Nord Stream 2 gas pipeline’s true purpose debated at Atlantic Council

A debate about the proposed Nord Stream 2 natural gas pipeline at the Atlantic Council on Mar. 12 quickly became heated as some participants argued that it would serve a broader Russian political purpose while others said it simply would increase available supplies for European customers. Speakers generally seemed to agree that the US should encourage an effective solution but keep its distance otherwise.

A debate about the proposed Nord Stream 2 natural gas pipeline at the Atlantic Council on Mar. 12 quickly became heated as some participants argued that it would serve a broader Russian political purpose while others said it simply would increase available supplies for European customers. Speakers generally seemed to agree that the US should encourage an effective solution but keep its distance otherwise.

They also suggested that a solution will need to consider what role Ukraine would play as a transit country since its relationship with Russian gas giant Gazprom has continued to deteriorate. “Nord Stream 2 would give Gazprom the technical option to ignore Ukraine. It transmitted 93 bcf through the pipe there—a volume too big for it to ignore,” said Vadym Glamazdin, special envoy on government relations at Naftagaz, Ukraine’s state gas company.

Sandra Oudkirk, deputy assistant secretary for energy diplomacy at the US Department of State’s Bureau of Energy Resources, said Nord Stream 2 matters to the US because it would cement a transportation system in place that could perpetuate dependence on Russian gas for some key US allies. “It would not increase the amount of gas coming into Europe, only replace volumes that now are being transported through Ukraine,” she said. “Buying into a massive, expensive undersea project like this only fosters dependence on Gazprom.”

Douglas Hengel, a senior fellow at the German Marshall Fund of the United States, noted, “I don’t think it’s unusual for us to talk about energy security and geopolitics. This particularly matters to Central and Eastern European countries. On projects like this, it’s hard to separate the commercial and geopolitical aspects. This is part of a Russian plan to weaken Europe’s Energy Union, which Germany depends on.”

Agnia Grigas, a senior fellow at the AC’s Eurasia Center, said, “Sanctions vis-a-vis Russian gas exports need to be reassessed. There are a lot of loopholes and a lack of clarity.” The US will need to consult its European allies before it decides what to do, she suggested. “But we know that when Russia exports its gas, it also exports its influence and corruption. I don’t think any country has done well acting as a transit point for Russian gas,” Grigas said.

But Brenda Shaffer, a visiting researcher at Georgetown University's Center for Eurasian, Russian & East European Studies, said the US will need to decide if it wants to limit gas coming into Europe. “Air pollution is rising in Germany and other countries which are trying to move away from coal to generate electricity,” she said. “Supply diversification is extremely important. But many countries which oppose Nord Stream 2 could do more at home, such as building more storage capacity.

‘More cold calculation’

Shaffer maintained, “We need more cold calculation in the US. I think the Trump administration has assembled a dream team to do this. We have to be careful about unintended consequences.”

Europe’s gas situation has improved since 2009, when Gazprom halted transmissions through Ukraine that winter, Oudkirk and Shaffer separately said. “Interconnections help mitigate problems, but don’t solve them,” said Oudkirk. “Still, Europe as a whole and Ukraine in particular are better equipped to withstand supply disruptions now.”

Grigas said Ukraine’s people would be hurt if gas is diverted from there. “Ukraine’s pipelines are old, but they’re extensive. If one fails, gas can be easily diverted to another,” she said. “We are seeing tremendous changes in Europe. Gas markets are becoming more local. But these changes will take time. Russia and Gazprom are trying to lock markets in to an expense infrastructure system right now.”

Oudkirk noted, “The European energy market is not fully finished yet. Bringing more gas through the Southern Corridor from a different source would be particularly helpful, especially in significantly greater volumes than are coming from Algeria.”

A second group of speakers focused on views from Europe. Friedbert Pfluger, who directs the European Center for Energy & Resource Security at King’s College in London, said Europe has come a long way in 10 years with more LNG import terminals and pipelines that can reverse flow. “It’s a buyer’s market now. Russia would make a big mistake withholding gas from Europe,” he said.

Alona Osmolovska, who leads corporate communications at Naftagaz, said Ukraine showed in recent weeks that it was ready to sacrifice some gas it already bought to use domestically for to assure European customers’ supplies would not be reduced when Gazprom arbitrarily cut volumes. “But Ukraine’s gas system and Nord Stream 2 can’t coexist,” she warned.

Contact Nick Snow at nicks@pennwell.com.

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