Alexander Baunov
An agreement that at first glance seems beneficial to Russia is in fact beneficial to all parties in its own way. Given the firm intention of Germany and Russia’s ability to complete the construction of the gas pipeline, the agreement gave Russia the opportunity to do this without additional pressure, Germany not in spite of, but in agreement with the United States, and Ukraine to receive written commitments to take it into the new European energy
After the United States and Germany signed an agreement on Nord Stream 2, much and immediately was said about the loss of the West, the gain to Russia and the trampled Ukrainian sovereignty. As if only Ukraine with Poland and the United States had sovereignty, at worst Russia, but not Germany.
Germany, like other European allies of the United States, is not autonomous in defense and security matters. However, within this system, of which the countries of the former Soviet bloc are a part, Germany’s sovereignty weighs no less than the sovereignty of Poland, Denmark or Ukraine.
Not just against Moscow
For Germany, the completion of Nord Stream 2 has become a matter of principle for its sovereignty. There are also opponents of the project there – for example, the head of the Green Party, Annalena Berbock. But the majority of the political class and business community in Germany are in favor.
The end of the “Stream” is supported by the leadership of Christian and Social Democrats, the two largest parties that, since the founding of the FRG, form governments in turn or together. The former Foreign Minister Sigmar Gabriel and the current one, Heiko Maas, the current Chancellor Angela Merkel and her successor as head of the CDU, the likely future Chancellor Armin Laschet, spoke in favor. The completion of the stream is supported by German businesses and the majority of German citizens. In fact, we are talking about a national consensus, to what extent it is achievable in principle in politics.
Seen from Kiev or Warsaw, Biden’s deal with Merkel looks like a victory for the Kremlin. But strictly speaking, this is a German victory. Without a clearly articulated German desire to complete the project, the Kremlin would be powerless.
The concept of another loss of the West to Putin is based on the idea of a common Western sovereignty, which is built from a single center and necessarily against a common enemy. Such a collective West is best represented by those countries that have worse relations with its opponents. However, the West is not only “against whom”, but also “for what”. To reduce the unity of the West to confrontation with Putin would mean imposing a negativistic identity on him, which is more characteristic of modern Russia, which is fighting not so much to promote its content as against the spread of someone else’s.
This Western content of its own, the universalization of which the Kremlin is so concerned about, is represented by Germany better than most contenders, including from the point of view of the current American administration. Indeed, if the West is not just those who are against Moscow, but stable, time-tested democracies based on certain values and practices. Post-war Germany embodies these values and practices in no way worse than Poland, which has fallen into social archaism, or a split Ukraine with a self-serving elite in Russia and a poorly researched deep people whose political behavior is difficult to predict.
Trump rebuilt great America at the expense of everyone else, including his own allies. For him there was no problem of a strong Europe: the smaller Europe is in the world economy, the more room there is for the United States.
Biden claims that he is interested in a strong and friendly Europe, she is not a cunning dependent for him, but an ally. Biden’s foreign policy is built under the slogan of the return of diplomacy; he wants to be an ally, not just a hegemon. Rather, he prefers to implement American leadership, or, as we say, hegemony, through the mechanisms of alliance.
Disagreements among allies make it possible to choose those whose position is closer to your own, and speak on their behalf. Trump would undoubtedly have taken this path. Biden chooses the strongest and most proven among allies and relies on a trusting relationship with him. The most loyal ally of the United States – Great Britain – left the EU, so now, if you trample on the sovereignty of Germany, you can be left without the most important support in European politics.
The completion of the Potok, of course, will delight Putin and increase Europe’s dependence on Moscow, but it will also economically strengthen Germany and the rest of Western European countries. And an economically stronger Germany can more confidently promote the very democratic values America cares about. On the other hand, a wounded Germany will weaken the West and damage its unity no less than an offended Warsaw and Kiev.
A risky fight against the fact
The West will further weaken the spectacle of US helplessness. Criticism of the agreement proceeds from the idea of the unlimited power of America, which can stop anything, and if it doesn’t, then it doesn’t want to. Meanwhile, on the eve of the signing of the agreement, Secretary of State Anthony Blinken, recalling the classic language of diplomacy, called it a fait accompli.
Nothing would hurt America’s leadership image more than its struggle against a fait accompli that would have been impossible to undo without falling into dangerous radicalism. Indeed, military action against the gas pipeline and German enterprises cannot be carried out.
The United States came to an agreement with Germany only after using a wide repertoire of sanctions – financial, political and technological. However, as the sanctions escalated, it became clear that Russia could, in principle, finance the completion of the gas pipeline itself. Although this was not necessary: interested European companies invested most of the money before the imposition of sanctions in 2019 and, fearing to become a shareholder, remained the project’s creditors.
And shortly after Biden’s victory, the Landtag of Mecklenburg-Vorpommern defiantly approved the creation of an environmental fund for the completion of the gas pipeline. Among the participants in the project are partners of American business in Europe, and if sanctions against Gazprom or Russian ships are completely painless for the United States, then steps against Western European companies would have consequences in America itself.
A year after the Pioneering Spirit left the project under the threat of sanctions, the Russian ships Fortuna and, after modernization, Akademik Chersky resumed construction, albeit at a slower pace than their more powerful predecessor, and the sanctions on Juno and Avos “Were not bothered: hallelujah to the beloved couple.
However, by threatening sanctions against Pioneering Spirit’s owner, Allseas, and Dutch owner Edward Heerem, the Trump administration was already at risk. Her ships are widely demanded by American oilmen in the Gulf of Mexico. If Kheerema had gone to a collision and stayed in the Russian-German project, the American oil and gas workers would have lost their pipelayers. It could have happened like with Rusal, when, under pressure from their own business, the hastily imposed sanctions had to be lifted.
Even more risky was the episode when a group of senators led by Republican Ted Cruz sent a letter to the leadership of the city of Sassnitz, threatening to “financially destroy” the port of Mukran, which serves the construction of Nord Stream 2. After this letter in Germany, they spoke especially loudly about the threat to sovereignty, since it was proposed to subject sanctions not to a private company, but to part of the regional and federal infrastructure of the German state. Senators might not have known that election after election, MP Angela Merkel is elected from the very district where the city of Sassnitz is located, as well as the city of Greifswald, near which the Potok exit point on the German coast is located.
Considering that the Germans were determined to complete the construction of the gas pipeline, considering it a touchstone of their own sovereignty, the agreement with Germany was not only a concession, but also an acquisition for America. The new administration behaved in such a way that Germany chose not only to follow the chosen course and reduce the damage to relations with Washington, but also to fix on paper some of the obligations that follow for it after the completion of the project, including with respect to Ukraine.
Competitive advantages
Both parties to the agreement would prefer to minimize the damage to their relations with Ukraine and Poland. An article in Politico full of leaks about how the US administration asked President Zelenskiy to keep his temper, commenting on the future agreement, if not in all details, then generally should be true. For Ukraine and other opponents of the project, this agreement also appeared as a fait accompli, but there is simply no way for Kiev to spoil relations with its main ally and defender in revenge.
The agreement between Germany and the United States begins with a commitment to preserve Ukrainian transit, protect Ukraine, and punish Russia if it uses gas supplies for political pressure. The United States and Germany promise to make efforts to get Gazprom to extend the transit agreements with Ukraine, which are valid until 2024, for another ten years. It is unlikely that this will be achieved only by pressure. The proposal, in addition to threats and criticism, must contain serious incentives.
The second “Nord Stream” will strengthen the negotiating position of “Gazprom”, this simple fact cannot be covered with promises. In 2020, 55 billion cubic meters of gas were supplied to Europe via Ukraine, this is exactly the amount that will add to the existing transit capacities of Nord Stream 2.
True, if Gazprom continues to increase supplies, as it is going, and is guided by the declared targets of 200 billion cubic meters and more annual supplies to Europe, then the Ukrainian transit capacities will be needed approximately in the amount of about 20 billion cubic meters per year. But it’s hard to say what could force Gazprom to agree to a 10-year, pump-or-pay, fixed-price transit contract that is currently in effect between Russia and Ukraine.
Under it, Russia pledged to pay for 65 billion cubic meters of transit in 2020 and for 40 billion a year between 2021 and 2024, a total of $ 7.2 billion. Gazprom, having received leverage in the form of Nord Stream 2 and Turkish Stream will prefer in the future a system of short booking of the required transit volumes at auctions or a more flexible contract. True, if supplies to Europe grow, a fixed agreement could theoretically turn out to be even cheaper.
Of the 55 billion cubic meters pumped through the Ukrainian territory to Europe in 2020, 10 billion went to Ukraine itself in the form of reverse deliveries of Russian gas from Europe (the reverse is legally carried out, and the gas is physically taken before the gas crosses the European borders), and 20 billion cubic meters of gas to Ukraine extracts itself. If transit through Ukraine is interrupted, Ukraine will have to buy Russian or any other gas from Europe, not legally, but physically, and it will cost it significantly more.
A paradoxical situation may arise when it will be profitable for Ukraine to pump Russian gas to Europe through its GTS almost for nothing, if only to be able to take Russian gas on the way to Europe, and not from Europe. Understanding Ukraine’s difficulties is unlikely to make the Kremlin more accommodating, especially when Ukraine imposes sanctions on Russian and Moscow-friendly Ukrainian companies.
Ukraine’s western allies will have to form a package of threats and incentives for Moscow. Moreover, both those and others will not necessarily be addressed only to Russia. Poland attacks German branches from the Potok to Austria and the Czech Republic for violating the agreed EU energy policy. However, the very idea of combining deterrence and involvement of the enemy is close to the current American administration and any German one.
Germany, in principle, does not feel entitled to breed mortal enemies in Europe, especially among the former victims of its own aggression. Biden, as a politician during the Cold War and detente, is also aware of the eternal dispute between the two methods of dealing with dictatorships – isolation and involvement, and does not exclude both. In addition, Ukraine has been promised serious assistance in the energy transition.
Green diktat
An agreement that at first glance seems beneficial to Russia is in fact beneficial to all parties in its own way. Given the firm intention of Germany and Russia’s ability to complete the gas pipeline, the agreement gave Russia the opportunity to do this without additional pressure, and Germany, not in spite of, but in agreement with the United States. The Biden administration, faced with a fait accompli, at the last moment managed not to stay away from it and act as a friend of some of its allies and a guarantor of the interests of others. The pipeline would be completed, and Germany would try to soften the situation for Ukraine and so, but now it is a co-author of this the easing turned out to be the United States. Finally, Ukraine, which could have received nothing but vague promises, received a written agreement from its allies, half of which was devoted to it, mentioning specific amounts.
In the worst-case scenario, Europe’s task is to help Ukraine recover the lost money and 10 billion cubic meters of gas it receives from Russian transit. In particular, promises from the American-German agreement to support Ukraine’s transition to green energy with money and technology are aimed at this.
The US-German agreement on “Nord Stream 2” cannot be interpreted correctly, forgetting about the big energy transition that Europe and the United States are planning to implement in the next one and a half to two decades. This transition should smooth out the gain that Russia has received now and give the West new instruments of competition. If the transition to new energy is successful in Europe, it is hoped that the benefits Gazprom gained after the completion of the Potok will be temporary. As the European economies move to new ecological sources of energy, they will need less Russian hydrocarbons, and Europe, as a buyer in a green future, will communicate from a position of technological superiority with its supplier from the hydrocarbon past, as the countries that built the railway network communicated in the 19th century with horse breeders.
The move to green energy was probably one of the important arguments that convinced Biden to accept a fait accompli and go to an agreement with Merkel. While many in Russia still view the energy transition as a utopia, if not a military ruse in the global competition, most Western countries are about to go into the post-hydrocarbon gap in earnest.
Unlike Trump, Biden shares this desire with the Europeans. Recently, especially over a year and a half of the Covid epidemic, the United States has lost its image of a country that can successfully coordinate global efforts and be at the forefront of solving common human problems. Biden intends to return the United States to this position where it has suffered the most – in the fight for clean energy against global warming. This is important not only for nature, but also for American leadership. Whoever manages to lead the fight to stabilize the climate will lead world progress and formulate future international rules.
The structure of the German energy sector is both advanced and archaic. More than a third comes from the sun and wind, but almost a quarter from coal and only 12% from gas. After the accident at Fukushima, Germany abandons nuclear power plants, which provide 12.5% of its energy. Gas, the cleanest of hydrocarbons, is intended to replace losses, displace coal and become a bridge for the transition to renewable energy, including hydrogen energy.
The West will try to compensate for the weakening of Ukraine’s positions by including it in the pan-European energy transition. New energy is one of the areas where Ukraine already feels quite confident and, if it does not miss its own, could become one of the exporters of green energy to Europe. Gas pipelines allow transporting not only gas, but also hydrogen, however, in their current form – no more than 10% in the methane-hydrogen mixture. These 10% in the gas transportation system passing through the territory of Ukraine to Europe can be used for Ukrainian-made hydrogen.
Russia can compete for the export of its own hydrogen not only through both Streams, but also through the old Soviet pipe: this competition can become one of the incentives for Russia to prolong Ukrainian transit. The energy transition, as conceived by its initiators, should create a new coordinate system and a new package of incentives and punishments for relations with Russia. The still necessary hydrocarbon Russia, depending on its political behavior and its own technological achievements, will either be taken into a low-carbon future, or left to grow poor in a dirty past with its increasingly less needed hydrocarbons. Russia can prepare for this new format of relations or, as has already happened, hope that they will not succeed.
Courtesy: (Carnegie)
