The country that will most likely win the race to conquer the European Union gas market is the one that keeps its nerve for longer, commented Hannes Vogel.
The fact that President Donald Trump has a strange weakness for his Russian counterpart Vladimir Putin cannot be ignored, at least not since the Helsinki summit. Even the conservative Wall Street Journal called the joint press conference at which the American president fell at the feet of his opponent a "personal and national embarrassment." Nothing was capable to making Trump contradict Putin with the whole world watching: not the annexation of the Crimean Peninsula, or Moscow’s bombings in Syria, or the Russian launched missile fired at Malaysia Airlines Flight MH17, or the alleged Russian attack using a nerve agent in Great Britain, or the alleged hacker attack during the 2016 U.S. presidential election.
Therefore, the fact that Trump has been in a lengthy conflict with Moscow over one particular case is even more remarkable. Germany’s approval of the construction of the Nord Stream 2 gas pipeline is terrible, Trump said last week. “A terrible mistake for Germany.” Because of its dependence on Russian gas, Berlin was “captive to Russia,” the president explained.
These might be the initial signs of the next round of punches between the U.S. president and German Chancellor Angela Merkel, writes commentator Hannes Vogel for the German economic channel n-tv.
In most policy areas – customs duties on cars, NATO, Syria, Iran – the two politicians have already crossed swords. Now, energy policy threatens to become the latest battleground. The bone of contention is the controversial pipeline Nord Stream 2, which is being constructed by the Russian conglomerate Gazprom. Gazprom plans to build 1,200 kilometers of pipeline (approximately 746 miles) at the bottom of the Baltic Sea, from Vyborg in Russia to Greifswald in Mecklenburg-Vorpommern, Germany.
The steel pipeline is expected to cost almost 10 billion euros and it would run, to a large extent, parallel to the Nord Stream 1 gas pipeline, which opened in 2011. If the construction goes according to plan, this will double the amount of gas that Russia delivers to Europe via the Baltic Sea and there would be global strategic implications. Then, Moscow may reduce its supplies through Ukraine. Germany will become the central point for exporting Russian gas to Europe. This is the reason why the Russian energy minister, representatives from Naftogaz* and mediators from the European Union gathered together in Berlin to negotiate the supply contract between Russia and Ukraine, which expires in 2019.
Merkel is very well aware of the political consequences. Back in April, she warned that Berlin would only support the construction of Nord Stream 2 if Ukraine remained a transit country for Russian gas. From Moscow's point of view, the pipeline could provide the biggest leverage for geostrategic pressure in Europe. The U.S. Department of State called Nord Stream 2 a tool for blackmailing European countries, especially Ukraine.
The Kremlin could eliminate Ukraine as a gas transportation hub for Europe, and with this the lucrative transit fees would vanish, all due to the new pipeline. "This would mean an annual loss of income of about $3 billion, minus 3 percent of Ukraine's gross domestic product," warned a representative of Naftogaz last week. This is a lot of money that will be missing from the Kiev government’s budget and from the fight against Russian separatists in eastern Ukraine.
And the company’s managers in charge of the pipeline have no doubt that this project is part of enhancing Putin’s prestige. Nord Stream 2 is managed by the former Stasi spy Matthias Warnig, who originally worked for Dresdner Bank after the fall of communism. Thanks to his close ties with Putin, he is now one of the most powerful men in the Russian economy.
Warnig is a chairman of the board of directors of the aluminum giant Rusal and a member of the supervisory council at VTB Bank, which has close connections to Russian intelligence services. He is also a member of the board of directors at Rosneft, the Russian state oil giant. Rosneft itself is closely linked to the Kremlin. The name of the conglomerate’s director, Igor Sechin, is constantly being picked up by the media because of his controversial management methods. His brusque actions in relation to business expansion and the takeover of competing companies are relentless. Some call Rosneft “the Kremlin's oil ministry." Sechin is a close confidant of Putin, and is considered to be the second most powerful man in Russia.
Political lobbying for Nord Stream is assigned to another one of Putin's friends: the former German Chancellor Gerhard Schroeder. He is not only the chairman for the Nord Stream project, but, come fall, he will be the newly elected chairman of Rosneft’s board, where Warnig has been a member since 2011. Together with Gazprom's director Alexei Miller, Schroeder spoke with Germany’s Federal Minister for Economic Affairs and Energy Brigitte Zypries in Berlin in order to strengthen the dialogue about the gas pipeline, the German daily newspaper Tagesspiegel revealed. No wonder; Germany holds all the keys for the pipeline project. It passes through international waters before finally reaching land in Mecklenburg. Neither the EU nor the current EU transit countries, such as Poland, can put pressure on Putin.
Only the German chancellor will be able to decide how much Russian gas is going to flow through to Europe from the Baltic Sea pipeline in the future. And this is why Trump targets Germany. But as Putin pursues purely strategic interests with the construction of the pipeline, Trump pursues his criticism of it.
Thanks to fracking technology, the U.S has turned into a global oil and gas exporter. Washington and Moscow are increasingly becoming competitors, not only with respect to geostrategic aspects, but also in terms of energy policy. They are fighting over who will rule in Europe – their most important market. Just like Putin, Trump wants to sell as much oil as possible supplied by tankers in the Atlantic Ocean. This is the reason why Trump is trying to stop the Nord Stream gas pipeline in every way.
In 2017, he signed a law for sanctions that was passed by the U.S Congress that allows him to halt access to the financial market to all companies that participate in the Russian pipelines.
So far, Trump has only threatened to apply this law. And Moscow hasn’t used the pipelines in Europe as political leverage, yet. Despite the fact that Russia stopped the gas supply for Ukraine in 2009 during the supply dispute, Moscow pumped sufficient quantifies of gas in the network to meet Europe’s needs even during the conflict. Even during the Cold War, the Russians continued to reliably deliver oil and gas to the West during every crisis because it was in their financial interest.
And although Germany will develop a greater dependence on Russian gas because of Nord Stream 2, it is doubtful whether Russia will really use this as a weapon. It is not only Europe that needs Russian gas – Russia also needs Europe as a market. If Moscow stops the pipelines, this will be the best way to push Germany and other EU countries into the hands of the American competition. The country that will most likely win the race for conquering the EU gas market is the one that keeps its nerves longer.
*Editor’s note: Naftogaz is the national oil and gas company of Ukraine.