Russian Led Nord Stream II In Trouble Over Navalny Poisoning

The Russian-led Nord Stream II pipeline connecting northern Russia to Germany via the Baltic Sea is in trouble and may be put on hold as the Germans seek to punish Moscow for what they believe to be a deliberate poisoning of the country’s most popular opposition figure, Alexei Navalny.

For the U.S., this is like a coup of sorts as the Treasury Department, in following the orders of the Senate, has sanctions on Nord Stream II’s infrastructure firms. The Germans have long led the charge in keeping that pipeline on schedule to be built and flooded with Russian natural gas this year. German oil and gas players Uniper and Wintershall are both partners with Gazprom in Nord Stream II. Nord Stream II sits besides Nord Stream I, and is seen as an end-around Ukraine, once one of Gazprom’s biggest transit routes into Europe.

The Ukraine situation is what has largely made Nord Stream II a political target of Washington.

Back the Russian soap opera involving Navalny, who was rushed a hospital last month and believe to have been poisoned, is making the project a political hot potato.

Angela Merkel’s Christian Democratic Union has some members, namely the well known Frederich Merz, calling to freeze the project for two years, the Bild newspaper reported over the weekend. 

Recommended For You

But Merz may not be representative enough of Germany.

Oliver Hermes, chairman of the Eastern Committee of the German Economy, said on September 5 that abandoning the project would cost Germany billions of euros. And on September 6, German Foreign Minister Heiko Maas said, “Those who demand the cancellation of the project must understand the consequences.”

Gazprom”s other partners in this include U.K. Shell and Austria OMV, but the German authorities are the most important.

Nord Stream II will deliver 55 billion cubic meters of Russian gas a year to the country, basically giving Germany its entire baseload of energy in case solar and wind peter out. 

U.S. sanctions interrupted the laying of the gas pipeline after targeting a number of infrastructure operators, but revamps to the sanctions law now have it threatening certification, without which it cannot be put into operation. 

The German government was expected to create a protective mechanism that would mitigate the impact of existing and future U.S. sanctions on the companies involved in the project. Uniper and Wintershall have invested €950 million each.

The termination date of Nord Stream II is unclear. 

Russian officials, including President Vladimir Putin, have talked about the fourth quarter of 2020 or the first quarter of 2021 for the pipeline to be ready. But Gazprom has not yet resumed laying the pipe after taking over the operation once companies bowed out due to sanctions threat.

According to Russian business daily, Kommersant, the Gazprom ship called Akademik Chersky, a pipe laying vessel, does not have the necessary equipment to do the job. The storm season will soon begin in the Baltic, which will also slow things up considerably.

It is now highly unlikely that Gazprom will roll into 2021 with Nord Stream II ready to go. 

The good news for Russia’s most important gas company is that she is not dependent on Nord Stream II to keep paying its dividend, or to maintain coveted European market share; a market that American LNG exporters are also trying to crack.

The total capacity of Gazprom’s gas supply to Europe (excluding Turkey, Finland and the Baltics) comes from Nord Stream I, Yamal LNG and the second connector pipeline of the Turkish Stream. Combined, those sources equate to about 300 million cubic meters, based on Kommersant’s own numbers. 

Despite all of this happening due to an ugly divorce with Ukraine, of which Gazprom and its partner in Ukraine, Naftogaz, starred as the dueling husband and wife, Gazprom now has a contract with them for pumping 45 billion cubic meters per year that will also go to Europe, in part. The company can also take from its storage facilities in Europe, at least 45-50 million cubic meters, and put that on the market as well, meaning that Gazprom can hold out for a little longer if required by politics.

Comments are closed.