Russian natural gas
All you need to know about Nord Stream 2 gas pipeline
Nord Stream 2 is a gas pipeline designed to deliver Russian natural gas from Russia to Germany through the waters of the Baltic Sea.
The gas artery's construction ended in September 2021. The project is controlled by the operating company Nord Stream AG office in Switzerland's Zug.
Last year, Nord Stream 2's certification was delayed by Germany, with the process halted indefinitely in February 2022.
Just six months later, a major breakdown hit the gas artery, with underwater blasts detected on the pipeline. The European Union saw the incident as "sabotage," and Moscow called it an act of "international terrorism."
Read more: Despite Russian supply cuts German gas storage over 90% full
Designed to carry Russian "blue fuel" to Germany through the Baltic Sea, Nord Stream 2 was founded by Russia's Gazprom.
The project's cost stands at about $9.2 billion. European companies chipped in to pay half the sum. Among these companies are France's Engie, Austria's OMV, Holland-UK's Shell, and Germany's Uniper and Wintershall.
Initial plans stipulated that Gazprom would receive 51 percent of the company's shares, while the rest should have been granted to its above-mentioned European partners.
In 2017, however, Gazprom bought out all 100 percent shares of Nord Stream 2 AG, with the European companies starting to act as the project's investors.
In June 2021, Famil Sadygov, deputy chairman of Gazprom's board of directors, pointed out that "the project is fully provided with financing to complete its investment stage and move to the operational one."
Where is Nord Stream 2 Pipeline situated?
The 1,234km project passes through the territories of Russia, Germany, Denmark, Finland, and Sweden.
Nord Stream 2 bypasses transit countries, including Ukraine, Belarus, and Poland.
Why is US against Nord Stream 2?
The US, along with its allies in Eastern Europe, especially Poland and Ukraine, has repeatedly opposed the construction of Nord Stream 2.
Washington previously imposed two rounds of sanctions on the project, arguing that once Nord Stream 2 is operational, Europe will become even more dependent on Russia's energy resources, something the White House claims will help Moscow obtain political leverage.
Former US Ambassador to Germany Richard Grenell described Nord Stream 2 as "an unceremonious attempt" by Russian authorities to increase the strangulation of European allies and partners in terms of energy supply in 2019.
Last year, the Biden administration decided to waive sanctions against Nord Stream 2, citing its understanding of the fact that the sanctions would not work and referring to its unwillingness to alienate Berlin, one of Washington's key allies.
Moscow has repeatedly underscored that the project is purely economic and that the way the White House opposes it is an example of unfair competition.
Read more: Russia’s Gazprom keeps gas pipeline to Germany switched off
How expensive would gas be for Germany without Nord Stream 2?
On September 16, Neue Osnabrücker Zeitung newspaper сited the German Public Utilities Association as reporting that next year may see a 60 percent increase in gas prices in the country due to a reduction in supplies from Russia amid the suspension of the Nord Stream 2 project.
According to the newspaper, with electricity prices in Germany increasing by more than 10 percent, the so-called ultimate consumers now have to pay 30-60 percent more for gas than before the beginning of the ongoing Russian special military operation in Ukraine, which was launched on February 24 and followed by western countries slapping packages of "severe sanctions" on Moscow.
Klaus Ernst, head of the Bundestag's Committee for Economics and Energy, said it is worth considering launching Nord Stream 2 due to what he called the absence of other alternatives.
According to him, "In general, it does not matter through which pipeline the gas is delivered to Germany because the fuel remains Russian anyway. In this sense the issue of Nord Stream 2 is rather symbolic."
Difference between Nord Stream 1 and 2
Both pipelines are parts of the single Nord Stream gas transportation network.
Nord Stream 1 gas pipeline, which entered into service in 2011, starts its route in the northern Russian town of Vyborg, while Nord Stream 2, which has yet to start running, begins its path near Russia's northwestern Ust-Luga.
Most recently, Russian President Vladimir Putin announced that one Nord Stream 2 branch was in working condition, adding that "the decision to launch it is not being made and is unlikely to be made, but this is not our (Russia's) business."
2 years ago
Putin wants 'unfriendly countries' to pay rubles for gas
President Vladimir Putin announced Wednesday that Russia will demand “unfriendly'' countries pay for Russian natural gas exports only in rubles from now on.
Putin told a meeting with government officials that “a number of Western countries made illegitimate decisions on the so-called freezing of the Russian assets, effectively drawing a line over reliability of their currencies, undermining the trust for those currencies.”
“It makes no sense whatsoever," Putin added, “to supply our goods to the European Union, the United States and receive payment in dollars, euros and a number of other currencies.”
Read:Russia to expel more American diplomats
As a result, he said he was announcing “measures” to switch to payments for “our natural gas, supplied to so-called unfriendly countries” in Russian rubles.
The Russian president didn’t say when exactly the new policy will take effect. He instructed the country’s central bank to work out a procedure for natural gas buyers to acquire rubles in Russia.
Economists said the move appeared designed to try to support the ruble, which has collapsed against other currencies since Putin invaded Ukraine on Feb. 24 and Western countries responded with far-reaching sanctions against Moscow. But some analysts expressed doubt that it would work.
“Demanding payment in rubles is a curious and probably ultimately ineffective approach to attempting an end run around Western financial sanctions,’’ said Eswar Prasad, a professor of trade policy at Cornell University. “Rubles are certainly easier to come by now that the currency is collapsing. But exchanging other currencies for rubles will be quite difficult given the widespread financial sanctions imposed on Russia."
“The hope that demanding payment in rubles will increase demand for the currency and thereby prop up its value," Prasad added, "is also a false hope given all the downward pressures on the currency.’’
Neil Shearing, group chief economist at Capital Economics, said: “It’s not an obvious move to me, since the (Russian) economy needs a supply of foreign currency in order to pay for imports — and energy is one of the few sources left.”
German Economy Minister Robert Habeck accused Putin of breaking contracts with the move, German news agency dpa reported. Habeck said Wednesday in Berlin that the German government would discuss the matter with European partners.
Habeck said Putin’s announcement shows once again that Russia is not a stable partner, dpa reported.
Read:7,000 to 15,000 Russian troops dead in Ukraine: NATO
Despite severe Western sanctions, natural gas flows are still heading from Russia to Europe. The European Union is reliant on Russia for 40% of the natural gas it needs to generate electricity, heat homes and supply industry — a key reason why the EU has not applied its sanctions to Russia’s energy industry.
At the same time, across Europe, governments are slashing fuel taxes and doling out tens of billions to help consumers, truckers, farmers and others cope with spiking energy prices made worse by Russia’s war on Ukraine.
Vinicius Romano, a senior analyst at Rystad Energy, suggested that Moscow’s insistence on payments in rubles “may give buyers cause to reopen other aspects of their contracts — such as the duration — and simply speed up their exit from Russian gas altogether.”
2 years ago