Authors: Prof. Dr. Md. Harun-or-Rashid and Md Tareq Hasan
Ten days before the 2005 election in Germany, Chancellor Gerhard Schroeder arranged a meeting with his best friend, Russian President Vladimir Putin. With defeat almost certain for rival Angela Merkel, she decided to finish a job that she could not be sure her successor would do at all. Germany and other European countries have been importing natural gas from Russia since the Soviet era. The gas connection had to be made through Ukraine, Belarus, Poland, and the Baltic states. For this, they had to pay a transit fee. Meanwhile, Ukraine had to handle 80 percent of the transit. Discussions began in the mid-1990s to establish a direct gas connection between Russia and Germany through the seabed. The agreement was signed on September 6, 2005.
Schroeder lost the election, presumably. Shortly after the end of his chancellorship, he joined the board of directors of Nord Stream, a newly formed company operating the gas connection. Analysts see the Nord Stream project as a product of Putin and Schroeder’s friendship.
The 6 billion project was called “Nord Stream 1.” The gas connection, which runs under the Baltic Sea, was completed in 2011 during Angela Merkel’s administration. It is possible to import 55 billion cubic meters of gas per year into Europe. More importantly, it greatly reduces the dependence of European countries on the Baltic states, including Ukraine. Inspired by this, a new project called “Nord Stream 2” was planned for 2015. Work on the 1,230-kilometer gas connection from Russia to Europe began in 2018 and was completed in 2021. The 11-billion project has more than doubled its capacity. It aims to reduce its reliance on Ukraine, and this is where the debate begins.
Nord Stream 2 is wholly owned by the Russian state-owned gas company Gazprom. If the project is implemented, the source of income from transit in Ukraine will be closed. Moreover, the timing of the project announcement was a bit fragile. The Crimean peninsula was occupied by Russia in 2014 and the year before.
However, then-German Chancellor Angela Merkel and current Chancellor Olaf Schultz both see Nord Stream 2 as a business venture. This project is important for the German industrial sector. Germany needs this gas connection to shut down its last three nuclear reactors. The new government has announced plans to eliminate dependence on coal by 2030. A natural gas connection is also required for its implementation.
Gas connections have become more urgent for the southern states of Germany. The demand for fuel is high as there are factories for BASF Chemicals, Daimler Automaker, and Siemens. Although it is possible to meet the demand for renewable energy through wind turbines in the north, the German people are reluctant to take them south. Apart from Germany, other European countries will be able to meet the demand for fuel at a lower cost. For Gazprom, too, it is an opportunity to reduce its reliance on nuclear reactors and coal to export fuel to Europe.
But since Gazprom is a Russian state-owned company, it has not only economic but also political implications. Ukraine earns approximately $2 billion from transit. Ukraine has a transit agreement with Russia until 2024. Their future is uncertain once Nord Stream 2 becomes effective. They will suffer the most here. Apart from Ukraine, Poland and Slovakia are also opposed to the project on transit issues. The Crimean crisis and the recent presence of Russian troops on the Ukrainian border have added fuel to the fire.
The United States sees the gas connection as a threat to the security of its European allies. This could lead European countries to become overly dependent on Russia and to become puppets of Russia. Because Russia may use this gas connection as a weapon of diplomacy, So the United States is considering imposing a blockade on Nord Stream 2. Moreover, if European countries start buying Russian gas exclusively, US trade will also suffer. While US gas suppliers have been able to reach an agreement in Poland, France and Ireland have faced environmental challenges. Moreover, it is more expensive for European countries to import fuel from the United States than from Russia. These aspects have given Russia a strategic advantage.
On the other hand, in Germany itself, the number of opponents of trade with Russia is not small. The Green Party is a political party in the German coalition government. The Green Party does not support the Nord Stream 2 project. But Chancellor Schultz said it was a private project. It is up to the German institutions to decide whether it will be effective or not. The anti-Putin leader, Alexei Navalny, was poisoned and assassinated in 2020, putting pressure on then-Chancellor Angela Merkel to stop the project. Nord Stream 2 was used as a weapon to put pressure on Russia. But Merkel said gas connections had nothing to do with “personal matters.”
Although the construction of Nord Stream 2 was completed on September 10, 2021, it is facing geopolitical issues as well as bureaucratic complications. German regulators have to complete additional tasks before it can begin operations. Gazprom is set to open a German branch of its Switzerland-based project management agency under the direction of the German energy regulator BNetzA and the European Union. It will then be approved at the end of an observation by the European Union and Benitez. However, its activities will not start at least before the last half of 2022. In addition, there is international pressure to ensure that Ukraine does not suffer.
