

The European Commission may try to apply European Union law to the offshore pipeline in a bid to derail it, but trying to do so would be a legal and political minefield that could have negative implications for the rest of Europe’s energy supplies.

“How serious is she really about being firm, and what tools does she have to prevent it at any rate?” Boersma asks.

Nord Stream is just the latest fight in a decades-long battle among Europe, Ukraine, and Russia over energy supplies, especially natural gas. At times of political tension, such as in 2006 and from 2008 to 2009, Russia cut off gas shipments to Ukraine and Europe, leaving many citizens shivering. Moscow and Kiev have repeatedly battled over energy supplies and transit since the beginning of armed conflict in Ukraine in 2014.

What makes Merkel’s newfound emphasis on ensuring some sort of future transit role for Ukraine confusing is that the original point of Nord Stream was to cut Ukraine out of the gas trade between Russia and Europe; guaranteeing a place in the middle for Ukraine would seem to be at odds with the logic behind the pipeline.

“The underlying rationale of Nord Stream is still to drastically curtail Ukrainian gas transit,” Boersma says.

The German and Ukrainian embassies in Washington did not respond to requests for clarification.

But Merkel’s comments on Tuesday could reflect that Russia and Europe will have to learn to live with a future role for Kiev after all. Even Russian President Vladimir Putin is now talking about continuing to ship Russian gas across Ukraine, rather than bypassing the country entirely by the end of next year. “We have nothing against continuing cooperation with Ukraine,” he said in late February.

Simple math suggests Putin may have no choice. The new pipeline would be able to ship about 55 billion cubic meters of Russian gas to Europe per year, while more than 90 billion cubic meters went through Ukraine last year. Even if Russia’s new pipeline to Turkey and Southern Europe is built, that will only transport another 16 billion cubic meters.

“Since even with Nord Stream 2, transit through Ukraine of some Russian gas into Europe will continue, the statement is just a polite acknowledgement of that fact,” says Brenda Shaffer, an energy expert at Georgetown University’s Center for Eurasian, Russian and East European Studies. (She’s argued that Nord Stream isn’t the threat that many in Europe and the United States make it out to be.)

Indeed, European production of natural gas is declining, especially due to the scheduled closure of the continent’s biggest gas field in 2030. That, plus the need to find more natural gas to replace phased out coal-burning and nuclear power plants, likely spells an even bigger need for imported gas in years to come, Shaffer says.

Then again, it wouldn’t be the first time that the long-serving chancellor has turned German policy on a dime. And her comments come at a time of heightened tension between Russia and the West, with Europe irate over the attempted killing of a former Russian spy in Britain, and with Washington levying tougher sanctions on Russian oligarchs.

“Merkel has made some major decisions on a whim, such as closing Germany’s nuclear power plants and inviting a large refugee flow, so this could signify a new policy,” Shaffer says.

Keith Johnson is Foreign Policy’s global geoeconomics correspondent. @KFJ_FP

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