Berlin Olaf Scholz has made his decision: the commissioning of the Nord Stream 2 Baltic Sea pipeline will be stopped in view of the escalation of the Ukraine crisis. The Chancellor condemned the decision by Russian President Vladimir Putin to recognize the self-proclaimed People’s Republics of Luhansk and Donetsk as independent states as a “serious breach of international law”.
“The situation today is fundamentally different,” said Scholz on Tuesday in Berlin at a press conference with Irish Prime Minister Micheál Martin. With his actions in eastern Ukraine, Putin is not only breaking the Minsk Agreement, but also the UN Charter, which provides for the preservation of the territorial integrity and sovereignty of states.
The Russian government is reacting calmly to the decision to put the Baltic Sea pipeline on hold. The government is not afraid and does not believe in tears, says Deputy Foreign Minister Andrei Rudenko, according to the TASS news agency.
What is actually behind the stop is an administrative process: he asked the Ministry of Economic Affairs to withdraw the existing report on the analysis of the security of supply at the Federal Network Agency, said Scholz. “It may sound technical, but it is the necessary administrative step so that the pipeline cannot be certified now.” Without this certification, Nord Stream 2 cannot go into operation, he emphasized.
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At the same time, he instructed the Ministry of Economics to reassess the security of supply. “It will certainly drag on,” said Scholz. The pipeline has been built but is not yet operational. The operating license from the Federal Network Agency is still missing – and will not come for the time being.
The Chancellor has thus left his previous line. In the past few days he has repeatedly stressed that Russia must pay a very high price if it violates Ukraine’s territorial integrity; but at the same time open to dialogue. This message was also understood, Scholz recently emphasized. This position was no longer tenable.
On Tuesday morning, the Federal Ministry of Economics informed the responsible network agency that it would withdraw the security of supply report for Nord Stream 2. “I believe that developments in geopolitics and on the gas markets are forcing us to reassess,” said Minister Robert Habeck (Greens). As long as the new review is not completed or positive, the pipeline cannot be approved.
The withdrawn report was still penned by the old federal government. The report was completed the day before it was dismissed and the ministers were only in office on an executive basis. He attested to Nord Stream 2 not jeopardizing the supply in Germany. Nord Stream is therefore not directly sanctioned.
Economics Minister Habeck also said: “With the recognition of the so-called People’s Republics of Donetsk and Luhansk, Putin’s Russia has committed a serious breach of international law.” There will have to be economic sanctions in response.
For the current winter, the gas supply is still secure, explained Habeck. However, the decision, but above all the escalation of the military conflict in Ukraine, will ensure higher prices in the short term. “War drives up prices,” stressed Habeck. In the long term he hopes for falling prices. For this, however, the political security of supply must be strengthened.
Putin recognized the People’s Republics on Monday and then immediately ordered troops to be sent to the embattled east of Ukraine.
The resistance to the pipeline was already enormous, in Europe, but also in the USA. Ex-Chancellor Angela Merkel and US President Joe Biden agreed on a joint declaration last summer, which includes sanctions against Nord Stream 2.
These actors are behind the Nord Stream pipelines
The term “Nord Stream” includes the two Baltic Sea gas pipelines Nord Stream 1 and Nord Stream 2. Both run from Russia to Germany and each consist of two strands. They are each supposed to transport around 55 billion cubic meters of natural gas per year from Russia to Germany.
While Nord Stream 1 has been transporting natural gas since November 2011, Nord Stream 2 has been completed but is not yet operational. It was and is controversial whether the second Baltic Sea pipeline is economically necessary, whether Germany is making itself too dependent on Russian gas supplies and how much the Ukraine, through which large quantities of gas have been routed, is suffering economically as a result.
The two Baltic Sea pipelines are operated by two different public companies: Nord Stream AG and Nord Stream 2 AG.
Unlike Nord Stream AG, Nord Stream 2 AG is a 100 percent subsidiary of the Russian energy group Gazprom. It is also based in Zug in Switzerland, the buildings of the two AGs are only a few hundred meters apart.
However, Gazprom is only paying half of the EUR 9.5 billion budgeted for the construction of Nord Stream 2. Five large financial investors have taken over the remaining 50 percent in equal parts: the French energy group Engie, the Austrian oil company OMV, the oil multinational Shell and the German energy companies Uniper and Wintershall Dea.
“Should Russia attempt to use energy as a weapon or engage in further aggressive actions against Ukraine, Germany will act at the national level and urge effective measures, including sanctions, in the European Union to increase Russian capacity for exports to Europe in the energy sector, too in relation to gas,” it says. “This pledge is aimed at ensuring that Russia does not use any pipeline, including Nord Stream 2, to achieve aggressive political goals.”
The US government welcomed the federal government’s decision to halt the Nord Stream 2 Baltic Sea pipeline for the time being. “Following Russia’s recognition of the so-called republics of Donesk and Luhansk and the deployment of troops to both regions, the time has come to resort to the list of consequences previously agreed upon by the Western allies,” the US Ambassador to NATO said , Julianne Smith, the Handelsblatt. Nord Stream 2 was on that list. “Germany did the right thing.”
Even in the traffic light, the voices for an off increased
In addition to the operating license from the Federal Network Agency, the EU Commission would also have to evaluate Nord Stream 2 – and the Brussels authorities make no secret of the fact that they are rejecting the project.
The traffic light coalition, on the other hand, recently had no clear position on Nord Stream 2. The pipeline has prominent supporters in the SPD, such as Manuela Schwesig, Prime Minister of Mecklenburg-Western Pomerania.
This is how the Handelsblatt reports on the developments in the Ukraine crisis:
The Greens and large parts of the FDP, on the other hand, consider the German-Russian project to be a serious mistake. On Tuesday, Federal Minister of Agriculture Cem Özdemir was the first member of the cabinet to speak out emphatically in favor of stopping the natural gas pipeline.
“We have to push this through together in the federal government,” said the Green politician on Deutschlandfunk. “I hope that our coalition partners don’t see it any differently.” Now at the latest is the time to “put this project on hold”.
German economic relations with Russia and Ukraine
Russia: German-Russian trade in goods totaled almost 60 billion euros in 2021 – an increase of around a third, which reflects the recent significant rise in energy prices. The total corresponds to a good two percent of the total German exchange of goods with other countries. This puts Russia in 13th place among Germany’s most important trading partners. Goods worth around 33 billion euros were delivered from Russia, mainly raw materials such as natural gas and crude oil – the country is Germany’s largest supplier of energy. Goods worth almost 27 billion euros were exported to Russia, mainly machines, vehicles and electrical engineering.
Ukraine: Trade relations are developing positively again after the pandemic-related slump in 2020. In 2021, German exports there increased by 17.2 percent to 5.4 billion euros. German imports even grew by 22.9 percent to 3.1 billion euros. The trade volume was thus 8.5 billion euros, almost a fifth more than in 2020. Ukraine is currently ranked 41st among the most important German trading partners.
Given the new situation, it is becoming increasingly difficult for supporters of the pipeline to justify going live. The federal government had no choice but to stop the project – otherwise Berlin would have lost the last spark of trust among its Eastern European partners and risked a serious rift with the USA.
A project against all political flair.
Ukrainian Foreign Minister Dmytro Kuleba praises the decision to freeze the gas pipeline. “This is morally, politically and practically the right step under the current circumstances,” Kuleba wrote on Twitter. “True leadership means making tough decisions in difficult times. Germany’s move proves just that.”
The halt to the certification process for Nord Stream 2 also affects several European companies that are involved in financing the project alongside the Russian energy group Gazprom. Engie, OMV, Shell, Uniper and Wintershall Dea have each invested around ten percent or 950 million euros in the pipeline. If it doesn’t go live, that money, and the associated returns for companies, may be lost.
When asked by the Handelsblatt, however, neither Shell nor Uniper initially wanted to comment on the certification stop. No one could be reached at OMV for comment on Tuesday afternoon either.
The Kassel-based gas company Wintershall also did not comment specifically on the decision of the federal government. A spokesman for the company only said that it was wrong to focus solely on natural gas supplies and pipelines when asked about the economic consequences. A further warlike escalation “would set back our entire continent and with it the economy in Russia and Europe by years, in addition to terrible human suffering,” said Wintershall.
Mecklenburg-Western Pomerania supports the course of sanctions against Russia and has asked the “Mecklenburg-Western Pomerania Climate Foundation”, which is financed by the Nord Stream gas pipeline project, to put its work on hold for the time being. The state government will meet again on Tuesday evening to discuss further developments, said Vice Prime Minister Simone Oldenburg (left) on Tuesday in Schwerin after a cabinet meeting.
The foundation was set up in early 2021 with the aim of supporting the completion of the Nord Stream 2 gas pipeline, among other things. For this purpose, an economic business operation was founded to support companies that wanted to help build the pipeline despite the threat of sanctions from the USA that already existed at the time. The state of Mecklenburg-Western Pomerania provided the foundation with 200,000 euros, Nord Stream announced 20 million euros.
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