🕑 5 min
By Francesco Lasorella
1. What happened?
On the morning of Monday 27th of September, the Swedish and Danish respective navies communicated the appearance of four total gas leaks in their national waters. On the same day, the Danish PM Mette Frederiksen publicly stated that the gas leaks of the two gas pipelines, Nord Stream 1 and 2 (each project consisting of two pipelines), were caused by a “deliberate act” and could not have been a result of accidents. The acknowledgment of public opinion has irreversibly determined the reactions of the markets and a tremble of the already damaged relationships between the West and Russia. Accusations of all kinds, and from all the interested sides were made. Therefore, this article is going to try to outline the various interests behind the pipelines, and their tampering, hoping to provide the reader with some useful tools to draw his/her own conclusion.
2. History of the pipelines: a tie between Europe and Russia
On November 8th, 2011 in the German city of Lubmin the then-German Chancellor Angela Merkel together with the then-Russian President Dmitrij Medvedev, the Netherlands Prime Minister Mark Rutte, and the ex-French Prime Minister François Fillon inaugurated the completion of the gas pipeline Nord Stream 1. The project started with the creation of the ad hoc company Nord Stream AG, with a legal base in Switzerland, and its ownership is divided among five investors, the state-owned Russian colossus Gazprom (51%), two German listed energy companies Ruhrgas (15,5%) and Wintershall (15,5%), the state-owned Dutch energy company Gasunie (9%) and the French listed company Engie (9%). The price of the natural gas futures at the Amsterdam stock market was barely affected by the realization of the project, instead, it helped to stabilize the price - calculated in Megawatt per hour - around 25€ for almost 10 years.
In June 2015, after many suspensions due to the pending sanctions on Russia, enforced by the West after the annexation of Crimea in 2014, the deal for the ideation of the project Nord Stream 2 was proposed by Nord Stream AG and signed by Gazprom, Royal Dutch Shell, E.ON, OMV, and Engie. The approval from the German government was only granted in January 2018. Despite many diplomatic obstacles, that will be mentioned later, the Russian pipelaying ship “Akademik Cherskiy” continued operating and the project was officially finalized in September 2021. The certification proceedings were suspended by Germany’s energy regulator on the 16th of November, causing a 17% rise in the prices in Amsterdam. The authorization still hasn’t been conceded, therefore this second pipeline has never been operative.
3. Putin and his strategic control of Gazprom
After his career inside KGB, the Soviet Union secret services, Vladimir Putin graduated in 1996 with a master's in Economics at the University of Saint Petersburg. His thesis title is: Mineral and raw materials resources and the development strategy for the Russian economy. Supported by a detailed analysis of Russia’s commodities, Putin points out how these intrinsic assets of Russian geographic nature could constitute the fastest ticket to becoming an economic and geopolitical superpower. Furthermore, the thesis indicates why the management of the extraction infrastructure should extensively be overseen by the state - following the market rules - to become a competitor of Western companies. Many other related arguments are also discussed, however, it is clear from the text, that this enormous amount of resources can become a powerful strategic tool to influence the world's political equilibria and assure Russia of a prominent role.
The current responses of Putin’s Russia to the West’s sanctions are perfectly in line with the concept mentioned in the thesis. This strategy can also be traced back to last year October - before the war in Ukraine - when, according to the European Union Agency for the Cooperation of Energy Regulators (ACER) the flow of Russian gas to Europe decreased by 20% compared to the same period in 2020. Gazprom itself, in its January 2022 report, reveals that the export of gas compared to last year diminished by 41,3%. After all, on May 26, 2021, the vice-president of the European Commission and High Representative of the Union for Foreign Affairs and Security Policy, Joseph Borrell, declared in front of the European Parliament Committee on Foreign Affairs (AFET) that “Russia constitutes the principal menace to European security” and continued arguing that Europe’s main focus should be creating a strong transatlantic alliance and reducing Europe’s dependency on Russian gas in concordance with the implementation of the Green Deal. As a matter of fact, Europe is also consistently following its declared strategy by increasing as it has never done before the GNL (liquefied natural gas) imports from the USA.
4. The pressures coming from the USA
The US has always taken an explicit position against the dependence of the “Old continent” on Russian energy resources. One of the first and most clear event that testifies America’s strong position was when three US senators, in August 2020, sent a letter to the Mayor of Sassnitz (a little town on the Jasmund peninsula, Germany), Frank Kracht, threatening him and his local administration of economic and political sanctions if he continued to allow ships to be equipped and fuelled for the Nord Stream 2 project.
On August 10th the year after, US Secretary of State Antony Blinken appointed Amos Hochstein as a senior adviser on energy security with a focus on measures to “reduce the risks” posed by the German-Russian Nord Stream 2 pipeline and support energy security in Eastern Europe. Blinken referred to this role as an important maneuver to “push back against the Kremlin’s use of energy as a geopolitical weapon”. Even President Biden, in an interview at the White House, said: "If Russia invades - that means tanks or troops crossing the border of Ukraine again -, there will no longer be a Nord Stream 2"; and when a puzzled journalist asked how could it be possible, since the project was under German control, he reiterated: “I promise you: we will be able to do it”.
The site FlightRadar24, reports that on the 27th September, day of the attack, a US Navy reconnaissance aircraft flew close to the site of the damaged pipeline for hours after the first damage emerged. A US Navy spokesperson replied to a Reuters journalist that confronted him with these data saying: “The U.S. Navy P-8A Poseidon aircraft shown in the tracking data conducted a routine Baltic Sea maritime reconnaissance flight, unrelated to the leaks from the Nord Stream pipelines”. It is also important to notice that some flight path data went missing between 3:39 GMT and 6:20 GMT. After all, on the same day of the attack, the German newspaper Der Spiegel revealed that the Berlin government was warned by the US Central Intelligence Agency (CIA) that there would have been attacks on the key pipelines.
5. Conclusion: Where is Europe going to find the needed energy?
Surprisingly, on the morning of October 6th 2022, Russia’s Energy Minister Alexander Novak announced that one pipeline of the Nord Stream 2, according to preliminary estimates, is in normal technical conditions. The minister says that if there are regulatory decisions that permit it, Russia is ready to start deliveries quickly. Alternative sellers like America, the Netherlands, Norway, Bahrain and many North African countries overall cannot substitute Europe’s need for Russian gas in the short run.
The European Commission has consistently opposed Russian gas, and now with the very delicate situation of the war this tendency has even increased; however, with winter coming and the prices rising due to high demand (and low offer), will they hold their positions?
Sources: Danish, European, German, American and Russian government’s dossier and official statements. Reuters, Der Spiegel, Nord Stream AG, Yahoo Finance, The Atlantic and FlightRadar24.
Written by Francesco Lasorella
October 2022
Comments