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Will Russian gas destroy India’s largest trading partner?

WorldWill Russian gas destroy India’s largest trading partner?

Nord Stream 2 could be the last straw, leading to the collapse of the EU.

London: As you read this, a flotilla of Russian boats in the chilly waters off Bornholm, a Danish island in the Baltic Sea, is rushing to complete the remaining 150 km of the construction of the Nord Stream 2, a 1,230 km pipeline supplying Russian gas to Germany. The $11 billion project, led by Russia’s state energy company Gazprom, when completed will double the capacity of an existing undersea pipeline.
Already long delayed, this project has generated controversy since its inception in 2015. Not only is it pitting Germany, the EU’s biggest economy, against central and eastern European nations, who claim it would unnecessarily increase the bloc’s dependence on Russia, but it is also setting America against Germany.
In recent years, Germany has become heavily dependent on fossil fuels following the decommissioning of its nuclear power stations after the nuclear explosions in Fukushima Japan in 2011. Influenced by its powerful Green Party, Berlin also wants to phase out dirty coal-fired power stations across the country by 2038 and replace them with renewables and gas. The new pipeline will supply 55 billion cubic metres of natural gas to feed the new stations.
German businesses have invested heavily in Nord Stream AG, whose chairman is former German Chancellor, Gerhard Schroder. Schroder is a personal friend of Vladimir Putin, whom he famously called a “flawless democrat”, a judgement that surprised many of his contemporaries. For years, however, many EU countries have been concerned that Russia could use the pipeline to harm Europe’s energy security and are strongly opposed to the project.
They have good reasons to be suspicious. President Putin has “form” in using gas supply as a weapon of foreign policy. In June 2014, Moscow cut its gas supply to Ukraine, just as the conflict between the government in Kiev and pro-Russian rebels in the Donbas region escalated. A few months later in September, there was concern when gas supplies to Poland, Slovakia and Germany suddenly dropped, seen by many as a warning signal against extending EU sanctions on Russia because of its illegal seizure of Crimea. Memories last, and by “weaponising” its gas supplies, Moscow made a serious error, causing customers to become nervous about their future deliveries.
But gas exports are equally important to Russia. As one of the top producers of natural gas and oil, Russia’s economy is heavily reliant on exports of these two resources, which added up to a combined 55.2 trillion roubles ($845 billion) in 2017, or 60% of Russia’s GDP that year. Germany points to this “mutual dependence” on gas when it argues against claims of Russia’s “leverage”.
The Trump administration, urged on by a concerned Congress, signed laws in 2019 and 2020 that sanctioned participating companies, halting the pipeline’s construction for more than a year until its resumption last month. Former President Trump has long criticised Germany both for its lack of spending on NATO and its reliance on Russian gas. “We’re supposed to protect Germany from Russia, but Germany is paying Russia billions of dollars for energy coming from a pipeline”, he told a rally in Tulsa, Oklahoma in June last year. “Excuse me, but how does that work?”
All eyes were on the new Biden administration when it too called the Nord Stream project a “bad deal”. Joe Biden was not only referring to the potential manipulation by Moscow, but also because the pipeline “divides Europe by going against its own stated energy goals and weakens Ukraine”, a country which currently benefits from the transit of Russian gas across its territory. After four years of Donald Trump, the new administration is clearly trying to repair relations with Germany, and there’s a noticeable reluctance to raise German hackles by blocking businesses working on the pipeline from the US financial system, the technique used by Trump. President Biden appears keen on undoing the legacy of his predecessor and intends bringing his allies back on board to tackle international issues posed by China, Russia, Iran and others. Nevertheless, in his confirmation hearings last month, the new US Secretary of State, Antony Blinken, made it clear that Nord Stream 2 will continue to be a big issue in US-EU relations. “I know that President Biden would have us use every persuasive tool that we have to convince our friends and partners, including Germany, not to move forward with the project”, he said.
The deterioration in bilateral relations between Berlin and Washington is not new. Relations started to decline under the presidency of Ronald Reagan and only reached a low under Donald Trump. When she was opposition leader 18 years ago, Angela Merkel, who assumed the office of Chancellor of Germany in November 2005, was a strong advocate of transatlantic relations. But America under George W. Bush and Donald Trump changed all that. Over time Merkel has shifted towards advocacy of European strategic autonomy, especially after concluding from last year’s US elections that Trumpism was not defeated and one day may come back.
The completion of Nord Stream 2 is how Merkel defines strategic autonomy and she doesn’t appear to be concerned by what the rest of Europe thinks. This is causing unease among policy makers in Brussels. “Anyone who still believes that we should continue with Nord Stream 2 is blind to what kind of regime we are dealing with in Moscow”, said Kati Piri, a Dutch Member of the European Parliament during a debate on the pipeline in January. Following the poisoning and imprisonment of opposition figurehead Alexei Navalny, the European Parliament passed a resolution calling for an immediate halt on the Nord Stream 2 project, with 581 votes in favour and just 50 against. Notably, the resolution also contained high praise of Navalny and strong criticism of the government of President Putin. However, experts caution that the project is too big to fail and that neither sanctions nor parliamentary resolutions might be enough to outsmart moneyed interests. In any case, the resolution was non-binding and Berlin simply shrugged its shoulders, unapologetically insisting that the project is purely commercial.
But these are difficult and dangerous times for the European Union, already under severe criticism by angry voters for its botched handling of the coronavirus vaccine rollout. Currently most European countries are way behind Britain and the US in vaccinating its populations, caused mainly by over-centralisation of procurement by Brussels. The pandemic has magnified major fault lines in the EU which have existed for years. Having evolved from basically a free-trade pact among a few countries, the EU of 27 is seen by many as a giant, bumbling and dysfunctional overreaching bureaucracy, with Brussels simply becoming another layer on top of all the national layers. Nord Stream 2 has demonstrated that a powerful country like Germany can ride roughshod over a huge majority of the European Parliament and that principles are of no consequence. The sad fact is that the pipeline may not be necessary. “For the European Union as a whole, Nord Stream does not contribute to security of supply”, the Director General of the EU Commission’s energy department told lawmakers in the Parliament’s industry committee last month, dismissing Berlin’s insistence of the need for the project.So, Nord Stream 2 and Europe’s muddled thinking on strategic autonomy are likely to drive the EU and US further apart, as well as creating further serious divisions within the Union. When added to its many structural problems and unpopularity among vast swathes of its diverse electorate, Nord Stream 2 could be the last straw, leading to the collapse of the EU. Delhi should be concerned. As India’s largest trading partner, on par with the US, and the second-largest destination for its exports, more than 14% of the total in 2019, it’s important for the Indian economy that the EU remains alive and healthy.
Unless there is an unexpected change of mind by Berlin, those boats off Bornholm will soon complete the Nord Stream 2 project and Russian gas will begin to flow. This will be much to the delight of the occupant of the Kremlin, who will not only receive the huge financial rewards from the pipeline, but will also see his opponents in serious disarray. A win-win for Putin.

John Dobson is a former British diplomat, who also worked in UK Prime Minister John Major’s office between 1995 and 1998.

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