The future of the Nord Stream 2 gas pipeline will be in question if Moscow does not make serious concessions.
According to Paul Gregory, the first statements by members of the new coalition government of the Federal Republic of Germany, where the majority were Social Democrats, sounded partly sensational. Germany's new foreign minister, Annalena Berbock , a Green Party spokeswoman long known for her skepticism about Nord Stream 2, announced in a Sunday television interview that the new pipeline could not be operational as members of the government coalition believe it does not meet the requirements of European energy legislation. A few days ago, the new German chancellor Olaf Scholz in response to a question whether Nord Stream 2 could be used as an instrument of pressure on the Kremlin to prevent a possible Russian invasion of Ukraine, he said that such a move by Moscow would have consequences, which, according to Paul Gregory, means that the Kremlin will have to pay with Nord Stream 2 in the event of an attack on Ukraine.
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- The problem for Gazprom is that if it is forced to comply with these requirements, the competitiveness of Nord Stream 2 will plummet. Gazprom will not be able to act as a producer and supplier of gas. He will have to allocate a certain share of the capacity of his gas pipelines to transport competitors' products. All rates must be made public. From my point of view, these conditions are unacceptable for Gazprom. I assumed that Germany might allow, roughly speaking, a shell company to take over the transportation of gas in order to separate producer and supplier. The new German government, apparently, will not allow this. Among other things, the start-up of the gas pipeline must be approved by the European Commission, which initially opposed this project,
- The use of Nord Stream 2 as an instrument of pressure in the event of meeting European requirements will be impossible, and in fact it was conceived in many respects in order to exclude Ukraine as a transit country for Russian natural gas. The capacity of Nord Stream 2 is close to the capacity of gas pipelines passing through the territory of Ukraine. Russia, of course, needs the money it can get by putting into operation a new gas pipeline, but I think the ability to use gas as an instrument of pressure is still more important for it.
According to Paul Gregory, the current US sanctions and the possibility of new sanctions also continue to pose a serious problem for Nord Stream 2:
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- The Senate is very decisive about the sanctions against the gas pipeline. And now there is a struggle between the Senate and the administration, which, as you know, has decided not to subject the pipeline operator to sanctions. But the existing sanctions are very tangible for Gazprom, because any European company related to Nord Stream 2 is in constant danger, it could become the target of US sanctions. This threat is taken seriously by any business.
It is possible that in these new conditions, the future of Nord Stream 2 will be in question, says Paul Gregory:
- In my opinion, we can say that the fate of the gas pipeline is in question. So far, there is no answer to the question of whether it will be possible to start its operation in June 2022 or the process of obtaining final approval for its launch will drag on for several years. If I had been asked this question two weeks ago, I would have answered in the affirmative: yes, it will be launched in June. But the picture was radically changed by the comments of representatives of the new government coalition in Germany, although it has been in power for only a few days, so it is too early to draw final conclusions, says Paul Gregory.