The Nord Stream pipeline, a $10 billion venture that opened last month, will allow Russia to deliver 55 billion cubic meters of natural gas directly to Germany, bypassing the traditional transit countries in Eastern and Central Europe. This has the potential to destabilize political relationships in Europe by transforming Russia from a merely influential player to a power that dominates the region.
The pipeline allows Russia to bypass traditional transit countries when delivering gas to Germany by running it through the Baltic Sea, decreasing the amount of transit fees paid to the traditional transit countries while allowing the Kremlin better accuracy in targeting those countries for strategic shut offs of gas delivered for domestic consumption.
The creation of the Nord Stream pipeline means Western European heating can no longer be held hostage to price negotiations between Russia and its transit states. Such a situation occurred in 2009 when tens of thousands, mostly in Bulgaria, were left without central heating after a failure in price negotiations between Russia and Ukraine. The EU members who will be the recipients of this pipeline are all of the EU old guard, most notably Germany, France, and Denmark. In exchange for enhancing their own energy security, they have sacrificed the newer Central and Eastern European EU members to the wiles of the Kremlin.
The most obvious losers of the Nord Stream pipeline are the traditional transit countries: Ukraine, Poland and Belarus. Ukraine stands to lose a quarter of the gas it sends to Europe, resulting in an estimated $700 million in revenue loss for 2012. Not only will the transit countries lose financially, their leverage when negotiating gas prices with Russia will decrease significantly. To make matters worse, the same countries depend on Russia for much of their energy imports. Ukraine, for instance, already spends around 20 percent of its budget on gas imports from Russia, and has now lost any bargaining leverage it may have had in price negotiations.
The current investigation into former Ukrainian Prime Minister Yulia Tymoshenko’s gas deal with Russia highlights Ukraine’s fear of high prices on imported Russian gas. The Nord Stream pipeline has almost certainly weakened Ukrainian President Viktor Yanukovych’s position in his attempt to re-negotiate Ukraine’s gas price agreement with Russia, if he ever had any chance of succeeding. Ukraine and the other transit countries can now be targeted for politically motivated gas shut-offs without fear on the part of Russia that the European community will be affected. Using energy as a weapon of foreign policy will lead to energy becoming increasingly securitized in these countries, leaving the traditional transit countries increasingly on edge.
While the Ukrainians walk on eggshells around the Russians, the Western Europeans can rest easy now that the Nord Stream will deliver natural gas without interruption directly to Germany. In this gas deal, the very nature of internal relations in the EU is revealed. Germany and the other Western European nations are securing their own energy security, leaving the newer Central European members, such as Poland, out in the cold.
The EU continues to be unable to act as a unit on energy policy. This pipeline deal between Germany and Russia is yet another example of the endemic bilateral deals that prevent a common EU energy policy, and foreshadows a growing of differences among EU members. Influenced by an increasingly autocratic Russia, the newer Central European EU members could regress in areas such as rule of law in order to secure their energy needs from Russia; reversing the changes those same countries underwent in order to join the EU. Now that different member countries have different energy needs, obligations, and sources, a common foreign policy will also be more difficult to achieve. The Nord Stream gas import countries may develop a policy of appeasement towards Russia, while the non-import members hope for a stronger stance.
Some argue that the Nord Stream pipeline will actually increase economic interdependence between the EU (Germany) and Russia, underscoring that, while Germany is dependent on Russia for gas, Russia is also dependent on Germany as a market. This is fundamentally incorrect.
Germany and the EU have a practically insatiable demand for gas, while Russia has the leverage in this partnership. Threatening to take away the German/EU market from Russia is not feasible; around 40 percent of their natural gas is imported from Russia. The German government cannot allow its people to freeze in winter and therefore will try its best to ensure uninterrupted service from Russia, absent drastic diversification of their natural gas portfolio. Germany, on the other hand, while a large market, is not Russia’s only option. Russia continues to diversify and expand its own export market, most notably with the recent opening of a pipeline from Sakhalin in the east meant for the Asian markets. The new South Stream venture, that portends to strengthen European energy security, is the product of a strategy put forth by Gazprom that diversifies Russia’s gas transit routes rather than Europe’s suppliers. While greater Europe seems complacent with its current amount of gas import diversification, Russia is not, resulting in a lopsided relationship with a divided Europe clinging to a fiercely independent Russia.
To sum up, the Nord Stream pipeline is a potentially destabilizing force for the European region. Not only will the traditional transit countries become far more vulnerable to Russia’s whims, they are also beholden to Russia for their very survival every winter. The development of a common EU energy and foreign policy is now even farther from becoming a reality, with newer members again forced to cooperate with Russia on the Kremlin’s terms. Russia’s continued search for new markets means that soon appeasement may be Western Europe’s most appealing policy when dealing with Russia. Europe’s loss of leverage will be an exceptional loss, especially when negotiating foreign policy or in criticizing Russia’s continued disregard for rule of law. The only real benefactor from this deal is Russia, which, if recent trends in its foreign policy continue, is likely to exploit this new-found advantage.
Morgan Aronson is with the Atlantic Council’s Dinu Patriciu Eurasia Center. Photo credit: Getty Images.
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