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Energy communities as digitally decentralized energy supply systems

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Human progress has often gone hand in hand with our energy development. However, it is nowadays unequivocally considered that our energy development and particularly our energy consumption is gradually leading more and more to the phenomenon of climate change. Looking at various studies, we can see that in the last 150 years, as our energy consumption has gradually been increasing, our global surface temperature over land and water has also risen by about 1.5 degrees Celsius.

In the last couple of years, these developments have rung several alarm bells internationally, so that as a result, various treaties, agreements, etc. have been concluded on a global stage.
One of the best known and most extensive ones is probably the Paris Agreement. Following its magnitude and ambitious realization, the European Union then concluded the Clean Energy Package in 2019, in order to help push the implementation at the Union level.

The core content of the Clean Energy Package

Already in 2016, the European Commission presented the “Clean Energy for all Europeans Package” for the first time. It consists of four regulations and four directives, each of which were adopted by the European Parliament in the time frame from the end of 2018 to early summer of 2019.  The package aims to make a significant contribution to stopping climate change, but above all, to usher in a new era of energy policy and to focus on individual citizens, by giving them a great deal of flexibility but also an impetus to take action themselves.

Among other things, the Clean Energy Package should simplify the process of switching electricity suppliers (in up to 24 hours). In addition, dynamic pricing and intelligent electricity meters will help to save costs and energy. However, in the event of impending energy poverty – quasi-droughts – the member state should then have the authority and it should also be able to regulate market prices at short notice and actively support and protect affected households. Furthermore, a support cap for environmentally harmful power plants in Europe is to apply from 2025. This measure will include all power plants that use fossil fuels.

The member states are also instructed to assess the risk of capacity bottlenecks, draw up national plans and to cooperate and support each other on a regional level.

Thus, ultimately, by 2030, in addition to the goal of gaining 32% of energy demand from renewable sources, greenhouse gas emissions should be reduced by 40%.
At the same time, energy efficiency should increase by at least 32.5% and at least 15% of the networks should be interconnected on a Union-wide level.

However, in achieving these ambitious goals, the European Clean Energy Package envisages that one of the key segments should be the new format of so-called energy communities – which have been defined in the Renewable Energy Directive 2018/2001 and are to be implemented nationally in the same way as the other directive topics according to Art 288 TFEU.

Two concepts of energy communities

The EU has set two similar concepts of energy communities through its directives –
the “renewable energy communities” (Renewable Energy Directive (EU) 2018/2001) on the one side and the “citizen energy communities” (Internal Electricity Market Directive (EU) 2019/944) on the other side. The idea behind both of them is to push the creation of communities that organize collectively and of citizen-driven energy actions, which will help to pave the way for a much-needed clean energy transition while moving the individual citizens to the fore.
Let’s take a deeper look at their respective structure.

Art 2 sec 16 of the Renewable Energy Directive (RED II) defines a renewable energy community as a “legal entity”,

  • which, in accordance with the legislation currently in force, is based on open and completely voluntary participation, is autonomous/independent and is under the effective control of the members or shareholders established in the immediate vicinity of the renewable energy projects owned and operated by that legal entity,
  • whose members or shareholders are natural persons, local authorities or municipalities, or small and medium-sized enterprises,
  • and whose aspiration is not primarily based on financial gain, but is to provide economic, social community and/or environmental benefits to its shareholders or members in which it is active.

Those communities have the right to collectively generate, consume, sell and store renewable energy. In addition, those entities shall generate a wider adoption of renewable energies, active participation in the energy transition, local investments, a reduction of energy consumption, lower supply tariffs, an improvement of energy efficiency and, in view of that, lead to the elimination of any energy poverty.

On the other hand, there is the citizen energy community, which was introduced by the Electricity Directive (ED II). It is defined in art 2 sec 11 as a legal entity,

  • which is based on open and completely voluntary participation and which is actually controlled by its members or shareholders, who may be natural persons, but also legal entities (like local authorities or small businesses);
  • whose main focus is not based on a financial return, but rather on offering community, economic or environmental benefits to its members/shareholders or to the local areas in which it operates;
  • and may additionally operate in the areas of generation, supply, distribution, consumption, aggregation, storage and services (in the energy sector) for its shareholders/members.

At first sight, they both seem quite similar, but there are some fundamental differences. In short, citizen energy communities are communities that operate on a supra-regional basis and jointly use, store or sell their generated energy, and are not limited to renewable sources.
Additionally, any actor can participate in such a community as long as shareholders or members, which are engaged in large scale commercial activity and for whom the energy area is constituting a primary field of economic activity, do not exercise any decision-making power. Renewable energy communities, on the other hand, are regionally active players that are spatially limited to the generation, use, storage and sale of renewable energy, but will additionally benefit from lower local grid tariffs and presumably from a tax exemption, as they can operate on lower levels of the grid due to their geographical regionality. The renewable energy communities must be capable of staying autonomous, and also the participation of the members mustn’t constitute their primary economic activity. As a practical example, one could outline the following simple scenario: If 10 households in a locality join together to form an independent society, invest jointly in a suitable photovoltaic system and use the energy generated from it together, this will be known as a renewable energy community.

The idea behind the energy communities seems promising on paper, but the EU`s goals behind them are ambitious and require, in addition to the legal framework, a social rethinking of the European population, a steady backing of the state (at least initially) and, last but not least, the support of power-generating companies, without which the plan to generate 100% of the total electricity demand from renewable energy sources in the near future (and fulfilling the goals set for 2030 and 2050) will not be feasible.

Challenges

One of the biggest challenges in this regard will be solving the question on how to create as many incentives as possible for every individual to ensure the establishment and participation in energy communities, as they are supposed to have such a large contribution to the energy transition.

One of these incentives could be that the energy communities would also be regarded as companies for tax purposes and thus become entitled to deduct input tax. The rules for when a community is considered a business / or has entrepreneurial status for tax purposes vary somewhat from state to state. However, most of them follow the principle of the three fundamental pillars – permanence, self-sufficiency and intent to generate revenue. The new energy communities are fulfilling all three of these conditions. Especially the critical third point, namely the intention to generate revenue is met, since an energy community is subject to an exchange of services – electricity for reimbursement of costs – which altogether should ultimately suffice for the status of entrepreneurship, regardless of whether the revenue generation is in the foreground or not. So in my opinion the option for input tax deductibility should be affirmative. In such a scenario, a community could at least be reimbursed, (depending on the respective state) in Austria or Germany, for example, with 20% of the costs for maintenance, repair, purchases and thus make the model of energy communities even more economically attractive.

Another issue is the choice of the corporate form. When the EU announced the Clean Energy Package including the energy communities, it also stipulated that an easy entry and exit from the community must be possible for each individual. Of course, this also raises the question of which legal form to choose. The choice of legal form ultimately determines the organizational effort, the costs and the liability regime to a large extent. The legal form of public limited companies will probably be too expensive for small energy communities of private means and superstructure.. In the case of limited liability companies, the strict formal requirements could result in difficulties with flexible changes of members, and in the case of associations and cooperatives, the ideational purpose must be clearly in the foreground, which could also become problematic in the instance of larger communities. Here, I think that real-life practice will show which legal form will prevail.

Likewise, the question of benefits vs. expenses is a valid one. From a purely economic and technological point of view, the entire power grid benefits from the fact that local energy communities are to consume the electricity where it is generated. This means that the electricity does not have to be transported over wide and higher-ranking network levels. This should also save the customers/members of such local energy communities a significant amount of money in grid fees for higher-level grid tiers. However, the question that is actually arising during the first implementation, is who and how exactly one would set up a simple, functioning platform where everyone from young to old, from technology aficionados to technology muffles can participate in this new way of energy consumption and exchange.

Several research projects are currently underway to solve these initial problems. It is already clear that a separate support and funding office is to be set up nationally (maybe even on a European stage), which is to serve as a kind of contact point for any questions from interested parties and is also to help and encourage the founding of energy communities in this regard. With this in mind, many countries are considering the use of additional limited funding, for example, through special quotas and funding opportunities that are only granted for a limited initial period. In this way, first movers would ultimately generate advantages and, as an additional effect, it would likely be possible to achieve a greater influx to the energy communities right from the start.

Opportunities

Energy communities will allow us to combine technological innovations. The goal is to turn a user not only into a consumer but also into a producer, a so-called prosumer.
Energy communities could soon be expanded to include other energy services, such as e-mobility concepts, where electric cars could also be used jointly as part of a car sharing system. In a further step, these e-cars could also serve as additional electrical storage units that can be supplied to the community via an intelligent e-charging station in the event of energy shortages.

Blockchain is also currently experiencing a big buzz in the energy sector. Just to name one example: This technology could be combined with digital platforms (apps) for energy communities in order to achieve better traceability and documentation by visualizing individual energy consumption, for example, and to create an additional incentive for the individual members of an energy community to save energy (competitions, prizes).

Through the implementation of energy communities on a large scale, the cityscapes will also have to change so that the broad masses will be involved as well. This opens up an opportunity to develop new innovations through broad public input and, subsequently, to work as a community on a sustainable city, community and region of the future.

Lastly, it is important to note that the Clean Energy Package and the goals it enshrines will also create many new jobs. Installations of megawatt solar farms on rooftops over agricultural land or between crops will provide additional revenue streams for farmers. The recycling of photovoltaic systems with a service life of 20-30 years will also offer a large, yet almost untapped, market with considerable potential. Experts expect up to 4 million new jobs to be created in the next 15-20 years in connection with the energy turnaround in the European Union alone.

As one can see, the goals are set high – it remains to be hoped that as many of these subpoints as possible can be implemented to finally achieve the great goal of the energy transition and the associated reversal of climate change in the upcoming decades.

Mak Bajrektarevic of the Vienna University of Economics. Besides researching legal and energy aspects of the contemporary world (authoring numerous articles and co-authoring the book on the topic for the US publisher), he is cofounder of the largest university sports platform in Europe, ACSL.

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China’s Unorthodox Intervention in the Global Oil Market

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Apparently, China has been the talk of the town for quite some time. While the entire yesteryear passed in a flurry of blame game over the pandemic, this year has been nothing short of a blessing for Xi’s regime. However, while China rapidly compensated for the drastic slump last year, the bustling economy has now cooled down – though a bit prematurely. Due to the expansive outbreak of the delta variant, China – like most countries around the world – now faces surging inflation and a crippling shortage of raw materials. However, while one might get a bolder vibe from China’s recent crackdown on industrial giants, the supposed Second Cultural Revolution’ seems on a divergent path from the government’s latest aspirations for the domestic industry.

China seems to be on a path to harness growth that appears to be slowing down as the global economy battles uncertainty. However, while many expected China to take orthodox measures to prolong growth, hardly anyone expected a drastic change of strategy: intervening in a close-knitted global market like never before.

China recently posted its most robust trade surplus in history, with a record rise in exports jumping 25.6% from last year to stand at $294.3; $10 billion more than any previous month. However, while the glowing figures imply sturdiness, the underlying fragility of the Chinese economy is not disguised. In the past few months, China’s production engine has taken a toll as surging energy costs have inhibited production capacity. The factory-gate inflation stands at a 13-year-high which has forced factories to cut output. Amid declining domestic demand due to covid restrictions, manufacturing surveys show that China’s export orders are eroding as supply bottlenecks coupled with energy costs have weighed heavily on the production function. To counter the problem, China recently supplied its reserves into the domestic market; undercutting the surging global price tag dictated by the petroleum giants.

Last Thursday, China’s National Food and Strategic Reserves Administrator made a press release, confirming that the world’s second-largest economy tapped into its crude reserves – estimated at 220 million barrels – to “ease the pressure of rising raw material prices.” While China is known to intervene in commodity markets by using its strategic reserves, for example, Copper, Aluminium, or even grains.

Recently, China tapped into its national reserves to intervene in the global commodity market of industrial metals for the first time since 2010. The intervention was situated as a release to normalize surging metal prices and retain domestic manufacturers’ margins. However,  it is a novelty that a national agency confirmed an active supply of petroleum buffer via an official press conference. And while no additional details were offered, it is presumed by global strategists that the press release referred to the 20-30 million barrels allegedly poured into the domestic industry around mid-July: when Xi’s government offered to supply crude to the OPEC.

Furthermore, China’s Stockpile Agency claimed that through open auctions, China’s reserve crude was intended to “better stabilize the domestic demand and supply.” It was apparent that as China ventured through a supply crunch when Brent Crude – Global Crude Index/Benchmark – breached the $76 bpd mark, the country instead resorted to utilizing its own stockpile instead of relying on expensive imported petroleum. Thus, it shapes a clear picture of how China managed to clock a phenomenal trade surplus despite not importing its usual crude quota.

While it is common knowledge that economies like the US and Europe maintain strategic petroleum reserves, the buffers held by China were utilized to actively manipulate the price in a ‘normalized’ oil market instead of their designated usage in supply crunches or wars. The situation today is anything but critical for the oil market to warrant such an intervention. As OPEC+ has boosted its output by 400,000 bpd starting August, output has bloomed beyond its peak since the price war back in April 2020. While the oil market is still well below the output capacity, mutually curbed by the OPEC+ alliance, the demand is still shaky and an equilibrium seems set. Yet, when we observe China – the world’s largest oil importer – we extricate reason that despite a growing economy, China continues to experience massive shortages: primarily in terms of oil, gas, coal, and electricity.

Furthermore, with the ensue of Hurricane Ida, massive US crude reserves have been wiped which has majorly impacted China as well. The US and China rarely stand on the same page on any front. However, even the White House recently asked OPEC to pump more crude into the market due to the rising gasoline prices in America. The same scenario is panning in China as energy shortages have led to surging costs while domestic demand is diminishing. The brunt is thus falling on the national exchequer: something China is not willing to haggle. While it is highly unorthodox of China to explicitly announce its intervention, many economists believe that it was a deliberate move on part of China’s communist brass to amplify the impact on the market. The plan seemingly worked as Brent fell by $1.36 to stand at $71.24 on Thursday.

If China’s commitment to normalize domestic energy prices is this significant, it is highly likely that another intervention could be pegged later in the fourth quarter. Primarily to counteract the contraction in export orders by cutting imports further to maintain a healthy trade surplus. In my opinion, it is clear that both the US and China are not willing to let Brent (and WTI) breach the $70-$75 bracket as key industries are at stake. However, while one takes a passive approach, the other is touted to go as far as pouring another 10-15 million barrels of crude by the end of 2021. Yet revered global commodity strategists believe that the downturn in prices is “short-lived” just like any other Chinese intervention in a variety of other commodity markets globally. And thus, experts believe that the pump is simply “not enough physical supply” to quite strike a permanent dent in an inherently flawed market mechanism.

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Energy Forum Seeks To Analyze Africa’s Energy Potentials And Utilization

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African Energy Week (AEW) 2021 in Cape Town, fully endorsed by the Government of South Africa, is committed to accelerating Africa’s energy growth with the aim of establishing a secure and sustainable energy future for every individual on the continent. Accordingly, AEW 2021 firmly believes in the role that oil and gas will continue to play in Africa and will emphasise the continent’s upstream market through a collaborative, International Oil Company (IOC) forum. Led by IOC executives, as well as government representatives from notable energy markets in Africa, the IOC forum aims to address the upstream challenges faced in Africa, providing solutions and strategies to drive exploration and make Africa more competitive for investment.

With the discovery of sizeable oil and gas reserves across the continent in recent years, regional and international explorers are turning an eye to the world’s final frontier market – Africa. Nigeria’s 200 trillion cubic feet (tcf) of gas reserves and 37.2 billion barrels of oil (bbl); Mozambique’s 11 tcf of gas; Senegal’s 450 billion cubic meters of gas; Libya’s 48 billion bbl and 53.1 tcf; and Egypt’s 77.2 tcf of gas have all made Africa the ideal destination for hydrocarbon exploration. What’s more, with many African countries making significant steps to enhance their regulatory environments, implementing legislation to create an enabling environment for investment, the continent has become a highly competitive market for exploration and production. Nigeria’s recently implemented Petroleum Industry Bill, Gabon’s new Hydrocarbon Code, and Angola’s inclusive petroleum regulation, to name a few, have all ensured a competitive and highly attractive market.

With the world’s six oil ‘supermajors’ – BP, Chevron, Eni, ExxonMobil, Royal Dutch Shell and TotalEnergies – all actively present in mature and emerging markets across Africa, the continent has become an upstream hotspot. AEW 2021 aims to accelerate this trend, promoting new upstream opportunities and ensuring both National Oil Companies (NOC) and IOCs drive the continent into a new era of energy and economic success. Accordingly, Africa’s premier energy event will host an upstream-dedicated IOC forum in Cape Town, led by IOC executives and government representatives. The IOC forum aims to address key challenges in Africa’s upstream market, whereby the diverse speaker panel will offer up solutions to expand exploration and production, while ensuring the continent remains competitive for investment in a post-COVID-19, energy transition era.

In addition to the discussion on upstream activities, the forum aims to highlight the role of IOCs in enhancing capacity building, whereby emphasis will be placed on IOC-NOC collaboration. IOCs have a critical role to play in Africa, not only regarding resource development, but human capital and local business development. In order for the continent to become truly sustainable and competitive, NOCs require support from IOCs. Accordingly, the forum aims to identify strategies to enhance cooperation and partnerships, with IOCs taking the lead in Africa’s energy development.

“AEW 2021 in Cape Town will offer a real discussion on Africa. Oil and gas are critical in Africa’s development and the African Energy Chamber (AEC) will not succumb to the misguided narrative that Africa should abandon its potential. The IOCs in Africa have demonstrated the continent’s potential, and by sharing strategies to enhance growth, address challenges, and accelerate upstream activities, they will be key drivers in Africa’s energy future. The IOC forum will not only offer a description of African reserves, but will provide clear, attainable solutions to exploitation, exploration and production with the aim of using energy to enact stronger economic growth. By coming to Cape Town, attending the IOC forum, and interacting with African ministers from across the continent, you will be able to be a part of Africa’s energy transformation,” stated NJ Ayuk, Executive Chairman of the AEC.

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Nord Stream 2: A Geopolitical Tension between Russia and Ukraine and the European Dependence

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nord stream

Nord Stream 2 gas pipeline is a 1,230-kilometer direct linkage between the Russian natural gas producers and the consumer market of Europe. The model was made keeping in mind the successful operation of the existing Nord Stream pipeline after a thorough analysis by Nord Stream AG. The main aim of NS2 is said to be the increase in the annual capacity of the existing pipeline up to 110 billion m³. The pipeline starts from the Russian region of Ust-Luga then stretches through the Baltic Sea and ends at the area of Greifswald in Germany. It is due to this route that the project is mainly considered to be controversial. Bypassing directly through the Baltic Sea, the importance of Ukraine for Russia for exporting natural gas to the European market would reduce significantly which will end the $3 billion transit fees gained by the Ukrainian government in the year 2018 alone, causing a sudden and huge strain on the GDP of the country.

This project worth $11 billion would double the market of Russia in Germany which is the largest market in Europe, possessing a key position in international politics. It is said by the Russian officials that the pipeline has almost been completed and it may get operational by the end of August in the year 2021. Some analysts and International Relations experts have considered this as a geopolitical weapon that gives leverage to Russia to influence future events in the region particularly the ones related to the Crimean annexation.

Threat to Ukraine

Recently in a meeting with German Chancellor Angela Merkel, the President of Ukraine appeared to be displeased by the Western recognition of the NS2 pipeline. He called it a “dangerous political weapon” in the hands of the authoritative regime of Russia which has already annexed an integral part of their country to fulfill their geopolitical and economic desires. The desperate opposition of this project by the Ukrainian government has several underlying factors which are very important to discuss.

Firstly, the transit fees earned by Ukraine just by giving passage to the gas going from Russia to Europe make up a fine amount of the GDP of the country. If projects like NS2 get operational then the importance of Ukraine will decline, causing an end to the $3 billion transit fee. Although Russia has ensured to still use Ukrainian passage for the export of their gas, this does not seem to be happening in the future. States are after their national interests and Russia would prefer the direct linkage with the European market instead of paying billions to the Ukrainian government. Currently, out of the quarter of natural gas transported to Europe, around 80% has to pass through the Ukrainian territory.

Secondly, after the expiry of the transit deal between Russia and Ukraine in 2024, it would depend upon the negotiations between the two parties to revive the fate of this deal. Although Kremlin’s Spokespersons have ensured the revival of this deal after its expiry in 2024, debates still exist about the prospects. No one can claim with certitude about the future of this deal between the two states.

Thirdly, Ukraine is intimidated by the future of the country if the Russian gas pipeline bypasses its territory. There already exist many gas-related disputes between the two states which resulted in the cut-off of the gas supply in 2014 and later on in 2015. Russia can pressurize Ukraine for accepting their demands to get their gas supplies back. Recently, Ukraine has started to reduce its dependence on Russian natural gas by switching back to European gas. But this would not be beneficial in any sense if the Russian monopoly over the gas market increases through the NS2 pipeline.

And lastly, the dependence of European markets on Russian gas can undermine the Crimean cause. Once a state has to depend on the other state for the necessities, it has to let go of many important causes and decisions. As Angela Merkel has repeatedly called the NS2 pipeline a geo-economic project rather than a geopolitical “weapon” that can be used by the Russian government as a decisive tool at times of disputes and crises, this already shows the drowning picture of the cause. In addition to this, previously the US administration was very aggressive towards the pipeline but the current government despite its opposition, is unable to do much for stopping the project which can get operational very soon.

Role of US and NS2 Pipeline

The United States of America is well aware of the changing dynamics of the region and the intentions of resurgent Russia. The Republican government under Trump proved to be very destructive for the project. The US did not only oppose the gas pipeline openly but also imposed sanctions on entities aiding Russia in the development of this gas pipeline. In January 2021, Trump imposed sanctions on the gas-pipeline laying ship, “Fortuna” and its owner under the Counter American’s Adversaries Through Sanctions Act (CAATSA). Previously, work on the pipeline had to be suspended as the US imposed sanctions on the main company, Allseas. President Biden was one of the many policy-makers who opposed this pipeline and considered it dangerous for the US and its allies. Although it was not clear what Biden’s policies would be, Blinken ensured to use “persuasive tools” against the pipeline, after acquiring the office. President Biden indeed imposed sanctions on the Russian ships and other companies involved in the laying of pipeline, but analysts think this would not cause any impact on the project as it is almost running towards completion. Rather, anti-sanction policy-makers consider it more important to waive off these sanctions and get into formal negotiation talks with the Russian government.

In May 2021, the President of the US and the Chancellor of Germany gave a joint statement for the agreement signed between the two countries related to the NS2 project. Some of the main features incorporated in the agreement are the announcement of sanctions on Russia in case it violates the peaceful use of the pipeline and utilizes it as a weapon against Ukraine. Germany would not only oppose such a step but would also press on the EU to take counter-measures. Similarly, it was decided to revolutionize the energy sector of Ukraine by the creation of a Green Fund for Ukraine by Germany worth $1 billion. Initially, it was decided that Germany would contribute an amount of $175 million. Also, it is said that Germany would use all its leverage to ensure an extension of the current transit agreement (which is going to expire in 2024) between Russia and Ukraine for at least up to 10 years. This would continue the role played by Ukraine as a transit state, helping its GDP and putting off the security threat over it. There is a sharp criticism on the Biden administration over this agreement which did not involve Poland and Ukraine while deciding their future. Also, the deal does not put any process of hindering the pipeline which is against the aspirations of all Americans and most of its allies.

In addition to limiting the role and influence of Russia in the European continent, the US is also looking forward to the opportunities of fulfilling its national interest. If the US becomes successful in hindering the operation of NS2, it can expand its gas buyers in the European countries. This way, like the post-war era the US can get a strategic and decisive role in this part of the world which can ultimately help it to counter the threats related to the rise of China and the Sino-Russian nexus. We can say that the US cannot only use this as an economic incentive but also utilize its importance in the future of great power rivalry.

Why states are against this Pipeline Project?

Along with the direct impacts of this project on Ukraine and Poland (to some extent). The major concerns of the states which oppose the NS2 pipeline include the additional leverage which Russia will gain when its national gas firm would directly export gas supplies between Russia and the European continent. This may result in a sudden disruption of the supplies, influenced by the changing dynamics of the region. The Russian authorities had cut off the gas supplies of Europe in the winters of 2006 and 2009, leaving millions without gas for days. Similarly, the increased dependence of Europe on Russian gas can be counter-productive and may hinder the interests of the states and the US soon. This situation can be utilized by both Russia and China to exploit the bonding between the US and its allies.

From the security perspective, the presence of Russia and its naval forces can cause a security threat to the states surrounding the Baltic Sea. The unsettled conditions may lead to chaos and problems in the region.

If Russia was to get a high stake in the energy market of Europe, this would also allow it to exploit the situation and create a monopoly over the market. This may not also lead to political outcomes and consequences but can also end the game of local and international gas market players in the continent. This is the biggest threat that is encouraging the US to make NS2 a security threat for itself and its allies.

Way Forward

Keeping in view the nature of international politics and changing economic dimensions to the project, the only possible way forward is an agreement between Russia and the US related to the pipeline and the future of Ukraine. If developments can be made over the existing US-Germany agreement then concerns of the states can be mitigated to a huge degree. The options of imposing sanctions on the pipeline are no more practical and can be counter-productive for the US concerning its allies especially Germany.

Conclusion

The Nord Stream 2 Pipeline despite its economic benefits cannot be separated from its geopolitical aspects and consequences. In international politics, the hardest thing to do is to trust the intentions of the other state, especially when it was a superpower previously and has several examples of violating the sovereignty and rights of neighboring states. But presently, all those who oppose the pipeline have no other option than to allow its proper functioning under certain terms and conditions.

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