Michael De Groot
Nord Stream 2,
At long last, Nord Stream II appears poised to cross the finish line. Not wanting to prolong the rift in U.S.-German relations, the Biden administration reluctantly lifted sanctions on the pipeline. While Moscow welcomed the move, the decision met bipartisan opposition in the United States as well as from several European partners. Critics denounce Nord Stream II as an instrument of Russian foreign policy rather than a commercial deal. They argue that the pipeline expands European dependence on Russian natural gas and provides the Kremlin with leverage to extract political concessions. Since Nord Stream II will deliver supplies directly to Germany, transit countries such as Ukraine will lose billions of dollars in revenues. The project has exposed deep fissures in the transatlantic community and the European Union, and the intra-alliance bickering has helped prevent the formation of a united front against Russia.
Nord Stream II deserves the scrutiny that it has received, but Western analysts and policymakers should not exaggerate the pipeline’s threat to Europe’s energy security. The devil is in the details, and the reality is that the natural gas industry has changed dramatically in the past decade. While Russia provides more than a third of the EU’s natural gas supply, dependence means less than it used to.
Natural gas used to be a relationship commodity, but the increasing use and availability of liquified natural gas (LNG) has changed the game. LNG, which can be shipped by tanker rather than pipeline, causes the natural gas industry to behave much more like a market and will make Europe more resilient to interruptions in Russian deliveries, intentional or otherwise. Western Europe has constructed a number of LNG terminals, and in recent years Eastern European countries have followed suit, with Lithuania kicking things off with the Klaipėda terminal in 2014. LNG can be introduced into the pipeline system at any of these terminals and then transported to its destination. LNG is more expensive than natural gas delivered by pipeline, but it provides insurance against shortfalls in Russian imports.
With the caveat that COVID-19 has proven a major disruption to energy consumption and production, consumers across the globe have benefited from the recent energy abundance. The unconventional energy boom has brought new suppliers and supplies onto the world market, and sellers have competed for buyers instead of the other way around. Conditions in the global energy markets place downward pressure on prices and provide options for consumers.
Europe’s natural gas infrastructure is also in a far better position to cope with supply disruptions. Against strong Russian opposition, the European system can utilize “reverse flows,” meaning that the flow of Russian natural gas, which has traditionally gone from east to west, can be manipulated to cover shortfalls. Europe has built interconnectors between countries so that one country can turn to another in the event of trouble.
The fallout of the Biden administration’s announcement has been strong. Critics have accused Washington of selling out its Central and Eastern European allies and providing a gift to Russian president Vladimir Putin. The loss of transit fees for Kyiv is indeed concerning. Yet from the perspective of energy security, the transatlantic community should not embellish the Russian threat. There is less risk in buying Russian natural gas than there used to be.
Michael De Groot is an assistant professor at the University of Indiana in Bloomington. His work focuses on the international, diplomatic, and economic history of the Cold War, and the conflict’s enduring influence in world politics.
Image: Wikimedia Commons
