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The Geopolitics of Nord Stream 2

Two incomplete parallel pipelines spanning the Baltic Sea remain at the centre of an unresolved geopolitical contest. Nord Stream 2, the offshore natural gas pipeline project that seeks to transport hydrocarbons over 1,230 kilometres from Russia to Germany has been a controversial international security topic for several years. In this piece, John Fee examines the unfolding geopolitical struggle to determine the fate of Nord Stream 2.

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Since its inception in 2015, the Nord Stream 2 project has been one of the most highly contested infrastructure projects on earth. Costing approximately €9.5 billion to finance, the offshore natural gas pipeline has created clear rifts between European Union members, generated enmity between the United States and Germany, and aroused the great power rivalry between Washington and Moscow. The issue has risen to prominence in recent months in light of fresh sanctions being imposed by Washington against the project. U.S. sanctions against Nord Stream 2 have been justified on the basis that the pipeline poses a grave geostrategic threat to Europe’s energy security. The precise nature of the threat is generally portrayed over several issue areas:

  1. Increased European Energy Dependence on Russia

The European Union maintains a strong dependence on natural gas imports from outside the union to keep the lights on. The Union’s dependency on natural gas imports to meet the energy needs of its member states has been increasing in recent years. The European Union’s growing dependency on natural gas imports is largely the result of the declining domestic production of natural gas, nuclear heat and coal from within the Union. As regards to the origins of the Union’s natural gas imports, Russia stands as the principal supplier—sourcing approximately 40% of all natural gas entering the EU. Germany’s decision to support Nord Stream 2 sets to deepen the Union’s dependence on a single external supplier which directly undermines the diversification goals of the EU’s energy union. Furthermore, the U.S. maintains that an increased dependence on Russian natural gas will be leveraged for coercive political ends—which will ultimately compromise the sovereignty of European states. This position is equally shared by a number of Eastern European states.

Counter Position: Germany has found this line of reasoning deeply problematic, not least, illegal. Since Germany not only maintains that Nord Stream 2 is strictly a commercial venture, but it also claims that its own sovereignty is being undermined by extraterritorial sanctions which undermine international law. On the matter of Russian coercion—despite increased political tensions between Europe and Russia over recent years, which have even led to EU sanctions against Russia, Moscow has proven to be a dependable energy party for its deliveries into Europe.

  1. Undermining of Ukraine’s Economic and Strategic Security

The U.S. has maintained a fairly consistent strategic policy towards Ukraine over the years—seeking to build a democratic, self-reliant, economic partner whilst keeping Kyiv’s development on a western trajectory in the face of increasing Russian coercion. The U.S maintains that Ukraine’s energy infrastructure operates as a deterrent to Russian encroachment, which Moscow seeks to undermine. Despite assertions from Nord Stream 2 supporters that the pipeline project constitutes a commercial venture, the U.S. argues that since Gazprom is an extension of the Russian state, one must give precedence to the geostrategic nature of this project.

The basis of this argument is generally predicated on the following points:

  1. The pipeline’s project company ‘Nord Stream 2 AG’ is owned by Gazprom; a company under the control of the Russian Government.
  1. Consequently, Gazprom is often deemed an external expression of Kremlin foreign policy—using its commercial veneer as camouflage. Therefore, Nord Stream 2 must not be judged in purely commercial terms.
  1. Russia seeks to undermine Ukraine politically by making its energy infrastructure obsolete.
  1. Nord Stream 2 will bypass Ukrainian gas transit routes into Europe, enabling Russia to significantly reduce gas transit away from Ukraine in due course. Reports suggest that this would also deprive Ukraine of more than $2 billion per year in transit fees.
  1. Additionally, Ukraine’s transit routes into southeast Europe and Turkey are bypassed on account of TurkStream—a two-string natural gas pipeline that links Russia directly to Turkey across the Black Sea.
  1. If Ukraine faces the gradual loss of transit fees on account of Nord Stream 2 and TurkStream, Moscow will hold a significantly stronger position to coerce Kyiv with cheaper gas over any number of issue areas—in other words, stand with Moscow and receive cheap gas, or exhaust your treasury through your new-found dependence on Western European reverse-flow deliveries.

Counter Position:

Can commercial actors be expected to tolerate transit fees indefinitely if they can find more economic means to facilitate energy transit to buyers? Nord Stream 2 can be viewed as the consequence of free market forces legally identifying and facilitating a more cost-efficient route to transfer gas supplies. Berlin supports the Nord Stream 2 project on the grounds that commercial investors are promoting national economic development. Following Germany’s emphasis on the commercial nature of the project, it is no surprise that some supporters are suspecting that the U.S. is hiding its own economic interests under the guise of energy security. It is certainly no secret that the U.S. has a far-reaching energy dominance strategy, which it takes great pains to enforce. Therefore, some observers suspect that U.S. sanction measures against Nord Stream 2 are in fact, part of a strategy to capture a larger gas market share in Europe with its liquefied natural gas (LNG) exports.

What is the Present Situation?

On July 15th, U.S. Secretary of State Mike Pompeo announced that the U.S. would be enacting additional sanctions against the Nord Stream 2 pipeline project, declaring that the measures are “intended to counter Russian malign influence” by targeting companies that provide “goods, services,… or support” for the construction of the project’s pipeline. In light of these sanctions, the European Union made its position abundantly clear “it considers the extraterritorial application of sanctions to be contrary to international law. European policies should be determined here in Europe not by third countries.” July’s additional sanction measures supplement earlier U.S. sanctions that forced the Switzerland-based Allseas to cease their pipelaying operations back in December 2019. Ever since then, Nord Stream 2’s pipelaying operations have been suspended, with an unknown resumption date for the construction of the remaining pipeline. Despite the cessation of construction operations, Russia intends to circumvent U.S. sanctions to complete the remaining pipelaying operations alone.

It is against this background that on August 5th, U.S. Senators Ted Cruz, Tom Cotton and Ron Johnson revealed the latest U.S. attempt to prevent the pipeline from being completed. A letter, signed by the aforementioned Senators, was sent to the owners of a German company who operates the Mukran Port—a vital staging point for Russian vessels that are reportedly being prepped to complete the project. The letter issued a stark warning to the port owners—bring your support to an end, or face “crushing legal and economic sanctions” that will “destroy the future financial viability of your company”. This ‘smart sanction’ is deliberately designed to coerce elites and supporters of the project through extensive asset freezing and travel bans to prevent the pipeline from being completed.

Reports suggest that the Nord Stream 2 gas pipeline is between 93% to 94% complete. It is still unclear at this point how Russia intends to complete the project. As the speculation continues, the U.S maintains its economic ‘gunboat diplomacy’ against any commercial stakeholders who may be implicated in the project’s support network. Furthermore, a German Bundestag committee hearing in July suggested that the EU presently lacks any effective measures to protect German companies from extraterritorial sanctions. What impact, if any, U.S. sanctions can have against self-reliant Russian pipelaying operations arising in the near future, remains to be seen.

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John Fee is a former signaller of the British Army with expertise in executive protection operations and risk analysis. John is currently pursuing a degree in Peace and Conflict studies at Malmö University, Sweden. His current academic focus concerns information influence operations.

For an in-depth, bespoke briefing on this or any other geopolitical topic, consider Encyclopedia Geopolitica’s intelligence consulting services.

Photo: Coastlines of the Southern Baltic Sea, NASA photograph