Nord Stream 2: Berlin-Washington Mutual Intransigence Shows Transatlantic Divide on Russia

Thomas O'Donnell

Hertie School of Governance

Thomas O’Donnell was a DAAD/AICGS Research Fellow in April and May 2015. He is an academic, analyst, and consultant with expertise in the global energy system and international relations. At AICGS, his focus is “U.S. Expert Perspectives on German Energy Vulnerabilities.” Dr. O’Donnell’s teaching and research have encompassed the EU and Russia, Latin America, the Middle East, China, and the USA. His PhD is in nuclear physics from The University of Michigan at Ann Arbor; for the past 15 years he has primarily taught post-graduate international relations and development with a focus on energy and natural resource issues, including at The University of Michigan, The Ohio State University, at The New School University’s JJ Studley Graduate Program in International Affairs (NYC), and at Freie Universität’s JFK Institute (Berlin). At his blog, the GlobalBarrel.com, he follows issues of energy and international affairs, and he also writes frequently for the IP Journal (Berlin), Americas Quarterly (NYC), and Petroguía (Caracas).

Throughout 2008-09, Dr. O’Donnell was a U.S. Fulbright Scholar and Visiting Professor in Caracas at the Center for the Study of Development (CENDES) of the Central University of Venezuela (UCV). He is a Senior Analyst at Wikistrat and consults with various other geopolitical, business-intelligence, and advisory firms. Before doing his PhD, Dr. O’Donnell spent a decade working in U.S. industry, gaining technical experience in automobile manufacturing, railway operations, large-scale HVAC, and in power generation. He has also worked as a radiation safety and health-physics officer at a research nuclear reactor and in medical and other settings. In experimental nuclear physics, he conducted basic research at several particle-accelerator and national laboratory facilities in the U.S., Japan, and elsewhere; and is author or co-author on about 40 peer-reviewed scientific papers. Since 2012, he has lived in Berlin with his wife and youngest children. He speaks English, Spanish, and functional German.

Nord Stream 2: Allies’ Crisis

Two decades of Washington-Berlin collisions over the Nord Stream 1 and now the Nord Stream 2 pipelines have come to crisis.

The U.S. Congress stopped Nord Stream 2 construction in December 2019 by enacting sanctions under the Protecting Europe’s Energy Security Act (PEESA), and is poised to enact a much harsher “Clarification” of PEESA, sanctioning any entity that resumes or aids in resuming construction in the Baltic Sea. German officials insist the project will, nonetheless, be completed, denouncing U.S. sanctions as “extraterritorial” interference in “European sovereignty.”

In reality, the project appears dead. Statements by businesses interests, as opposed to political actors, support this.[1]To resume construction, companies, ports, officials, and insurers would require guarantees against ruin, including being personally sanctioned, which is difficult to imagine the German state providing. And there is no evidence of preparations to do so. Nevertheless, Russia’s Gazprom continues preparations to resume work.[2]

Complicating matters, the U.S. Congress, having mandated sanctions against the pipeline, would have to approve any compromise. On the other side, the German Bundestag roundly “savaged” a motion by the Green Party to abandon Nord Stream 2 in response to Navalny’s poisoning, unprecedentedly uniting the CDU/CSU of Chancellor Merkel and her SPD coalition partners with both the far-left Die Linke and far-right Alternative for Deutschland.[3]

What Of A Compromise?

The only known attempt at compromise was proposed by German finance minister Olaf Scholz (SPD) in August,[4] replaying a proposal rejected in February 2019. Scholz offered subsidies up to €1 billion toward building two domestic LNG terminals, enabling imports of U.S. gas, if Nord Stream 2 sanctions were lifted. The first time this was offered, verbally, by energy minister Peter Altmaier (CDU) to then-deputy energy secretary Dan Brouillette. Brouillette thanked Altmaier for enabling U.S. LNG imports, but made clear this does nothing to address U.S. objections to Nord Stream 2.[5] This time was no different.[6]

As I wrote in June and July of 2018, Berlin’s claims then that its previous decision[7] to build two LNG import terminals was intended to offset over-dependence on Russian gas, allaying U.S. concerns over Nord Stream 2, had been repeatedly floated to the press by unnamed federal officials.[8] This turned President Trump’s loud demands that Germany buy U.S. LNG back against Washington by painting U.S. opposition to Nord Stream 2 as based on narrow commercial interests. However, the smaller-scale terminals Merkel’s coalition had already agreed to fund were specifically approved to provide fuel for ships and heavy trucking, as stated in the CDU/CSU-SPD coalition’s founding “treaty” (Line 3335). This had nothing to do with counterbalancing dependence on Russian gas, as the press was later told.  While this campaign has succeeded in misleading many observers—and Trump’s LNG rhetoric enabled this—it only worsened matters by misrepresenting actual congressional objections.[9]

Congressional support for sanctions has been bipartisan and, notably, centered in the influential, geopolitically-focused Senate Foreign Relations and Armed Services committees, indicating this is not reduceable to a push for LNG sales to Germany versus Russia gas.

As is well known, Congress finally imposed sanctions out of frustration with Trump’s refusal to do so since it gave him authority in 2017, and driven by anger over Moscow’s continuing war against Ukraine, its relentless cyberattacks, disinformation, assassinations, and disruptions of elections, as well as Berlin’s insistence on still partnering on Nord Stream 2.  And, more immediately, PEESA forced Moscow to sign a new gas transit contract with Ukraine before the previous one expired on New Year 2020, as Russian plans to divert this gas into Nord Stream 2 were now disrupted.

Nord Stream 2: Conflicting Strategic Calculations

Closer examination shows that such uncompromising intensity between the transatlantic allies reflects the special role of this pipeline to infrastructurally lock-in one or the other’s preferred strategy toward a revanchist Russia, a sharply contested issue.

For Moscow’s part, its imperative is to preserve its European gas-export revenues, while simultaneously working to re-incorporate Ukraine and Belarus, or at least disrupt their movement toward the EU, are at cross purposes. Long accumulating, this reached a critical point after Russia’s 2014, war in Ukraine. The present Belarus protests add to the urgency for Moscow to build export pipeline detours around these countries.

Completion of Nord Stream 1, 2, and the 2^nd String of TurkStream (i.e., formerly known as “South Stream,” which runs from Russia across the Black Sea and Turkey, entering the EU via Bulgaria), taken together, would completely reroute how all Russian pipeline-borne gas arrives into the EU, enabling Russia to abandon the late Soviet-era system sending Siberian gas across Belarus and Ukraine to EU customers.[10] However, to fully escape this old system, Nord Stream 1 and 2 are insufficient. Russia also needs TurkStream, already completed to Bulgaria in January 2020, to be extended north to Austria and west to Italy. Vladimir Putin visited the region earlier this year to urge these extensions be built quickly.[11] This explains why U.S. sanctions and diplomacy are also actively targeting these extensions.

For Germany, the risks that Russian gas transiting Ukraine and Belarus is interrupted due to conflicts (i.e., Russian aggression), causing a catastrophic EU energy crisis, are deemed unacceptable. In addition, many officials will privately declare they “do not trust” Ukraine, which would “cause a crisis” for Germany.  This has long instilled a resolve that Russia gas exports should instead come directly to Germany via the Baltic Sea. Completing the two Nord Stream systems would make Germany the new hub for Russian gas distribution into Europe.

Indeed, only 18 percent of this gas is for Germany,[12] the rest is to go south across Germany via the new Opal and Eugal pipelines also built with Gazprom,[13] into the Czech Republic and on to fill existing pipelines that Russia can at present fill only by sending its gas across Ukraine, Belarus, and Poland. This, I am often told here, will reduce tensions by making Berlin the mediator, “dealing directly” with Moscow in any EU gas crisis, (i.e., eliminating the complications of Ukraine, Poland, or Belarus being at the table).

Berlin aimed to realize this energy strategy for Europe without having sought Brussels’ or other members states’ approvals. Instead, Berlin has constantly insisted this is “merely a commercial project”—taken in DC as willfully “not hearing” U.S. concerns.[14] So too, I have repeatedly witnessed German officials’ curt dismissals of Baltic and Eastern European allies who raise concerns that Nord Stream 2 undermines their security. All this has done much to embitter relations in both directions, including with DC, Brussels, and many member state allies.

For Washington-at-large, unlike Trump’s nationalistic contempt for Germany and affinity for Putin, it is broadly united against handing Putin the infrastructural escape he seeks from Russia’s existing gas-export constraints. Not only would $2 billion annually in gas-transit fees that Kyiv needs for defense be lost (largely to Germany), but more crucially, Russia’s dependence on pipelines through Ukraine and Belarus provides a material constraint on Putin’s ability to subordinate these countries.

Prospects for U.S.-German Relations

More broadly, starting under Obama and completed in the Trump administration, the U.S. has embraced a new National Security Strategy (2017) of “renewed Great Power competition,”[15] which dictates confrontation of Russian revanchism. This has already produced significantly increased U.S. activity such as its “Three Seas Initiative” including the Baltic states, Central and Eastern Europe, and the Balkans, to oppose Russian influence—often to the irritation of Berlin,[16] whose Nord Stream policy has undermined its soft power here. So too, Biden and key advisors endorse this new policy, and Biden’s dedication to Ukraine is well known.

This indicates U.S.-German collisions over transatlantic strategy on Russia and in the “Three Seas” zone will not end with this Nord Stream 2 confrontation. The new U.S. bipartisan willingness to impose uncompromising sanctions to quash a key German project indicates resolve to force strategic alignment on Berlin consistent with renewed Great Power Competition.

Trump’s predilections evidently led Berlin to misjudge the U.S. as withdrawing from Europe. However, its persistent, sharp Nord Stream 2 involvement contradicts this, and a Biden administration would undoubtedly pursue Great Power competition still more consistently, a strategy German elites broadly do not want.

[1] Zukunft Gaz, German industry advocacy group spokesman: “If the [new US] sanctions are actually enforced, the completion or commissioning of the pipeline is currently not possible,” S&P Global, July 2, 2020; Erika Solomon, “Germany’s Uniper warns of possible Nord Stream 2 loan write-off,” Financial Times, August 13, 2020; Reuters Staff, “Top shipping insurance group will not cover ships linked to Nord Stream 2,” Reuters, September 28, 2020.

[2] Thorsten Koch, “Will Further Sanctions Stop the Nord Stream 2 Gas Pipeline?” Global Risk Insights, 20 September 20, 2020.

[3]  “… Green party leader Annalena Baerbock said Nord Stream 2 was ‘splitting Europe’.” “Yet Ms Baerbock and her party found themselves almost entirely isolated. Erstwhile enemies from across the political spectrum ganged up to savage their motion. It was one of the few occasions on which Ms Merkel’s CDU/CSU, the Social Democrats, the hard-left Die Linke and the hard-right Alternative for Germany had ever agreed on anything.” Guy Chazan, “Angela Merkel stands firm on Nord Stream 2 despite Navalny poisoning,” Financial Times, September 23, 2020.

[4] Holger Stark, “Das Milliardenangebot: Rettet Olaf Scholz die Gasröhre Nord Stream 2?” Die Zeit, September 16, 2020; Guy Chazan, “Germany offered €1bn for gas terminals in exchange for US lifting NS2 sanctions,” Financial Times, September 16, 2020.

[5] Personal communication, a witnessing official.

[6] “’The US opposition to Nord Stream 2 long predates any discussion of LNG,’ said Joseph Giordono-Scholz, a spokesman for the US embassy in Berlin.” Guy Chazan, “Germany offered €1bn for gas terminals in exchange for US lifting NS2 sanctions,” Financial Times, September 16, 2020.

[7] This decision to approve construction and to subsidize Germany’s first LNG terminals became widely known when referred to in the CDU/CSU-SPD “Treaty”, establishing their “GroKo” coalition. It is stated there, and in contemporaneous Federal Energy Ministry, Energy Network Agency and other official documents that these were to support ports, LNG-fueled ocean shipping, and heavy over-the-road trucking, etc. as long demanded by those industrial sectors; viz.:

• Federal Gas Network Agency Bundesnetzagentur bestätigt Szenariorahmen für den Netzentwicklungsplan Gas 2018-2028 (12.12.2017).

• The government’s port and maritime strategies, including a new role for LNG, were elaborated in a BMWi report of March 2017 Maritime Agenda 2025: The future of Germany as a maritime industry hub

[8] Articles from 2018, initiating what has become a common trope in Germany:

• Anna Shiryaevskaya and Brian Parkin, Bloomberg, March 19, 2018;

• Oil Price.com;

• sputniknews.com;

• Der Spiegel.

[9] Berlin is often criticized in DC for avoiding confronting the actual U.S. and many EU member states’ objections to the pipeline. See: Matthew Karnitschnig, “Germany blames Trump in pursuit of Nord Stream 2 pipeline: Blaming US president helps Berlin dodge deeper questions over Nord Stream 2 project,” Politico, October 13, 2020.

[10] Russia accounted for 40% of the EU’s gas imports as of late-2019, whose transit pipelines “Urengoj-Pomary-Uzhgorod” and “Soyuz” came online in 1973 and 1983 [Sec. 4.1.3] respectively.

[11] “Is Bulgaria Weak Link in Russia’s TurkStream Gas Pipeline?” Russia Observer, Warsaw Institute, January 30, 2020.

[12] NEL Gas Pipeline Website (NEL is fed by Nord Stream 1, and flows toward northwest Germany).

[13] “GASCADE is part of the chemical group BASF and Gazprom. GASCADE holds a 50.5% stake in the European gas connection pipeline project (EUGAL) and is the project sponsor.” Eugal website.

[14] A frustration related to me in DC interviews in 2015 (AGI Fellow) and 2019 [also] (Wilson-Kennan Fellow).

[15] “The New Concept Everyone in Washington Is Talking About: How exactly did great-power competition go from being an “arcane term” a few years ago to “approaching a cliché”? Uri Friedman The Atlantic, 6 August 2019, https://www.theatlantic.com/politics/archive/2019/08/what-genesis-great-power-competition/595405/

[16] Christoph Hasselbach, Rosalia Romaniec, “Berlin takes a new approach to the Three Seas Initiative,“ DeutscheWelle, June 5, 2020.