Nord Stream 2 and the power struggle

What is Nord Stream 2?

Nord Stream 2 is the second natural gas pipeline running under the Baltic Sea from western Russia to northeastern Germany.

Along with its earlier cousin Nord Stream 1, which opened in 2011, the new pipeline has a transport capacity of 55 billion cubic meters of natural gas per year. 

Nord Stream 2 cost €9.5 billion ($10.6 billion) to build and, at 1,230 kilometers long (764 miles), is the longest subsea pipeline in the world. First conceived more than a decade ago, construction began in May 2018 and was completed in September.

However, Nord Stream 2 has yet to begin pumping gas as its operating license has been delayed.

Why is Nord Stream 2 needed?

Germany is almost totally reliant on natural gas imports, with Russia accounting for more than half of supplies in 2020, according to IHS Markit.

Europe's No.1 economy needs to wean itself off coal and nuclear as part of its energy transition, and wants to use natural gas as a bridge until it can build or import enough renewable energy.

The need for gas has become more acute with the closing of three of Germany's six last remaining nuclear power stations last month. The final three will shut down in December.

While Nord Stream 2 will help Germany boost its supply, most of the natural gas will be piped to Austria, Italy and other Central and Eastern European nations.

Some environmental groups have insisted all along that the pipeline is unnecessary.

Who is involved in Nord Stream 2?

The pipeline belongs to the Russian state-owned company Gazprom and was built with the backing of five European energy firms.

They are: Austria's OMV, Britain's Shell, France's Engie, Germany's Uniper and the Wintershall unit of BASF.

The five companies put up around half of the initial investment.

Why is Nord Stream 2 so controversial?

The United States and several of Germany's European partners have been against Nord Stream 2 from the start and lobbied the government of former Chancellor Angela Merkel to back out of the deal.

The allies have warned that Nord Stream 2 would make Europe too reliant on Russian gas, which they say Russian President Vladimir Putin could use as leverage in disputes with the West.

Much of Europe's gas currently transits through Ukraine, which receives transit fees from Russia.

Poland disapproves of Nord Stream 2 as it, too, has sought to boost its role as a transit country for Russian gas.

Berlin has long insisted that the pipeline is purely an economic issue.

Why was Nord Stream 2 nearly shelved?

In 2018, as it was being built, then US President Donald Trump imposed sanctions on anyone involved in the construction of Nord Stream 2.

Some 18 European companies pulled out, including Germany's Wintershall, for fear of being hit by financial penalties.

Gazprom said it would continue laying the pipeline itself, and the project was completed anyway.

Last May, the Biden administration waived all sanctions against Nord Stream 2 so as not to strain relations with Germany.

Why is Nord Stream 2 again under threat?

The pipeline has now taken center stage during an escalating crisis between Russia and the West over Ukraine.

The US and NATO say Russia has amassed more than 100,000 troops at its border with Ukraine, ready to invade. Moscow has denied this.

The West has threatened to impose fresh sanctions on Moscow, this time targeting Russian banks.

One theoretical possibility is to exclude them from the SWIFT global payment system, which is responsible for 35 million daily financial transactions worth some $5 trillion (€4.4 trillion).

Another proposal is to further delay formal approval for Nord Stream 2 to begin operations as leverage to force Russia back from the brink of war.

The post-Merkel government is no longer ruling out shelving the pipeline project. But Europe is currently facing a winter energy crunch. Prices of natural gas have skyrocketed in recent months, and stockpiles in EU countries are at a five-year low.

US President Joe Biden on February 7 vowed to put a stop to Nord Stream 2 if Russia invades Ukraine, warning: "`We will bring an end to it."

Meanwhile, Germany's energy regulator recently said Nord Stream 2 is unlikely to win approval before the summer.

Edited by: Hardy Graupner

This story was originally published on January 31, 2022, and was updated on February 8, 2022, to reflect recent developments.