The Russian-sponsored natural gas pipeline Nord Stream 2 is in the news as U.S. Secretary of State Rex Tillerson recently claimed it will threaten European energy security. The pipeline, which will run from Russia to Germany through the North Sea, and will be the world’s longest subsea pipeline, will double the annual capacity of the exiting Nord Stream pipeline to 110 billion cubic meters of natural gas.
The pipeline’s sole shareholder is Russian natural gas champion, Gazprom, with financial investors from France (Energie), Austria (OMV), Germany (Winter shall, Uniped), and the United Kingdom and the Netherlands (Royal Dutch Shell).
The pipeline is supported by Germany, and opposed by the U.S., the European Commission, Ukraine, Poland, and the Baltic states. German leader Angela Merkel says it’s a strictly economic effort, but the pipeline’s opponents see it as a Russian project to increase European reliance on Russian gas. (Europe currently imports almost 40 percent of its natural gas from Russia.)
{mosads}The U.S. opposes construction of Nord Stream 2 and in 2017 “introduced sanctions that call for penalties against European companies that participate in the Nord Stream 2 and other Russian energy projects in Europe.” That sanctions legislation was passed overwhelmingly by Congress with a veto-proof margin and will kill the project if President Donald Trump implements sanctions against the European participants.
In opposing Nord Stream 2, what’s in it for the U.S.? Nothing.
The U.S. should pick its battles. The pipeline is important to Germany, America’s most important partner on the Continent, Russia’s largest trading partner in Europe, and Europe’s key political interlocutor with Russia. And the U.S. fought and lost this battle in 1982 when President Ronald Reagan opposed Soviet natural gas pipelines to Europe but backed down when Europe stood fast against U.S. sanctions. Then, as now, Europeans are sensitive to the perception that they are America’s junior partner.
In fact, trying to kill the project will hand Russia’s spinmeisters the opportunity to paint the U.S. as “stuck in the Cold War” and give Germany and the other pipeline supporters a unifying project with the potential political upside of making the Trump administration retreat.
If Nord Stream 2 is completed, Ukraine claims it will lose $2 billion in transit fees, a large piece of the national budget, but Ukraine’s epic corruption likely ensures most of that money never makes it to roads, schools, hospitals, or improvements to the pipeline network. Germany is a more reliable and stable transit state for European gas imports.
Russia may never cease all shipments via Ukraine but Nord Stream 1 and 2, and Turk Stream, which runs from Russia, under the Black Sea, to landfall in Turkey will give it, and Europe, redundancy in the event of disruptions. Why the concern for redundancy? The real potential for ongoing instability in Ukraine; TurkStream will bolster Russia’s growing relationship with Turkey; and the Russians probably haven’t forgotten the CIA sabotage of a Siberian natural gas pipeline in 1982.
Russia’s pipeline power has its limits: Gazprom recently lost an arbitration court ruling in Ukraine’s favor and must pay Kiev $2.56 billion in natural gas transit fees. Russia responded by returning a prepayment from Ukraine, saying it would not restart shipments until the contract was amended, but the point is Russia won’t have a free hand in Ukraine; the U.S. has signaled this by authorizing the sale of anti-tank missiles to Kiev.
Europe’s energy needs are increasing and, with limited progress for fracking due to widespread environmental opposition, dwindling natural gas storage, and the planned phase out of nuclear power in Germany by 2022, importing more natural gas is a reasonable option. And Europe’s very cold winter sharply increased demand for Russian natural gas, leading Gazprom boss, Alexi Miller, to crow “Only Gazprom is capable of increasing gas supplies to European customers to maximum levels at a breakneck speed.”
The U.S. has legitimate beefs with Russia over human rights, freedom of the press, its actions in eastern Ukraine and in Syria, and Moscow’s participation in North Korea’s fuel smuggling scheme. Why dilute that focus by opposing a “close to home” project so important to key players in Europe?
Sanctioning our allies for trying to diversify their energy supplies by cooperating with Russia will confirm concerns that the U.S. is using sanctions to clear the way for exports of more expensive U.S. liquified natural gas to the Continent. Why should Europe pay a premium for energy to satisfy a U.S. policy preference?
America’s national security managers have more pressing challenges to tackle, like Russia’s fantastical claims of invincible nuclear weapons and North Koreas galloping missile development program, and should avoid divisive economic issues, especially in the wake of President Trump’s recent call for tariffs on imported steel and aluminum.
The U.S., Europe, and Russia may not be headed to a new Cold War, but relations will be chilly for the medium term. America should not succumb to the bright, shiny object called “sanctions” and instead do what it can enable stable long-term energy supplies for our European allies.
James D. Durso (@James_Durso) is the managing director at consultancy firm Corsair LLC. He was a professional staff member at the 2005 Defense Base Closure and Realignment Commission and the Commission on Wartime Contracting in Iraq and Afghanistan, and served as a U.S. Navy officer for 20 years specializing in logistics and security assistance. His overseas military postings were in Kuwait and Saudi Arabia, and he served in Iraq as a civilian transport advisor with the Coalition Provisional Authority. He served afloat as supply officer of the submarine USS SKATE (SSN 578).