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Pipelines and Power

Aug 12, 2021
  • Wu Zhenglong

    Senior Research Fellow, China Foundation for International Studies

With the project reaching completion, the dust around the Nord Stream 2 gas pipeline is settling. The project will not only profoundly affect relations between the United States, Germany and Central and Eastern European countries but will also intensify domestic political polarization in the U.S. It is the epitome of America’s waning hegemony.

Back in 2015, Gazprom and five European energy companies reached an agreement to build Nord Stream 2. This pipeline runs parallel to Nord Stream 1, which became operational in 2012 with an annual capacity of 55 billion cubic meters.

Nord Stream 2 had a bumpy start. The Obama administration expressed strong opposition, arguing that the project was a geostrategic calculation of Russia meant to increase the European Union’s energy dependence on Russia, thus jeopardizing Europe’s energy security. The U.S. opposition to the project was also intended to crowd out Russian interests from the European energy market, so that more expensive shale gas from U.S. could be sold to European countries. However, the Obama administration just talked the talk of opposition.

Ukraine and Poland, which are on the transit routes, also voiced opposition, claiming that the project would make gas transit via Ukraine redundant and diminish Ukraine’s political and security role in Europe.

Moscow proposed the Nord Stream 2 project out of its need to reroute gas to Europe. Russia mainly delivered gas to Europe through Ukraine, but gas transmission was cut off twice — in the winters of 2006 and 2009 — over disagreements between Russia and Ukraine on transit gas prices and gas sales to Ukraine. Many EU countries on the route had to tough it out without gas-fueled heating.

The project is an important part of Russia’s restructuring of gas pipelines to Europe. Germany supports the Nord Stream 2 project as a “commercial” project that will directly connect production and demand, so that it will no longer be at the mercy of gas transit countries.

   At the end of 2019, construction of the pipeline came to an abrupt halt just 100 miles short of completion when the Trump administration imposed sanctions on the Nord Stream 2 pipe laying vessels and the contracted Swiss ship suspended the contract. In response, Russia dispatched its pipe-laying vessels, which were stationed in a Far East port, to assist in construction. Russian President Putin assured the public that the pipeline laying would be completed without international assistance, but there would be a delay of “several months.”

For all German companies and entities involved in the Nord Stream 2 project, the Trump administration threatened to impose sanctions and pressured Germany to stop the project. But Germany was not alarmed. On top of that, U.S. German relations were beset with issues such as military cost-sharing, trade frictions and European integration. Bilateral relations seriously deteriorated.

The Nord Stream 2 project was 99 percent complete when President Joe Biden took office. To repair U.S.-German relations and solicit German support to contain China, the U.S. announced in May that it would waive sanctions against Germany. Meanwhile, the two countries discussed specific plans to stop Russia from using natural gas as leverage against Ukraine. In June, the U.S. announced another waiver of sanctions against Russian entities and individuals related to Nord Stream 2 to clear the air before a summit between the U.S. and Russian presidents in Geneva. In July, when German Chancellor Angela Merkel visited the U.S., the two sides eventually announced an agreement on the project.

Under that agreement, if Russia attempts to use energy as a weapon or in “further invasion” of Ukraine, Germany will take action and urge the EU to take effective measures, including sanctions and restrictions on Russian energy exports to Europe. Also, Germany is committed to using all means available to facilitate a 10-year extension of the gas transit agreement between Russia and Ukraine; and Germany pledged to establish the “Green Fund for Ukraine” and to provide $175 million to the fund in support of Ukraine’s energy transition.

The U.S.-German agreement was met with mixed feelings. Germany said it was “a relief,” and the Russian president, for his part, said the project would help buttress German-EU energy security. But the Ukraine government expressed disappointment and fury. In a joint statement, the foreign ministers of Ukraine and Poland said, “Unfortunately, the proposals to cover the resulting security deficit cannot be considered sufficient to effectively limit the threats created by NS2.” Also, U.S. lawmakers from both parties expressed confusion and unease over the agreement, launching scathing attacks on the Biden administration. Republicans accused Biden of handing Putin a victory gift, while Democrats, who were also critical of the deal, used more moderate diplomatic language.

To appease Ukraine, Biden will meet with President Volodymyr Zelensky at the White House at the end of August. It is expected that this meeting will not completely bridge the gap between the U.S. and Ukraine regarding the U.S.-German agreement.

The Nord Stream 2 project, with its many twists and turns, ended with compromise on the part of the U.S., which reflects declining U.S. hegemony.

First, the ability of the U.S. to control its allies has declined. While it is a bipartisan consensus to oppose and deter Nord Stream 2, and there was consistent pressure on Germany to call off the project, yet Germany refused to comply and saw the pipeline through. The two sides engaged in a tug-of-war, which ended in favor of Germany, with the U.S. compromising. This is a rare situation in the international arena. It shows that should the right circumstances arise, U.S. allies will put their own interests above the alliance, as opposed to subordinating their own interests to those of the U.S. as in the past.

Second, U.S. policy failed to balance the interests and concerns of its allies. While the U.S.-Germany agreement catered to the demands of the Germans, it offended Ukraine, Poland and other Central and Eastern European countries. The Biden administration saw its honeymoon with these countries come to an abrupt end. America’s ability to manage the alliance system is a pale shadow of its former self.

In addition, the U.S. failed to block construction of the Nord Stream 2 project. As a major competitor, the project poses a serious threat to U.S. gas exports to the European market. The U.S. wanted to terminate the project through various means including sanctions, but Russia pressed ahead with the construction at such speed that it outpaced the U.S. in its attempt to disrupt the project with sanctions. The U.S. plan fell through, which is a reflection of the decline in U.S. administrative capacity.

Finally, U.S. political polarization has damaged its governing efficiency and international standing. To express his dissatisfaction with the Biden administration’s waiver of sanctions against Russia and Germany, Republican Senator Ted Cruz single-handedly shelved consideration of nominations for more than 60 senior State Department positions, including ambassadorships to Mexico, Algeria, Cameroon and Vietnam, as well as the Under Secretary of State for energy and environmental issues and the assistant secretaries of state for regional affairs, diplomatic security, intelligence and research, international law enforcement and consular affairs. Cruz publicly said that he would act under federal law, and as soon as the Biden administration imposes sanctions on Nord Stream 2, he will lift the hold on the confirmations.

If anything, the real threat to the U.S. is neither Russia nor China. It stems from serious political, economic and social conflicts, such as political polarization, within its own fabric.

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