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Does Europe really need the Nord Stream 2 pipeline?

Andreas Becker
September 9, 2020

After the poisoning of Russian opposition figure Alexei Navalny, Europe is facing the tough choice of whether or not to stop its pipeline project with Russia. DW examines what an end to Nord Stream 2 would mean.

Pipes waiting to be used in the Nord Stream 2 project
Image: Imago Images/C. Schroedter

Despite German Chancellor Angela Merkel's long-held claim that Nord Stream 2 was a "purely commercial" project, the gas pipeline has never been only that.

Admittedly, commercial aspects are playing some role against the background of rapidly depleting gas reserves in Europe and Germany's shift away from coal and nuclear power toward renewables. Still Russia's primary aim has always been direct access to the huge German gas market, without taking the costly transit detour via Ukraine and Poland.

For more than nine years now, Russian gas has been flowing through the original Nord Stream 1 underwater pipeline in the Baltic Sea. Construction of its younger twin, Nord Stream 2, has stopped just about 160 kilometers (100 miles) away from German shores. Once finished, the two projects together will double Russia's gas exports through the Baltic pipelines to about 110 billion cubic meters (3,884 billion cubic feet) a year.

Christoph Weber, a professor of energy economics at the University Duisburg-Essen in Germany, believes the additional capacity is not really needed. "Nord Stream 2 isn't essential for maintaining Germany's energy security," he told DW. "There is sufficient access to natural gas resources in Norway, the United States and North Africa."

Unnecessary, destructive, inefficient

Marc Oliver Bettzüge also thinks that the termination of Nord Stream 2 won't open up a supply gap in Europe. At the same time, he acknowledged that gas prices in Europe would decline "noticeably, but not dramatically" if the controversial pipeline would be allowed to deliver gas to the continent.

Graphic: Sources of German energy production

In an interview with the German FAZ newspaper, the director of the Energy Institute at the University of Cologne, said that prices could fall "by about 5%," citing the findings of his own experts in a study published in April.

By contrast, the verdict of the German Institute for Economic Research (DIW) is more devastating. DIW's senior energy expert, Claudia Kemfert, told DW that Nord Stream 2 is "unnecessary" in respect to German energy policy, as well as "environmentally destructive and commercially inefficient." Even Russian energy analysts doubt that the project would ever turn a profit for Gazprom, the Kremlin-backed Russian energy giant, she says.

Unlike Nord Stream 1, where European energy majors like Germany's E.ON and Engie from France are part of the consortium operating the pipeline, Nord Stream 2 is fully owned by Gazprom.

Will taxpayers pay the bill?

If Nord Stream 2 were to be killed, it is however not only Gazprom who would be hurt. A total of five major European energy firms have provided about 10% of the funding for the project worth €10 billion ($11.8 billion) overall.

They are Uniper and Wintershall DEA from Germany, Anglo-Dutch company Royal Dutch Shell, Austria's OMV and Engie from France.

Christoph Weber thinks the companies would attempt to recoup the money they had invested. "Probably they would try to seek compensation from those who are politically responsible [for ending the pipeline]," he says, adding that this bill would most likely be footed by the taxpayer in the end.

Russia's President Vladimir Putin and Gerhard Schroeder hugging each other at the opening of the 2018 FIFA World Cup (TASS/dpa)
Former German chancellor Gerhard Schröder and Russian President Vladimir Putin have become close friends over Nord Stream 1Image: A. Druzhinin/TASS/dpa/picture-alliance

Adding to European governments' woes would be Moscow's likely reaction, he says. "Russia will underscore that it's always been a reliable supplier, and it will start questioning Germany's role as a reliable partner."

So is there a rising probability of Russia using its energy supplies as a weapon in the future?

Timm Kehler, a senior board member of the Zukunft Gas (Gas Future) industry group, thinks it's possible. In an interview for the German business daily Handelsblatt he pointed to the vast volume of natural gas delivered by Russia, which makes up about 40% of Europe's total supply.

"Such huge volumes of gas cannot be replaced quickly," he said, and noted that for Germany the gas from Russia was even more important as it makes up almost half of the nation's total consumption.

A demonstrator holds a poster picturing Saudi journalist Jamal Khashoggi and a lightened candle during a gathering outside the Saudi Arabia consulate in Istanbul
Germany's tigth-rope walk between business and geopolitics is harder since the murder of Saudi dissident Jamal KhashoggiImage: Getty Images/Y. Akgul

What should be done?

Energy expert Christoph Weber believes that the "tricky issue" can only be resolved in the realm of politics, with politicians having to decide which side they want to be on and with who they want to "forge an alliance."

"As a scientist you can only shed so much light on some aspects," he told DW, and suggested that clear-cut CO2 emission pricing within a multilateral framework agreement might help. "This would make all sides think twice as to how much sense the project really makes."  

"Personally speaking," Weber says he understands why public calls for ending Nord Stream 2 are rising, because he thinks Germany and Europe, as communities "based on common values," need to stand up for those values. "In extreme cases, tough choices have to be made," he adds.

However, it wouldn't be the first time that politicians in Germany shun tough choices, as was shown in the 2018 killing of Saudi dissident Jamal Khashoggi by a Saudi hit squad in Istanbul. Despite evidence that the government in Riyadh was involved in the murder, Germany interrupted its weapon exports to that country only briefly, and calls for ending purchases of Saudi oil have long been forgotten.

This article was adapted from German by Uwe Hessler