German Chancellor Olaf Scholz called a halt to the Nord Stream 2 Baltic Sea gas pipeline project on Tuesday as a result of Russia’s invasion of two separatist regions of Ukraine.
Originally meant to enable a doubling of the amount of natural gas from Russia to Germany, the project will now not go forward after Russia formally recognized the independence of the Donbass, the two breakaway regions in eastern Ukraine.
The gigantic energy project, worth $11 billion, was completed in September of 2021, but had not been put into operation since it had become embroiled in international politics, awaiting certification by Germany and the European Union.
Medvedev taunts “Welcome to the new world” of astronomically high gas prices
The US, the UK, Ukraine and several EU countries have repeatedly stated their opposition to Nord Stream 2 ever since it was announced back in 2015, for fear that it would further increase Moscow’s influence in Europe.
The pipeline was capable of delivering 55 billion cubic meters of gas per year, just over 50% of Germany’s annual consumption. Experts believe it could have been worth as much as $15 billion to Gazprom, the Russian state-owned company that controls the pipeline.
While Europe and much of the rest of the world experience record-high energy prices due to a confluence of factors, including post-pandemic issues, European governments have already begun to issue vouchers to their citizens to try to offset the hikes.
Nordstream 2 had been meant as a way to ease the perennial energy crunch that Europe faces during especially cold winters as well.
There has been a dramatic change in the situation, and we must now reassess; this will include #NordStream2. I have asked our Economic Affairs Ministry to conduct a new analysis of the security of the energy supply. Under the present circumstances, certification is not possible.
— Bundeskanzler Olaf Scholz (@Bundeskanzler) February 22, 2022
Reuters reports on Tuesday that the European benchmark gas price was up 10% to 79.28 euros per megawatt hour (MWh), similar to the prices seen in the fourth quarter of last year, when the pipeline had been had been expected to start pumping its precious product to the West.
Meanwhile, Dmitry Medvedev, Russia’s former president and its current deputy chairman of its Security Council, taunted Western leaders today in a Tweet, saying “Welcome to the new world where Europeans will soon have to pay 2,000 euros per thousand cubic metres!”
This was seen as a clear indication that gas prices could soon double, with one week left in February to go.
Putin assures West that current gas supplies will not be interrupted
However, Russian President Vladimir Putin promised that Russia would not interrupt any of its existing gas transport to the West.
Germany, which receives half its gas from Russia, had previously maintained that the Nord Stream 2 had been first and foremost a commercial project that was meant to diversify energy for Europeans.
But the project bore the brunt of continual assaults, with a range of countries from within Europe, along with the US, decrying the pipeline, saying that it would only serve to increase the West’s dependence on Russia for its energy needs. It would also, ,they charged, deny important fees paid to Ukraine, which also has a Russian gas pipeline, and in the end make it more vulnerable to invasion from Russia.
Scholz said in a televised press conference “I have asked the German Economy Ministry today to withdraw the report on the analysis of energy supply guarantees from the re4gulator.” This is the technical language needed, he went on to explain, that was necessary in order that there be “no certification for the pipeline now.”
Reuters reports that Marcel Dirsus, a non-resident fellow at Kiel University’s Institute for Security Policy, stated after the anouncement “This a huge change for German foreign policy with massive implications for energy security and Berlin’s broader position towards Moscow.
“It suggests that Germany is actually serious about imposing tough costs on Russia.”
As had been expected, US leaders warmly welcomed the announcement, acknowledging that it had been in close consultation with the German government overnight into Tuesday. But opponents of President Joe Biden noted the irony in the decision, with conservative political consultant Alex Bruesewitz Tweeting: “I’m old enough to remember when Joe Biden lifted sanctions off Russia and allowed them to move forward with the NordStream2 pipeline shortly after he shut down the Keystone XL pipeline here in the US.”
Back in May of 2021, Biden had waived sanctions on a company that was building the pipeline even after a damning report issued by the Department of State noting that Nord Stream 2 AG and its chief executive, Matthias Warnig — who is a former East German intelligence officer — had engaged in sanctionable activity.
Nord Stream had been a point of contention between Germany and the US for years, with American officials concerned that the pipeline would stoke yet more tensions between Russia and the West.
Meanwhile, Ukrainian Foreign Minister Dmytro Kuleba congratulated Scholz on his difficult decision on Tuesday.
“This is a morally, politically and practically correct step in the current circumstances,” he said in a Tweet, adding “True leadership means tough decisions in difficult times. Germany’s move proves just that.”
I’m old enough to remember when Joe Biden lifted sanctions off Russia and allowed them to move forward with the #NordStream2 pipeline shortly after he shutdown the KeystoneXL pipeline here in the US
— Alex Bruesewitz (@alexbruesewitz) February 21, 2022
The German chancellor told the press as part of his remarks that “The appropriate departments … will make a new assessment of the security of our supply in light of what has changed in last few days.”
German Economy Minister Robert Habeck gave assurances that the country’s gas supply was secure even without the addition of the supplies that would have come via Nord Stream 2.
He acknowledged, however, that energy prices were indeed likely to rise in the short term.
Russia’s state-owned entity Gazprom owns the whole pipeline but paid half the costs of the already-completed project, with the rest paid by Shell, Austria’s OMV, France’s Engie and Germany’s Uniper and Wintershall DEA.
Germany’s Federal Network Agency, which is in charge of regulating the country’s electricity, gas, telecommunications, post and railway sectors, had already suspended the certification process in November, while saying at the time that Nord Stream 2 must register as a legal entity there.
However, barring such developments as have just occurred, analysts had expected it to begin that procedure in the middle of the year.