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Nord Stream and German-Russian energy relations during the Ukraine crisis

November 16th, 2014 by Marco Siddi, University of Edinburgh

Eight years ago, shortly after German and Russian leaders agreed on the construction of Nord Stream, then Polish defence minister Radoslaw Sikorski called it “the Molotov-Ribbentrop pipeline”. Sikorski compared the project to the 1939 pact between Nazi Germany and the Soviet Union, which partitioned East-Central Europe. Nord Stream, he argued, would allow Germany to secure its gas imports from Russia while Moscow simultaneously turned off the tap and blackmailed governments in East-Central Europe. However, contrary to Sikorski’s predictions, during the current crisis in Ukraine the pipeline has allowed Germany to take a tougher stance towards Russia than most EU member states.

Inaugurated in 2011, Nord Stream provides a direct link (via the Baltic Sea) for Russian gas exports to Germany. Prior to its construction, Russian gas reached Germany through pipelines crossing Ukraine, Belarus, Poland, the Czech Republic and Slovakia. The flow of gas was subject to disruptions resulting from political tensions and economic quarrels between Russia and some of the transit countries, most notably Ukraine. Thanks to Nord Stream, Berlin’s reliance on transit countries has now decreased enormously.

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According to International Energy Agency data, in 2012 Germany imported around 86 per cent of its natural gas demand, which totalled 87.2 billion cubic meters (bcm) a year. Russia is the main supplier of gas to Germany, providing over 31 bcm (namely 36 per cent of total German gas imports). In 2013, Nord Stream transported 23.5 bcm to Germany, but its yearly transport capacity is much higher, at 55 bcm. This means that German gas imports from Russia would be guaranteed even in the case of a complete blockage of imports via Ukraine.

Germany would only face problems at securing imports of Russian gas if tensions escalated further and Russia decided to put an embargo on exports to Berlin via Nord Stream. However, this is highly unlikely. Exports of Russian gas to Germany started in the 1970s and continued uninterrupted during the worst Cold War crises of the early 1980s – those following the Soviet invasion of Afghanistan, the downing of the Korean Airlines flight 007 near Sakhalin and the 1983 nuclear war scare. Furthermore, today revenues from gas sales to Germany (the biggest importer of Russian gas) are an important source for the Russian federal budget. Blocking this flow of energy and cash would seriously undermine vital German and Russian interests, hence it is a step that neither Merkel nor Putin would contemplate under the current circumstances.

While Russian gas exports to Germany are highly unlikely to face serious disruptions, the same cannot be said of supplies to several East-Central European and Balkan countries. These are the states that rely the most on the transit of Russian gas via Ukraine – which, with an estimated capacity of 155 bcm, remains the largest corridor for the westward flow of Russian gas. What is more, these countries are much more dependent on Russian gas supplies than Germany. In Slovakia and Bulgaria, more than 80 per cent of total gas imports come from Russia. The figures for Hungary, Slovenia, the Czech Republic and Austria are between 55 and 80 per cent.

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Other non-EU countries such as Serbia, Macedonia, Moldova and Bosnia are also heavily reliant on Russian gas and on the Ukrainian corridor, and some have limited storage capacity to face potential crises. In these countries, the memory of the January 2009 energy crisis is still fresh: back then, a Russian-Ukrainian gas price dispute resulted in the interruption of gas supplies, which paralysed their economies and heating facilities in the middle of the winter.

This contributes to explaining why the leaders of several East-Central European countries have been critical of EU sanctions against Russia. The prime ministers of Hungary, Slovakia and the Czech Republic have recently stated that the sanctions are meaningless and risk hurting the EU more than Russia. Outside the Union, Serbia has refused to align itself with Brussels, despite its EU membership ambitions. On 16 October, Serbian president Tomislav Nikolić hosted Vladimir Putin as guest of honour at a parade celebrating the seventieth anniversary of the country’s liberation from Nazi occupation and told him that Belgrade would not impose sanctions on Russia.

While scepticism towards EU sanctions increased in East-Central Europe, Germany reiterated its tough negotiating position vis-à-vis Russia at the Europe-Asia summit, which took place in Milan last October. Angela Merkel argued that the German and Russian stances on the crisis in Ukraine are very different and implied that her country would continue to back the current, intransigent EU line on Russia, including selected economic sanctions. The German chancellor may be right about confronting Putin and being suspicious of his true intentions in Ukraine. However, her position appears inconsistent with Germany’s flourishing energy trade with Russia via Nord Stream.

Under these conditions, the main economic risks that Germany is taking by confronting Russia are actually born by other EU member states – those that would suffer the most if the transit of Russian gas through Ukraine is interrupted. Although an agreement on the supplies of Russian gas to Ukraine was reached at the end of October (with the EU as guarantor of Ukraine’s payments to Russia), some East-Central European experts still fear that Russian exports via Ukraine will be disrupted this winter. In order to be consistent, Merkel’s foreign policy towards Moscow would have to put Germany’s own interests at stake, either by using German gas imports via Nord Stream as a bargaining chip with Russia, or by making credible commitments to support exposed EU member states if confrontation leads to the interruption of their gas supplies.

Marco Siddi, PhD in Politics at the University of Edinburgh

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