Thursday 24 October 2019

More trouble in the pipeline over Putin's gas link to Europe

Russian President Vladimir Putin. Photo: AP
Russian President Vladimir Putin. Photo: AP

Elena Mazneva and Anna Shiryaevskaya

A planned natural-gas pipeline into Europe from Russia is shaking up geopolitics.

Nord Stream 2 worries leaders in Eastern Europe, has stirred the ire of US President Donald Trump and has put German Chancellor Angela Merkel on the hot seat.

Nord Stream 2 is a planned 1,230-km undersea pipeline that will carry natural gas from Russia to the EU network at Germany's Baltic coast. It will double the capacity of an existing undersea route that opened in 2011.

Russia's Gazprom owns the project, with Shell and four other investors, including Germany's Uniper and Wintershall, providing half of the €9.5bn in cost.

How close is it to being built?

Dredging work has already started, and the company plans to begin putting sections of pipe on the seabed in the next few weeks. It's due to be completed in late 2019, a target that looks "optimistic", according to Bloomberg analysts.

What's the point?

Before Nord Stream, Russia was sending about two-thirds of its natural gas exports to Europe through pipelines in Ukraine, a nation with which it has had tense relations since the Soviet Union collapsed. The Nord Stream projects are just one part of Gazprom's decades-long efforts to diversify its export options to Europe.

What's the worry?

Countries that sit between Russia and Germany collect transit fees on the natural gas that flows through their territories. They're worried that they will lose revenue and that Nord Stream 2 gives Russia the ability to bypass them completely in times of political friction.

Why is the US involved?

A group of US senators said in March that Nord Stream 2 would make American allies "more susceptible to Moscow's coercion and malign influence". In July, US President Donald Trump said Germany had made itself "captive to Russia" by "getting so much of its energy" from there. After a subsequent meeting with Russian President Vladimir Putin, Mr Trump vowed to compete for Europe's gas market. Nine days later, after striking a deal with European Commission President Jean-Claude Juncker over threatened tariffs, Mr Trump said the EU would become a "massive buyer" of US LNG.

Could the US really compete for the EU market?

That would be a stretch. Gas from the US must be chilled into a liquid and shipped in tankers at a great cost. Russia's supplies mostly arrive in Europe through a network of pipelines that have been in place for decades at a lower price. US gas is more likely to end up in Latin America, or in Asia, where prices are higher (though China's planned 25pc tariff on US LNG may close that avenue).

Does Germany rely on Russia's energy too much?

Russia supplied roughly 46pc of Germany's gas and 59pc of its oil in 2017, according to Bloomberg calculations. Mr Trump may be exaggerating when he says Germany could rely on Russia for up to 70pc of its energy once Nord Stream 2 is operational.

But he's right that Germany spends billions on Russia's energy - almost €18.7bn last year, according to Russian customs.

How do Russia and Germany respond to criticism?

Vladimir Putin has said Trump's complaints are motivated by his wish to promote "the interests of his business" to sell American LNG to Europe. Merkel has defended the "economic aspects" of Nord Stream 2 and says she's determined to make sure Ukraine isn't "fully cut off from transit traffic." (Bloomberg)

Irish Independent

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