How Putin’s $11 billion pipeline split NATO and the EU at a time of crisis

The content originally appeared on: CNN

London (CNN Business)An undersea pipeline set to deliver gas from Russia to Germany has become exactly what the two countries have always insisted it would never be: A weapon in a geopolitical crisis.

The United States, United Kingdom, Ukraine and several European Union member states have fiercely opposed the pipeline ever since it was first announced in 2015, warning the project would boost Moscow’s influence in Europe.
The 1,200-km (750-mile) pipeline was completed in September and is now awaiting final certification. But even though the pipeline isn’t operational yet, it has already acted as a huge wedge between the traditional allies at a time of huge tensions between Russia and the West.
According to experts, that on its own is a win for Russian President Vladimir Putin.
Kristine Berzina, a senior fellow at the German Marshall Fund of the United States, a nonpartisan research center, said Moscow has benefited from the drama around the pipeline. “Everything about the Nord Stream 2 pipeline has been a victory for Russia,” she told CNN.
“Given that Russia’s aim is to split everybody, if they’re seeking to break apart unity in the European Union and in NATO, this pipeline has been a wonderful vessel.”
For years, both Russia and Germany argued that the pipeline is purely a business enterprise and has nothing to do with politics.
But in central and eastern Europe, where gas supplies from Russia play an essential role in power generation and home heating, few topics are more political than energy security. With natural gas prices already near a record high, many fear further tension could cause more pain to European consumers.
And while Russia has denied using energy to put pressure on Europe, the International Energy Agency has blamed Moscow for contributing to the European gas prices crisis by cutting supply.
The US and Europe are preparing for the possibility that Russia could weaponize its gas exports to Europe to retaliate for any possible sanctions. The Biden administration has been in regular discussions with a number of countries in Europe, the Middle East and Asia about stepping up their production of liquified natural gas to Europe in the event that a Russian invasion of Ukraine leads to gas shortages, multiple US officials familiar with the discussions told CNN.
As Russia’s biggest gas customer, Germany had been reluctant to use the pipeline to put pressure on Moscow. Less than two weeks ago, German Defense Minister Christine Lambrecht warned against dragging Nord Stream 2 into the conflict.
Yet as tensions built up between Russia and the West over Ukraine, the claim has been quietly dropped by the Germans. Under pressure from the US, German Foreign Minister Annalena Baerbock acknowledged last week the Nord Stream 2 pipeline could be included in a package of sanctions against Russia over its involvement in Ukraine.
At the same time, the US has somewhat scaled back its vocal opposition to the pipeline. Earlier this month, the US Senate voted down legislation from Republican Sen. Ted Cruz of Texas to sanction entities associated with Nord Stream 2. The main argument from the Biden administration was that sanctions on the pipeline would undercut US efforts to deter the Russian threat by giving the West less leverage.
“Putin wants to see Nord Stream 2. If somehow it’s killed before any potential invasion, he has one less reason not to invade Ukraine,” US Senate Foreign Relations Chair Bob Menendez said.
Ukraine and other eastern European countries have warned the new pipeline could make the region more vulnerable to Russia’s whims.
Disputes over energy prices have plagued the relationship between Russia and Ukraine ever since the collapse of the Soviet Union in 1991, with Russia cutting its supplies of gas to Ukraine on number of occasions. At the moment, Russia needs Ukraine, because large amount of the gas it sells to Europe still flows to the rest of the continent through Ukraine’s territory.
By bypassing Ukraine, Nord Stream 2 would make it easier for Russia to isolate Ukraine.
Making the situation even more complex is Germany’s decision not to supply weapons to Ukraine. While several other NATO countries including the US, UK and the Czech Republic said they’d ship weapons to the country, Germany has so far refused, sparking criticism from Ukrainian officials.
Controversial remarks by the chief of German navy Vice-Admiral Kay-Achim Sch?nbach about Putin “probably” deserving respect and suggesting Ukraine had permanently lost the Black Sea peninsula of Crimea to Russia have only added to the tensions. While Sch?nbach has resigned over the comments, the Ukrainian Ambassador to Germany Andrij Melnyk said on Sunday the German government “has to change its course towards Kyiv” in order to “restore full trust in German politics.”
The pipeline is especially valuable to Russia, which relies on oil and gas exports for over 40% of its government revenues. If operational, it would deliver 55 billion cubic meters of gas per year directly from Russia to Europe. Gazprom, the Russian state-owned company that owns the pipeline, said its average export price was $280 per 1,000 cubic meters of gas in 2021, which means the new pipeline could be worth more than $15 billion a year.
Gazprom has already invested some $11 billion into the project.
“The West needs every possible form of leverage that it can get to dissuade Russia from invading Ukraine,” Berzina said, adding that not sanctioning the pipeline now means it could be used as leverage in the future. “Russia’s ambitions right now are huge and the explicit asks it has made of the West on returning troops to where they were in the early 90s and to close the door on NATO expansion, these are not in line with the West’s values, so the West really can’t give Russia what it wants there.”
Andrey Kortunov, director-general of the Russian International Affairs Council, said Moscow views the Nord Stream project as a test of the EU’s strategic autonomy from the United States.
“If the Nord Stream 2 project goes down the drain, which is possible, it would serve as a confirmation of this perception that Europe is not a reliable partner and you cannot work with the European Union because they cannot agree on anything and they cannot make any decision. So if you want something to be accomplished, you should go to Washington,” he said.
Russia has repeatedly warned the West not to drag Nord Stream 2 into the political crisis. Russian Foreign Minister Sergey Lavrov said attempts to politicize the Nord Stream 2 issue were “counterproductive.”
But while the pipeline is extremely valuable to Putin, it is doubtful whether it could play the decisive role in persuading him to scale back any plans to cross Ukraine’s border.
“If it fails, it will be a big loss for Gazprom and the Russian economy, but it’s not like the Russians will say okay, you can go ahead with the NATO enlargement, but as long as Nord Stream 2 is operational, that’s fine,” Kortunov said.
“The question is what is [Putin’s] ultimate aim? He’s got the money, the currency reserves that Russia has saved, it can afford to lose money right now … is the economic relationship, the pipeline, a cost he’s willing to pay?” Berzina added.