Nord Stream 2: How to Make the Most of a Bad Idea

An outlet filtration installation of a gas treatment unit at the Slavyanskaya compressor station in the Leningrad region of Russia, the starting point of the Nord Stream 2 gas pipeline. Photo via Peter Kovalev / TASS.

Even after the United States and Germany issued a joint statement on July 21 aimed at allaying widespread concerns over the Nord Stream 2 pipeline, the project continues to arouse opposition in Washington and across Europe, and for understandable reasons.

For years Russian President Vladimir Putin has used natural gas as a political weapon, especially against Ukraine, and Nord Stream 2 appears to aim to extend that leverage. At the St. Petersburg International Economic Forum in June, Putin himself threatened to cut off gas transit through Ukraine if Kiev did not show sufficient “goodwill”. Meanwhile, Gazprom, the owner of the pipeline, is cutting gas deliveries to Europe – a move that pushes up prices – and hints that the supply shortage will only ease when Nord Stream 2 is fully operational. .

No wonder Ukrainians, Poles, many Germans, most of the European Parliament, many European Union (EU) officials and a strong majority of an often divided US Congress remain firmly opposed to the project. This is why Germany and the United States must work hard and quickly to deliver on the commitments they made in their joint statement to push back against the militarization of energy by Russia. They would do better: Germany and the United States are now bearing the brunt of the consequences if the project encourages Putin to further intimidate Ukraine or other European countries through energy or other means.

Policy documents like the Joint Declaration have both risks and potential. At worst, they provide cover for inaction. But at best, they can mobilize governments to solve the problems. The document was a big step for Germany, whose president at the start of the year has always maintained that the pipeline is a strategic bridge to Moscow. If Berlin and Washington believe what they said, their statement could serve as a platform to address, at least in part, the risks of Nord Stream 2 and thwart Putin’s victory that many critics fear.

Here is what they should do, based on the provisions of the joint statement:

  • Build on Germany’s commitment to take action, including sanctions, against Russia’s export capabilities to Europe in the energy sector or other economically relevant sectors, if Russia is using energy as a weapon or is stepping up its aggression against Ukraine. Targeting Russian exports is a potentially important new step. This can be complicated to implement: Russia exports oil, gas and other raw materials to Europe – and to the United States, where Russia is a major source of crude oil – and the quick cuts can be tricky. The term “export capabilities” could, however, include a set of creative new sanctions, for example blocking certain investments or access to technology in order to tap Russia’s export potential. In any case, the United States, Germany, the EU and the main EU member countries must consult each other quickly and prepare the means to implement this provision. The United States and Germany must also develop an understanding of the threshold above which Russia increases its aggression against Ukraine and uses energy as a weapon. The stronger the understanding, the greater the deterrent value of Germany’s engagement. The United States and Germany cannot afford to wait for Putin to take a step forward to prepare their options.
  • Build on Germany’s commitment to respect the EU’s third energy package with regard to Nord Stream 2. The Third Energy Package is a set of regulatory standards designed to avoid monopoly power over the EU’s energy system, including measures such as ownership separation, third-party access and transparent tariffs. Given their closed and non-transparent nature, Nord Stream 2 and Gazprom do not comply well with Third Energy standards. The rigorous application of the third energy package could either block Nord Stream 2 or force substantial changes in its operation and ownership so as to make it less of an instrument to serve the objectives of the Kremlin in Ukraine. There is also a precedent for its application: the July decision of the Court of Justice of the European Union in the OPAL gas pipeline case ruled that ‘energy solidarity’, a key principle of the third energy package, is a principle legal and not just political. The US and Germany, in consultation with the EU and interested European governments (including Poland and Ukraine) should determine how they will work with courts and regulators to force Nord Stream 2 to adhere to the standards regulations rather than relying on political protection to avoid them. .
  • Implement measures to support the security and modernization of Ukraine’s energy sector, including the commitment of Germany (with the support of the United States) to request a ten-year extension of the agreement of transit of gas from Ukraine to Russia by September 1; and a package of measures supported by the United States and Germany to help modernize Ukraine’s energy system, including the integration of its electricity grid with that of Europe, making Ukraine a part integral part of Europe’s energy transition. Dependent on Russian energy and a source of massive corruption, the Ukrainian energy system has long been a strategic handicap. But Ukraine has made major strides in solving both of these issues, giving it, as well as the United States and Germany, a lot of leeway. Extending the gas transit deal – and making it more costly for Russia to cut or reduce gas again – would reduce Putin’s influence over Ukraine (although enforcement is a challenge). Energy sector reform and integration with Europe could have significant long-term impacts if taken seriously. Germany and the United States will need to work quickly to push forward the extension of the gas transit agreement. The joint statement means that Nord Stream 2 is now politically, if not legally, linked to the extension of the gas transit agreement, giving Germany some leverage, which it should use. The United States and Germany also pledged in the joint declaration to financially support Ukraine’s energy transition, including by financing the development of hydrogen and promoting renewable energies, which both can do greatly. to contribute. Finally, the United States and Germany can combine these efforts with increased support for the Three Seas Initiative, a Central European-led infrastructure investment program that includes energy development.

The Biden administration’s appointment of Amos Hochstein as the State Department’s senior energy security adviser on August 9 is a welcome development. Hochstein played a similar role under the Obama administration, is familiar with the issues and the players, and has long been an opponent of Nord Stream 2. He is the right person to oversee the implementation of the best provisions of the Joint Declaration.

Hochstein and the future German special envoy must act quickly. We recommend establishing a mechanism that includes special envoys and their counterparts from other governments with equity in the matter, as well as working with the US-EU Energy Council, to monitor Russia’s actions. . This mechanism is expected to recommend responses, including sanctions and restrictions on Nord Stream 2, to any objectionable Russian energy policies.

Neither directly enforceable nor legally binding, the joint declaration nevertheless contains commitments which, if implemented, could further empower Russia and protect Europe’s energy security. Putin and the regime-dominated Russian media have greeted the recent progress of Nord Stream 2 with a smirk, but thanks to cooperation and determination, the United States, Germany and Europe, including the Ukraine, can turn the tide.

Daniel Fried is the distinguished member of the Weiser family at the Atlantic Council. He was sanctions policy coordinator under the Obama administration, deputy secretary of state for Europe and Eurasia under the Bush administration and senior director at the National Security Council for the Clinton and Bush administrations. He was also Ambassador to Poland during the Clinton administration. Follow him on Twitter @AmbDanFried.

Ambassador Richard Morningstar is the Founding Chairman of the Global Energy Center of the Atlantic Council, former United States Ambassador to the European Union and former United States Ambassador to the Republic of Azerbaijan.

Ambassador András Simonyi is a Senior Non-Resident Researcher at the Global Energy Center of the Atlantic Council and Project Director at George Washington University. He previously served as Hungarian Ambassador to the United States.

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