‘If there is a conflict with NATO, Russians will have a huge amount of leverage over Germany,’ analyst tells Anadolu Agency
NEW YORK: A planned Nord Stream 2 pipeline project set to carry natural gas from Russia to Germany through the Baltic Sea is an attempt to divide NATO, an expert told Anadolu Agency.
Scheduled to become operational in 2020, the pipeline has been scrutinized by President Donald Trump who said last week, “Germany is the captive of Russia” because of the project.
“We are supposed to be protecting you from Russia, but why are you paying billions of dollars to Russia for energy?” Trump said on the first day of the NATO summit in Brussels.
“The Russians want to divide NATO,” Ed Hirs, an energy economist at the University of Houston told Anadolu Agency. “Trump is concerned about Germany turning towards a cheaper alternative [of gas] at the expense of the strategic alliance with NATO and the western bloc.
“It is a strategic and economic weapon,” according to Hirs, who said Russia “could cut the gas off to Germany and cripple the German economy and not have to fire one shot.”
Trump has been critical of NATO and he demands other alliance members pay their fair share in defense instead of letting the U.S. carry most of the financial burden.
Germany’s overdependence of natural gas from Russia is “a very bad thing for NATO,” Trump said.
“This is not just a Trump analysis. It is a strategic analysis that many people in the U.S. administration have undertaken,” Hirs said.
“This gives a huge amount of economic leverage to Russia over Germany,” he explained.
Russian energy giant Gazprom cut off natural gas supplies to Ukraine in June 2014, four months after Moscow annexed Crimea. Although Moscow faced western sanctions, Washington’s concerns have grown stronger over the close ties between Germany and Russia.
– ‘Too late to protect Germany’
German Chancellor Angela Merkel, who grew up in East Berlin, is fluent in Russian and knows Russian President Vladimir Putin for 15 years. There are more than 6,000 German companies operating in Russia.
“Merkel has a warm relationship with Putin. Putin will try to chisel the allies apart. We’re not going to be able to respond and protect Germany when Putin decides to cut their gas supplies off. It may very well be too late,” according to Hirs.
“Nobody really wants to go to war. But if Putin decides to expand … it’s an attack against the NATO allies. Will the Germans step up and respond especially if they know that the Russians would cut off the gas supply and their families are all freezing?” he added.
Cyril Widdershoven, a partner with the VEROCY consultancy firm in the Netherlands, told Anadolu Agency that a good relationship with Russia has always been a major focal point for Germany.
“Even during the Cold War, Germany was relying on gas supplies from the Soviet Union. At the same time, German-Russian business cooperation is extremely high. German business leaders are heavily involved in Russian activities or even lobbying efforts,” he said.
Trump’s criticism of the pipeline project also stems from his willingness to increase the U.S.’s LNG (Liquefied Natural Gas) supplies to Europe — an attempt to realize American energy dominance and to wean Europe’s energy dependency off Moscow.
However, cost is a major issue for Europe in importing American LNG.
“At present, Russian pipeline gas is the cheapest,” Widdershoven said.
“While access to German markets for LNG is still underdeveloped, even when counting on access via third-party countries, transportation cost from third party to Germany will be constraining overall export to Germany in the end,” he explained.
Since the 2008 shale revolution, U.S. gas production is booming, but there is only one operational LNG export facility in the U.S. — Cheniere Energy’s Sabine Pass terminal in the state of Louisiana.
– ‘Economic and strategic risk’
The Federal Energy Regulatory Commission (FERC) has approved nine LNG export projects, but only five are currently under construction while 13 export projects are pending a decision, according to data compiled by Anadolu Agency.
Russia makes long-term take-or-pay contracts when selling gas, but “a contract with Russians is only good as long as they’re making money on it and it fulfills their strategic needs,” Hirs said.
“Russians have a history of abrogating contracts,” he said. “They’ve done that with oil delivery, currency exchange, and debt. With these long-term contracts, Germany is agreeing to buy the gas at a set price,” he said.
“Germany needs to diversify its energy supplies, but it is not thinking strategically about this. Germans are taking a very big economic and strategic risk. If there is a conflict with NATO, Russians will have a huge amount of leverage over Germany,” he warned.
Widdershoven said security of energy supply is a major issue for Europe, and the European Union has been promoting diversification of supply, however, little has happened towards this end.
“At present, Russian gas is ruling on all sides and will even become more important in the coming years. Exports of Russian gas to Europe are up, instead of becoming under pressure. Other supply routes are still underdeveloped or are constrained by geopolitics or other issues. Central Asia, Caspian [region], Algeria or Egypt are considered but are not being fully addressed. Iran at present is out for years,” he explained.
“U.S. LNG can address only a part of all, as costs and availability are not yet attractive enough. At the same time, LNG needs landing points, which are not fully developed, while most of Europe’s upcoming gas needs are in countries without any option for LNG at present,” he concluded.
The U.S. exports of LNG totaled around 20 billion cubic meters (bcm) last year; with 10 percent imported by European countries, according to the Energy Information Administration.
The Nord Stream 2 is planned to carry 55 bcm from Russia to Germany.–AA