Intersecting Geo-economics and Geopolitics: Nord Stream 2 and Europe
21st Dec, 2021
Recently, the natural gas prices soared in Europe after the Nord stream-2 project faced a setback due to the sanctions by the US administration under ‘Protecting Europe's Energy Security Act’ of 2019.
- The project aims to transport natural gas from Russia to Germany through the sea route bypassing land route covering many countries including Ukraine.
- It has been opposed by East European countries as well as USA administration due to many reasons, primarily to undermine the influence of Russia in Europe.
- In this background, the recent sanctions by the USA government on the project cause new irritants in the USA-Russia relations.
Protecting Europe's Energy Security Act (PEESA)-
- PEESA, as amended, provides the United States with the authority to advance U.S. national security and foreign policy objectives, in particular to address Russian pipeline projects that create risks to U.S. national security, threaten Europe’s energy security, and consequently, endanger Europe’s political and economic welfare
What is Nord Stream 2 project?
- This is an extension of Nord Stream project that aims at transporting natural gas from Russia to Germany through a system of offshore gas pipelines running under the Baltic Sea.
- In Nord 2 project, additional pipelines are installed for transporting gas from Russia to Germany.
Importance of the project-
The project holds significant benefits to Germany and Russia due to economic and other reasons. These benefits are-
- For Germany
- Economic- It will be able to get natural gas at a cheaper cost due to elimination of transit fees that were to be provided to the transit countries.
- Energy security-
- It will lead to energy security in the light of reduced domestic production in Europe. For instance, recent sanction on the project has increased gas prices by 17% in Europe.
- The Nord 2 stream pipeline bypasses Ukraine, and so the soar Russia- Ukraine relations will not affect the supply of natural gas to Europe as it did in 2006 and 2009.
- For Russia-
- Friendly relations with the Germany and thus, Europe can reduce USA’s hegemony in the region fueling Russia’s geopolitical ambitions.
- Bypassing of transit countries like Ukraine can lead to greater Russian interference in the region. It will also reduce Russian dependency on the Ukraine to transfer energy to Europe.
- Economic- In the light of pandemic induced recession, Nord Stream project can lead to greater economic returns for the Russia.
Recent concerns about the project-
- Germany has highlighted that the operator is not organized in a legal form under German law.
- The main assets and human resources had not been transferred from the Swiss-based Nord Stream 2 parent company to its German subsidiary.
- USA feels that the project can lead to long term concerns on energy security for Europe.
Persisting issues about the Nord Stream pipeline-
The project has been criticized since inception by many countries due to the following reasons. The reasons are-
- Political reasons-
- It could be used as a geopolitical weapon against the transit countries like Ukraine.
- It can also increase Russian interference in Europe and so, can lead to challenges for USA in the long run.
- Environmental reasons-
- Concerns were raised about its effect on under water biodiversity in the Baltic sea
- Economic reasons-
- It could increase Europe’s energy dependence on Russia which could be used for political gains in the longer run.
- It is considered that it could result in loss of $3 billion per year to Ukraine due to elimination of transit fees.
It is necessary in the present context that fears among the European countries be addressed in a positive manner. In this direction, Russia can take following measures-
- Transferring the main assets and human resources from the Nord Stream 2 parent company to its German subsidiary.
- Discussions and dialogue in a wider manner to ensure that economic project will not be used for political reasons.
- An agreement with the transit countries by which Russia and Germany can provide some minimal transit fees to these countries.
Energy security is essential for any country and its affordable access should be everyone’s right. It is therefore necessary, that environmental, economic and human rights should be put above political reasons so that cooperation and collaboration can be promoted for greater human good.