Will Russia's Loss be America's Gain in Europe?

Updated: Feb 1

Last week, in response to the confirmation that Russian opposition leader Alexei Navalny had indeed been poisoned by the nerve agent Novichok, a substance favorited by Russian assassins, German Foreign Minister Heiko Maas insinuated that Germany could reconsider the nearly completed Nord Stream II pipeline should Russia refuse to cooperate with European investigators looking into the alleged assassination attempt against Mr. Navalny. But, it was not long after that Minister Maas backtracked on his earlier statement, conceding that to pull the plug on the pipeline now would produce dire consequences for the German companies involved and should not be taken lightly. This quick turnaround reflects the vulnerability that Europe—and in particular, Germany—faces when it comes to energy

insecurity and how that continues to shape the continent’s relationship with Vladimir Putin’s Russia.

First, it would be helpful to know what exactly the Nord Stream II pipeline is and why it has been so controversial. Nord Stream II is the sister pipeline to the Nord Stream I pipeline completed in 2011. Running parallel to each other, when completed the Nord Stream II will carry Russian liquified natural gas (LNG) under the Baltic Sea to a port on the German coast. When completed, the pipeline will double the amount of LNG that Russia—already Europe’s largest gas supplier—can import into Europe using the Baltic Sea route. This bears major political ramifications for two reasons. First, it would allow Russia to bypass the traditional route for transporting gas into Europe: the land route through Ukraine. Gazprom, the Russian state gas company and primary shareholder of Nord Stream II, has argued that, due to the ongoing civil war, Ukraine has become too unstable to reliably facilitate the delivery of much needed gas to Europe, and while that may be true (albeit somewhat doubtful since the war in Ukraine is mainly one of posturing with very little real fighting), the pipeline would also serve to further isolate Ukraine, politically and economically, from the European Union, which has been a high priority goal of Putin’s for the better part of a decade. Secondly, the pipeline’s European (and American) critics have charged that such a project will make the EU far too dependent on Russian gas and surrender European energy security to a potentially hostile power that has already shown itself to feel little fealty to international norms. Despite these concerns, at the behest of Germany, the pipeline has continued to move forward. This is because, as many analysts have pointed out, the EU is stuck between a rock and a hard place when it comes to Russia. There can be no doubt that Putin’s actions in Ukraine, Syria, Georgia (and perhaps next in Belarus) are those of a revisionist power seeking to undermine established norms of geopolitical behavior. But, Europe’s demand for energy is astronomical and Russia is the closest source capable of satisfying that demand. This, of course, begs the question: why is Europe’s energy demand so high? First, the EU is an economic powerhouse and boasts a market larger than even that of the United States, making it the largest single market in the world. The EU is also home to almost half a billion people ranking the bloc behind only China and India in terms of population. Running an economy of that size with that many people inevitably means a high energy bill. But, the European continent is relatively resource poor. Compared to the United States’ vast deposits of oil, shale, and natural gas or China’s abundant coal and rare earths mines, Europe lacks the resources to be energy independent and, furthermore, the high population density of the EU means that exploiting what resources are available in Europe would be tricky. This is all exacerbated by a growing trend against nuclear power across the bloc. Europe has long relied on nuclear power as a clean and sustainable source of energy dating back to the Euratom Treaty signed in 1957 by the six founding members of the EU. And in many parts of Europe (such as France who procures upwards of three quarters of her energy consumption from nuclear reactors dotted across the country) that is still the case. But, following the Fukushima reactor meltdown in Japan in 2011, many Europeans began to turn against nuclear power, including Germans who resolved later that year to shut down all of their nuclear reactors by 2022. Part of the argument was that by phasing out nuclear power, Germany could embrace more renewable energy sources such as solar and wind, but Germany is also Europe’s biggest manufacturer whose economy often leads the bloc in size and growth. This means that with each nuclear reactor closure, Germany has been forced to increase carbon emissions and import more fossil fuels, most of them coming from Russia. On the other side of the Atlantic, the pipeline has been a flashpoint in U.S.-EU relations and has drawn the ire of the Trump administration who levied sanctions against the project in December to a chorus of disapproval from German policymakers. These sanctions targeted not only Gazprom and other Russian companies, but many European companies involved as well—which is a rarity in U.S. policy and resulted in the Swiss-Dutch energy partnership Allseas leaving the project. The Americans are not without their supporters, though; Ukraine and EU member country Poland had long lobbied for the U.S. to get involved, neither of them eager to see Russia gain more influence in Europe. But, the U.S. has another reason for taking interest in this issue in particular. As the world’s leading producer of natural gas, the United States naturally wants to break into the world’s largest energy market and denying Russia dominance in the European market is essential for ramping up America’s presence there. Unfortunately, the coupling of European energy demand with American gas supply faces surprisingly many obstacles for a match seemingly made in heaven. First, many elements of the domestic American market make exporting gas difficult. First and foremost is infrastructure. The U.S. embarked on the path of fossil fuel exploitation under George W. Bush with the goal of energy independence in mind. By subsidizing natural gas exploration and exploitation, the U.S. was able to produce an abundance of gas and become energy independent. But, with so many people rushing to produce natural gas, the market became oversaturated and American gas prices plummeted. This meant that gas producers needed to find new markets to get rid of excess gas and stabilize prices in the American market. But transporting natural gas across long distances is difficult and, whereas Russian gas can get to Europe by pipeline, American gas needs to be liquified and shipped, an intensive process that involves cooling the gas to -260℉. However, many US producers lacked the facilities to liquify gas as gas in the American market is often transported by pipeline which meant that breaking into foreign markets would require retooling the domestic infrastructure. Under the Trump administration though, the U.S. has made a reinvigorated push to break into the European market. American producers’ capability to liquify natural gas has greatly increased and the EU is now the number one destination for American liquified natural gas exports. That being said, Russian exports to Europe still dwarf America’s share of the market and, as the Navalny affair shows, Europe is not ready to bank on American gas anytime soon. Further, the American natural gas industry has been particularly decimated by freefalling prices due to the coronavirus pandemic and the ensuing crash in demand. Due to stubbornly low prices in the domestic market, the industry has never been that lucrative but now, with crashing prices in the global market too, some wonder if the industry can recover. But, if American producers can recover, they will likely be prepared to truly challenge Russia for dominance in the European market which could potentially strengthen Europe’s biggest and most glaring weak spot when dealing with Vladimir Putin’s Russia.

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