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Institute for Postinformation Society republishes materials of Ukrainian blogs on Russia aggression related issues (All rights reserved).

Europe’s gas risks

If we look at the message spread by the Russian media, then Europe’s powerful gas dependence is obvious. It is easier to list independent countries than vice versa. Only Norway, Sweden, Spain, Portugal and Belgium are relatively independent of Russian gas, in France and Italy it is 37% and 38%, respectively, in Austria, Poland, Greece, Hungary, Bulgaria, Serbia, Latvia, Finland exceeds 60%, and some even 100%. In 2017, Germany imported oil and natural gas from Russia in the amount of 19.8 billion euros.Currently, 38% of the gas used by Germany is imported from Russia.

In general, Europe’s dependence on Russia is estimated at 40%, and while supplies are growing: last year – by 8%, breaking the record in absolute terms (194 billion cubic meters). Gas consumption in Europe is growing, and Gazprom wants to increase its supply in the coming years. Analysts suggest that already this year Gazprom will export more than 200 billion cubic meters of gas.

Gas ambitions of Russia

Now, despite the opposition of many EU countries and the leadership of the European Union, the construction of the Nord Stream-2 gas pipeline continues, with a total value of 9.5 billion euros. Gazprom is the only shareholder in the project who bears half of these costs. Western partners of Gazprom are the German companies Uniper and Wintershall, the Anglo-Dutch group Royal Dutch Shell, the French Engie and the Austrian OMV. Nord Stream 2 will double the volume of natural gas that Russia can supply directly to Germany under the Baltic Sea, bypassing Ukraine. It is expected that its construction will be completed no later than 2019. The volume of pumped gas to EU countries can reach up to 55 billion cubic meters.

With the help of new gas pipelines, Russia wants to prevent a hostile government in Kyiv from receiving billions for gas transit and thus moving even further towards Europe. If Russia succeeds in connecting to the European network with the help of two gas pipelines at once, this would be a great success for Putin. After all, only along the northern route Europe will be able to receive an additional 110 billion cubic meters.

Unfortunately, America, even in the short run, is not able to offer Europe a real alternative. Although the capacity of Sabine Pass terminals already allows, in terms of liquefied gas, to send about 27 billion cubic meters, and by 2020 – 96 billion, actual deliveries were less than 10 billion. And even from these supplies to Europe there are less than 1 billion cubic meters (mostly to Spain and Lithuania). The main buyers of American LNG are Southeast (China, India, South Korea and Japan, in particular), Latin America and Mexico. The reason is simple – if in Asia the price of LNG has exceeded $ 330 per thousand cubic meters, in Europe they do not exceed 240.

One thing is clear, the implementation of the Nord Stream-2 project and the multi-channel Turkish Stream will strengthen Russia’s dominance in the gas markets of Europe.They will reduce the number of opportunities for the diversification of natural resources, create security risks in the already tense Baltic region, and bring Russia closer to the goal of undermining Ukraine’s position, depriving it of its role as a transit country for Russian gas supplies to Europe. The construction of Nord Stream 2 will concentrate about 75% of Russian gas imports to the EU on one route, creating a potential reference point, which will significantly increase Europe’s vulnerability to possible supply disruptions.

Europe is “protected”

The feeling of future gas dependence on Russia, apart from fears, simultaneously creates another trend – the desire to weaken it. Even the special term “energy security” has appeared in the everyday life of the EU. It manifests itself in the search for ways to diversify supplies, be it American LNG or the construction of new, in particular, southern gas flows to Europe.

As the deadline for completing the construction of the Russian Nord Stream-2 gas pipeline approaches, the United States has stepped up its efforts to block it, threatening Russia with new sanctions. This was confirmed by US Ambassador to the EU Gordon Sonland, speaking at the Center for European Politics in Brussels. This is a direct response to an earlier statement by US President Donald Trump that the gas pipeline will strengthen the EU’s dependence on Moscow in the energy sector. Recall that in August, Trump signed a law imposing sanctions on the gas pipeline, which, according to Gazprom, may hamper some of its projects.

Sonlend’s statement is not specific, but it does make it possible to conclude that the White House administration does not abandon attempts to block Russian gas expansion into Western Europe. Moreover, answering the question whether the American leader can take further measures to thwart the project, Sonland said: “We have not yet used the entire set of tools that could significantly undermine the project, if not stop it completely. We hope that opponents of this project will work organically, because the EU and its member countries agree that dependence on Russian energy is not a good long-term geopolitical solution.

This official position must be understood in such a way that if the construction of the Nord Stream continues, then the president has many other tools at his disposal to try to contain and stop the project. that the opponents of this project will work organically, because the EU and its member countries agree that dependence on Russian energy is not a good long-term geopolitical solution.

US Assistant Secretary of State for Energy Frank Fannon said: “The position of the United States is clear enough. We oppose Nord Stream II and call on all parties to withdraw from the project. ” According to him, Nord Stream II is “a tool with the help of which the Russian state wants to strengthen the dependence of importing countries and exert coercive influence on them.” Fannon stressed that “diversification” of energy is the key to preserving Europe’s energy independence. He mentioned several projects aimed at achieving this goal, in particular the construction of a connecting pipeline (interconnector) between Greece and Bulgaria, the synchronization of the Baltic grids with continental Europe and the construction of a liquefied natural gas (LNG) terminal on the island of Krk in Croatia. “This terminal could receive LNG from a wide range of suppliers. This will allow us to increase diversification and move away from Russian sources, which will be of particular importance for Hungary, ”said Fannon.

In turn, the European Parliament once again urged to stop the construction of the Nord Stream-2 gas pipeline. This project “is contrary to the EU’s energy policy and therefore must be stopped,” the statement said.

In fact, Germany, which is the destination of the gas pipeline, was left alone in supporting the project, considering it a purely private enterprise. German Chancellor Angela Merkel, during her speech to the European Parliament, defended the Nord Stream 2 project, stressing that gas from Russia is needed as a transitional raw material in the fight against climate change – “especially in a country like Germany, which is not going to use atomic energy. ” Merkel at the same time stressed that she is making efforts so that Ukraine does not cease to be a transit country for gas.

Not everyone in Europe likes the leading position of Germany in deciding on the routes of transportation of Russian gas. So, Italy insists on receiving gas not through Germany, but through Ukraine. Italians do not like much that Germany will become a hub for the distribution of Russian gas to Europe.They require the preservation of the previous route.

It should be noted that discussions about the feasibility of the gas pipeline unexpectedly turned around in Germany itself, and more and more questions arise about the position of Merkel. One of the contenders for the role of successor Angela Merkel Friedrich Mertz recently loudly doubted that the Nord Stream-2 gas pipeline should be built.According to Merz, “amid the incident in the Sea of Azov, Putin should know that they are thinking about it in Germany.”

The opinion of the British Conservative Deputy Tom Tugendhat, Chairman of the Committee on International Affairs of the House of Commons is interesting: “The Nord Stream-2 gas pipeline project is an element of purposeful and diligent dismantling of the West, if you look from Moscow. The refusal of gas transit through Eastern European countries to Germany will increase the vulnerability of these countries, allowing them to “shoot them one by one, without risking the income of the gas oligarchs.”

And even in Russia they recognize that the project may have difficulties in connection with the sanctions of the US Congress. Of course, if fearing fines from Washington, some concerns will come out of the project, Russia will still try to fill the financial gaps on its own. At the same time, Putin is not concerned with either international law or his own promises. This is evident from the example of the Crimea, the Donbass, and now the conflict in the Sea of ​​Azov. For Putin, it’s only about completing the gas pipeline, and financial expenses are not taken into account.

Germany after Merkel

Of course, Merkel’s position is a strong argument in favor of completing the construction of Nord Stream-2. And although some countries, in particular Italy, Spain, Greece and Poland, consider the strength of Germany to be excessive, the Germans do occupy higher positions in the EU institutions, and Merkel is recognized as the most influential politician in Europe.

However, if we look at the main posts in the European Union, we will see that they are not occupied by Germans at all. For example, the European Commission is headed by former Prime Minister of Luxembourg Jean-Claude Juncker. President of the European Union – Donald Tusk from Poland. The president of the Eurogroup is from Portugal, the president of the European Central Bank is from Italy.That is, the leading position of Germany – this is not some kind of dogma. Simply, Germany is the most populous country in the European Union. This is important because when countries vote in the Council of Ministers of the EU with a qualified majority, at least 65% of the EU population should be represented. About 16% of the population of the European Union live in Germany, and it is difficult to make such a decision without it.Economic influence is also important: many projects without German money are simply unrealizable.

At the same time, the dominant role of Germany in Europe was shaken after Merkel’s sensational resignation from politics. This is definitely the end of a whole era, and with each passing month it will be more difficult for her to push her decisions in the EU.

And no matter who becomes the future chancellor of Germany, he will be faced with a difficult choice: either the risk of an immediate energy war with Moscow, or the observation of how Moscow finally delays the gas noose.

Russian factor

Against the background of the fierce criticism of the project by the United States, Russia immediately joined the cause of its defense, and at the highest level. Thus, the head of Gazprom, Alexei Miller, told the Kommersant newspaper that the United States was not able to stop the construction of the Nord Stream-2 gas pipeline. “Well, you see everything yourself – 200 km have already been built. And the rest will be completed, ”Miller said on the sidelines of the Summit of the Association of Southeast Asian Nations (ASEAN) in Singapore.

A spokesman for the Russian president, Dmitry Peskov, warned that new US anti-Russian sanctions would harm relations between the two countries. “It’s hard to say what the sanctions will be,” the Kremlin spokesman said in an interview with Dozhd TV channel. – Will they lead to further complication of the situation with Russian-American relations? The answer is unequivocal: of course they will. ” “The fact that America has become unpredictable lately is also not a secret to anyone, everyone is already talking about this absolutely openly, because this unpredictability in the performance of such a largest country, the most powerful economy in the world, of course, is a subject of deep concern for all” – added Sands.

At the same time, for Russia itself, the financial feasibility of the project is a big question. The cost of the Russian budget only to bring the pipeline to the Baltic Sea is estimated at $ 44 billion, and it’s a stretch to call the gas pipeline a commercial project. If we take into account the investment component of Nord Stream II, it was obviously unprofitable and will never pay off.In fact, 44 billion were taken away from pensioners and state employees and paid for the pipe, which Russia, in principle, did not need. Those gas pipelines that already exist have twice the capacity than Russia exports gas to Europe.

And here the true goal of building a gas pipeline bypassing Ukraine is manifested – to punish the Ukrainians with the deprivation of transit and to give the opportunity to cash in on the contractors who build it.

Russian gas lobby

In its gas battle for Europe, Russia is actively attracting European lobbyists. Such as the former deputy of the German party of the CDU Friedbert Pfluger. Although Pfluger is not as famous as former Chancellor Gerhard Schröder, who works for the Russian energy company, behind the scenes, the former CDU functionary has become one of the most important European lobbyists in the field of gas policy. When in 2010 his political career ceased to develop, the politician decided to start a new life and devote himself to protecting Russian gas interests.

As a visiting professor at King’s College London, he now advocates for the Nord Stream 2 gas pipeline, for which he pays the Russian gas lobby. The once well-known deputy has become a kind of public relations manager of the energy policy. The former politician supports projects like Nord Stream 2 and, as a private consultant, and as a research assistant.

At King’s College in London, Pfluger founded the European Center for Energy and Energy Security (EUCERS), and a year before leaving politics, Pfluger opened Pflüger International in Berlin. One of the most well-known clients of Pfluger consulting firm is Gazprom’s subsidiary Nord Stream-2, that is, the company that is currently promoting the construction of a second gas pipeline from Russia to Mecklenburg-Western Pomerania across the Baltic Sea.

In 2016, the Pfluger Institute at King’s College in London published two studies on the feasibility and geopolitical significance of the gas pipeline. The result of the study was clearly in favor of the project.The new gas pipeline will allegedly strengthen the energy security and competitiveness of Europe and will be beneficial for European consumers. One of the studies was sponsored by gas pipeline investors Shell, Engie, Wintershall, Uniper and OMV. In addition, at that time Ilya Kochevrin sat at the EUCERS Scientific Council, and he is the director of Gazprom Export, a subsidiary of Gazprom.

Pfluger skillfully uses the good connections that he established while being a member of the Bundestag and foreign policy expert of the CDU / CSU faction – since 2009 he has been holding discussions on energy issues in the Reichstag, where eminent politicians and entrepreneurs are invited. At the same time, being the director of EUCERS, Pfluger gives an interview about the scientific assessment of Nord Stream-2. So, at one of the economic forums, he spoke with the German service of the state channel Russia Today.

Contacting the right people to promote Nord Stream 2 Pfluger also tries in Brussels: according to an investigation by Lobbycontrol, in 2016, he twice failed to invite to the event dedicated to Nord Stream 2, Maros Shefcovic, President of the European Commission on Energy.

And there are a lot of such lobbyists of Russian gas interests, like Pfluger, in Germany. Unfortunately, it is especially easy for them here to act as neutral experts in society and to disguise their real function, since there is no register of lobbyists in Germany. This leads to the fact that the focus of such extremely relevant projects as Nord Stream 2 is only odious individuals like Gerhard Schroeder, and not the entire lobbyist network, including former politicians of various parties and movements.

The question of natural gas is an important one for European Union — it is used for generation of more than 25% of electricity of total EU electricity demand. And as of now the demand is only going higher — in the July report the International Energy Agency predicted the increase of gas demand in Europe until 2023.

 

Even though US became a pure exporter of natural gas in 2017, this cannot solve the problem of fulfilling the demand of most EU countries. More even, there are prognoses of decrease in production of natural gas by the biggest gas producers in Northern Europe, which are Great Britain, Norway and the Netherlands — all because of depletion of natural gas sources in Northern Sea. The extraction of natural gas in the Netherlands will be shut in 10 years because of ecological concerns. At the same time Germany plans to get rid of atomic energy plants and coal power dependence, which adds to the global warming.

Thus, Europe will be in constant demand of foreign natural gas supplies, since their own gas production shortens because of depletion of gas sources, while the demand goes up. By the estimates of European energy companies, in 2035 European Union might be in need of additional 107 billion m3 of natural gas, per year. And the big share of EU-consumed gas today is supplied by Russia. In 2017 alone “Gazprom” supplied the European market with 193.9 billion m3 of natural gas, which is 8% more than the previous record of 2016. The share of Russian gas on European market is close to 35%, almost 60% share of market in Germany. “Gazprom” steadily grows its share on European market, since 23% in the year 2010 up to 34.2% in year 2017. The biggest “Gazprom” client in EU is Germany (53.4 billion m3), while the fastest growing procuring countries are Turkey (+4.24 billion m3) and Austria (+40%).

Moscow has hopes on increasing their share even more. For this, “Gazprom” builds two new natural gas pipelines to Europe: a TurkStream (to serve the markets of Southern Europe through Turkey and Greece), and a Nord Stream II (to supply the large European countries, Germany first of all).

The dependency of Europe from Russian gas is on the rise, and this fact cannot be ignored. First of all because the fuel is used by the Kremlin not only as the main source of filling the budget, but also as a tool which Russian powers hope to use to secure the economical and geopolitical dominance of “Russian world” ideas at least in Europe, and perhaps someday — all across the world.

A good example of an attempt of Russian expansion into EU is a building of the Nord Stream II pipeline, which will run from Russia through the Baltic Sea floor to Germany. The length of the pipeline would be 1200 kilometers, the cost is 9.5 billion Euros (joint financed by “Gazprom” and five European companies).

“Gazprom” predicts that since the end of 2019 the gas pipeline Nord Stream II will transport approx. 55 billion m3 of Russian natural gas per year. That means, the amount of export to Germany will be effectively doubled.

Of course the Nord Stream II project for Russia is more a political than economic project. It will create an economic bastion in Germany, which Russia will later be able to use to create a political influence on countries of Central and Eastern Europe. And we all know already how “Gazprom” can use the supply of natural gas to put pressure on the government of particular country.

For example, if the Nord Stream II pipeline will be put into operation, “Gazprom” can easily cut the supply to Slovakia, Poland and Hungary companies which now provide a reverse supply of Russian natural gas to Ukraine.

The threat of militarization of this pipeline is completely real. Because there are reasons to believe that Russia will try to use the pipeline as a zone for hosting the techniques and equipment not connecting with gas transportation. As Russia already does in the area of annexed Crimea in Black Sea and Azov Sea, where right next to energy infrastructure a double-purpose objects appear, which are required by Russian military. Besides, such infrastructure object as a pipeline gives a chance to use it not only for examination purposes, but also to increase the intelligence potential in the region, for the industrial espionage, etc.

Seeing the overt flirtation of Vladimir Putin with Angela Merkel, we can easily see the end-goal of this new pipeline, which is to split the European Union from the inside, to give a glimmer of hope to Germany that using the gas pipeline it will be able to manipulate and to dictate its terms to other European countries. Imagine that with Nord Stream II Germany will get a leverage against other energy-dependent countries, because Merkel’s say will decide whom to and on which price the Russian gas will be distributed in Europe.

This is an appealing bait to Merkel, who tries to position herself to an average German citizen as the most influential politician in Europe. And at the same time this hook is on the line in Putin’s hands, who can loosen it or tighten it up. Or cut it off in a critical situation.

In fact, most of Merkel’s achievements are connected to Vladimir Putin’s name in one way or another, and the Russian natural gas import is not the last of them. About 50% of Germany’s gas import is from Russia, while the rest comes from Norway and the Netherlands.

Of course Merkel understands that her dialogue with the Kremlin doesn’t add to the number of her supporters in the US and EU, but she cannot resist holding the post until 2021. And the election fail of Christian Democratic Union of Germany in Hesse speaks for itself: the electors will not forgive any more of gas supply shortages to Angela Merkel. An average German couldn’t care less which country of origin has the gas which is burning in his kitchen stove.

Therefore, no matter that Germany has some intense internal discussions about cooperation with Russian Federation, which in fact made the political circles of the country to split, the public anti-Russian rhetoric of Merkel has more and more of declarative nature. Merkel, as an experienced politician, doesn’t put all the eggs in one basket. Putin will hardly be happy with a strategic decision of Merkel’s government to build an LGN terminal in the lands of Schleswig-Holstein. And when declaring this decision, Angela Merkel made it clear why this terminal is needed — on one side, to spare the country from growing dependence on Russia in terms of gas supply, and on the other side, this was a crucial concession to US President Donald Trump who tries to weaken Russian’ positions and presence on the largest energy market in Europe. This is where Merkel comes as a conciliator in the long trade war between US and EU, and this is where she raises her rating of approval.

At the same time, the growing amount of imports of liquefied natural gas from the US to Europe, Germany in particular, must reconcile Trump and Merkel with the problem of Nord Stream II — which means, in the end this plays into Putin’s favor. Funny thing is, the big statement from Merkel has intensified the activity of Russian lobbyists in Germany. And Leif-Eric Holm, a fraction leader deputy of “Alternative for Germany” party, not only voiced strongly against the terminal project, but also made a demand to the government to start the works on implementing the Nord Stream II project.

In circumstances like this, it would be naïve to expect that Angela Merkel will prioritize the energy safety of Ukraine over the economic interests of Germany. Though, a powerful opposition of US to Nord Stream II building is based not on preoccupation with European energetic independence or keeping the gas transit through Ukraine, but on the simple eagerness to sell the US liquefied natural gas to Europeans.

That’s why during the Kyiv visit on November 1st 2018 Merkel made a diplomatic but firm statement about Germany’s support for Nord Stream II construction. At the same time Merkel emphasized that Nord Stream II launching is directly connected with getting a guarantees to the project participants on preserving the status of transit country for Ukraine. Merkel assured that the negotiations on corresponding agreement are held between European Commission and Russian Federation.

As of today, the European Union is divided on the question of Nord Stream II: Germany, Finland and Sweden allowed for pipeline building on their territories, Denmark did not. Governments of Ukraine, Poland, Hungary, Moldova, Romania, Czech Republic, Slovakia, Latvia, Lithuania and Estonia consider Nord Stream II to be a threat to energetic safety of Europe. All in all we can conclude that Russian energy decisions were successful in the sense that they have sown the discord and uncertainty between the European citizens, and they can put Europe in a political dependence from Russia.

But considering the last stance of US President Donald Trump, who on September 18th stated that US do not have plans to sanction the Western companies involved in gas pipeline building, the chances of pipeline building halting are quite slim, unfortunately.

In contrast to Germany, for Ukraine the building of Nord Stream Ii pipeline is a matter of national security, even though the economic aspect is important enough. A possible termination of gas transit through Ukraine will lead to economic shock and political destabilization in the country (the damages from the pipeline startup for Ukraine are estimated as 2 billion dollars per year).

It would be good to persuade Angela Merkel that Nord Stream II poses a threat to the countries of European Union, and the wise decision would be not to build the new pipeline bypassing Ukraine, but to invest into transit pipeline located on the territory of Ukraine. The argumentation is strong enough — no matter what decision would be on Nord Stream II, Ukraine stays to be one of the crucial transit paths to European Union, and has a huge potential to become one of the most important gas markets in the region. It is lucky that some influential politicians do understand this, such as Johannes Bauer, a first advisory and the head of operation department of EU office in Ukraine, who is sure that Ukraine might become one of the most important gas markets in the region, and an important part of energy market of European Union.

Sadly, todays’ realities are against Ukraine. Despite the efforts of Ukrainian diplomats, government members, and President of Ukraine, Germany confirmed its intents to finish the Nord Stream II construction. At this moment the most important to Ukraine is for Washington, Berlin and Brussels to not renounce the guarantees of Russian gas transportation through Ukraine after Nord Stream Ii finishing, and to continue the gradual inclusion of Ukraine to energy market of European Union, especially since this would be an important element of the successful foreign energy politics of European Union. Ukraine is the only country on today’s European map which is not dependent on Russian gas. This leadership costs a lot, but it must be preserved.

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