Russian pipeline faces big hurdles amid Ukraine tensions

FRANKFURT, Germany – The pipeline is built and being filled with natural gas. But Russia’s Nord Stream 2 faces a rocky road before any gas flows to Germany, with its new leaders adopting a more skeptical tone toward the project and tensions ratcheting up over Russia’s troop buildup at the Ukrainian border.

The pipeline opposed by Ukraine, Poland and the U.S. awaits approval from Germany and the European Union to bypass other countries and start bringing natural gas directly to Europe. The continent is struggling with a shortage that has sent prices surging, fueling inflation and raising fears about what would come next if gas supplies become critically low.

The U.S. has stressed targeting Nord Stream 2 as a way to counter any new Russian military move against Ukraine, and the project already faces legal and bureaucratic hurdles. As European and U.S. leaders confer on how to deal with Russia’s pressure on Ukraine, persistent political objections – particularly from EU members like Poland – add another challenge to one of Russian President Vladimir Putin’s key projects.

Former German Chancellor Angela Merkel backed the pipeline, and the country’s new leader, Olaf Scholz, did so as her finance minister. But his new government took a more distanced tone after the Greens party joined the governing coalition. The Greens’ campaign position was that the fossil fuel pipeline doesn’t help fight global warming and undermines strategic EU interests.

New German Vice Chancellor Robert Habeck and Foreign Minister Annalena Baerbock have said the project doesn’t meet EU anti-monopoly regulations.

“Nord Stream 2 was a geopolitical mistake,” Habeck recently told the newspaper Frankfurter Allgemeine Sonntagszeitung. “The question is open if it will be able to start operating,” adding that further “aggression” meant “nothing is off the table.”

Officials have not said what sanctions or other tools might be used on top of existing U.S. sanctions against ships connected to the project.

As chancellor, Scholz has been cautious in his comments, and it’s not clear if he’s willing to go as far as U.S. Secretary of State Antony Blinken, who has said it’s “very unlikely” that gas will flow if Russia “renewed its aggression” toward Ukraine.

Pressed on whether an invasion would halt the pipeline, deputy German government spokesman Wolfgang Buechner said Nord Stream 2 is “an undertaking of a private business that is largely completed” and that regulatory approval “has no political dimension.” He stressed that military aggression would have “high costs and sanctions,” without saying what those might be.

Scholz “never makes things completely clear,” said Stefan Meister, an expert on Russian energy policy at the German Council on Foreign Relations. “So I am not sure under which conditions he would really agree to stop the pipeline.”

Still, Meister said, there was “a new tone, a new rhetoric from the new German government.”

The pipeline would double the volume of gas pumped by Russian-controlled gas giant Gazprom directly to Germany, adding to a similar pipeline under the Baltic Sea and circumventing existing links through Poland and Ukraine. Gazprom argues it would allow more reliable long-term supply and help save billions in transit fees paid to Poland and Ukraine. Gazprom says the pipeline is part of its role as a long-term supplier of affordable energy to Europe, which is heavily dependent on natural gas imports.

Pipeline critics say it increases Russia’s leverage over Europe, pits member states against each other and deprives Ukraine of key financial support. Europe also went into winter with scant gas reserves that have sent prices soaring to eight times what they were at the start of the year, with Putin using the crunch to underline his push for final approval of the project.

Gazprom didn’t sell gas above its long-term contracts this summer, further increasing unease about Russian motives. Analysts say existing pipelines have enough capacity for Gazprom to have sent more, but it filled domestic reserves first.

For now, the approval process for the pipeline is on hold. German regulators say they can only approve a company formed there, so the Swiss-based Nord Stream 2, owned by a Gazprom subsidiary, is creating a German arm. A decision won’t come in the first half of 2022. The European Union’s executive commission then must review the project.

Analysts say those decisions are legal, bureaucratic ones not subject to politics.

Critics say Nord Stream 2 doesn’t meet an EU requirement to separate the gas supplier from the pipeline operator to prevent a monopoly that could hurt competition and mean higher prices for consumers.

Nord Stream said it “undertakes all necessary efforts to ensure compliance with applicable rules and regulations” and has permits by the four EU countries it passes through.

Even if the pipeline clears regulators, it’s not necessarily in the clear because of Poland’s opposition. EU members can sue in the European Court of Justice if they disagree with regulators, said Alan Riley, senior fellow at the Atlantic Council and a lawyer specializing in European antitrust and energy issues. EU anti-monopoly rules could bring years of litigation, even a ruling temporarily halting pipeline operations until the case is decided.

“This could go on for some time,” Riley said. Final approval “is not a slam-dunk by any means.”

Konstantin Kosachev, a deputy speaker of the upper house of Russian parliament, deplored the “artificial” obstacles against quickly launching Nord Stream 2. While some argue that Europe has grown more dependent on Russian gas, the country has met all its obligations, he said.

“The opponents of gas projects by Russia and the EU nations fear not that Russian supplies would fail, but just the opposite, that all problems would be solved, leaving no opportunity to accuse Moscow of harboring ill intentions or using energy as a weapon,” Kosachev said.

Ukrainian energy company Naftogaz accused Russia’s Gazprom in an EU complaint of “abusing its dominant position on the European gas market.” The company alleged in a statement Wednesday that Gazprom aimed to create “an artificial deficit of gas” to pressure Europe into approving Nord Stream 2.

But Kremlin spokesman Dmitry Peskov noted that Germany has treated the pipeline as a purely commercial project and voiced hope that the certification process would steer clear of politics.

“We just need to be patient,” Peskov said in televised remarks, adding that the pipeline’s operator stands ready to meet German regulators’ demands. “We hope that the project will be certified once the regulator completes its work.”

Even if it never starts, Nord Stream 2 has been worth it for the Kremlin’s geopolitical goals because it has sowed division among EU members and between Germany, the EU and the U.S., said Meister of the German Council on Foreign Relations.

“Without being online, the pipeline has already repaid the Kremlin,” he said. “Politics and security always trump the economy in Russia.”