What does an $11 billion undersea pipeline between Russia and Germany have to do with Ukraine? And why is it such a big deal? The answer has everything to do with how Europe gets its energy.
The 750-mile pipeline was completed in September but has not yet received final certification from German regulators. When up and running, it would boost deliveries of gas directly from Russia to Germany.
The United States, the United Kingdom, Ukraine and several EU countries have opposed the pipeline since it was announced in 2015, warning the project would increase Moscow’s influence in Europe.
Nord Stream 2 could deliver 55 billion cubic meters of gas per year. That’s more than 50% of Germany’s annual consumption and could be worth as much as $15 billion to Gazprom, the Russian state owned company that controls the pipeline, based on its average export price in 2021.
Energy is a major political issue in central and eastern Europe, where gas supplies from Russia play an essential role in power generation and home heating. Natural gas prices are already near record highs in Europe, and a conflict in Ukraine could bring more pain to consumers.
As Russia’s biggest gas customer, Germany has tried to keep Nord Stream 2 out of global politics. But the issue has become unavoidable after Russia amassed over 100,000 troops near its border with Ukraine.
There’s lots of history here.
Disputes over energy prices have plagued the relationship between Russia and Ukraine ever since the collapse of the Soviet Union in 1991, with Russia cutting supplies of gas to its neighbor on a number of occasions.
Russia has in recent months denied using energy to put pressure on Europe. But the International Energy Agency has blamed Moscow for contributing to the current European gas crisis by supplying less than it could.
Nord Stream 2 could help change the balance of power in Europe when it comes to energy. At the moment, Russia needs Ukraine, because a large amount of the gas it sells to Europe flows to the rest of the continent through the country.
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