Negative Energy: Berlin’s Trumpian Turn On Nord Stream 2

  • Date: 01/03/19
  • Gustab Gressel, Europeam Council On Foreign Affairs

Berlin’s handling of the controversial Nord Stream 2 project reveals double standards and neglect of the pipeline’s security repercussions. 

Berlin has handled the dispute over the Nord Stream 2 gas pipeline with unilateralism and clumsiness worthy of US President Donald Trump. On 8 February, the EU Committee of Permanent Representatives was to vote on a proposal to tighten the rules of the common energy market – which have thus far enabled states and companies, particularly Germany and Gazprom, to circumvent EU law. Paris signalled on 7 February that it would support the proposal, igniting debate among European policy analysts and prompting hasty diplomatic interventions from Berlin. Although this eventually led to a Franco-German compromise of sorts, the incident reflected Germany’s increasing isolation on the issue.

Paris has a direct interest in Nord Stream 2 through French firm Engie’s involvement in the project. Yet the French government appears to be less worried about commercial interests than the prospect that German insistence on completing Nord Stream 2 will drive other EU member states into the hands of the Trump administration. Portraying itself as a fearsome opponent of the project, the administration likely sees Poland and other opponents of Nord Stream 2 as potential allies in a coming trade war with the European Union. For Eurosceptic-led governments such as that in Italy, the debacle over the pipeline vindicates their view of the EU as a club whose rules twist to accommodate the tactical preferences of Berlin.

What happened to the proposal?

The proposal would probably not have prohibited the construction of the pipeline outright but rather made it more expensive and transparent. The proposal would also have given concerned EU countries a greater say in the project and the European Commission a pivotal role in supervising energy contracts, thereby diminishing Gazprom’s ability to distort the European gas market.

When it came out in support of the proposal, France did not perceive this as being an affront to Germany: the pipeline had drawn increasing criticism from across the EU and constant attacks from Trump. Greater EU oversight of the project would have allowed the German government to deflect much of this condemnation without giving in to Trump (which is widely seen as something close to domestic political suicide). By bridging the political divide, the proposal would not only have reduced Germany’s isolation but also reduced the risk that the United States would exploit disagreements over Nord Stream 2 to split the EU.

German Chancellor Angela Merkel has only added to the confusion with her inconsistency on the matter. She voted down the European Commission’s first attempt to change EU energy regulations in November 2017, but acknowledged the following spring that Germany needed to address the security concerns about Nord Stream 2 of Ukraine and other countries. Hence, many diplomats thought she would accept the proposal.

The EU’s reaction

Nonetheless, Berlin’s reaction was far from accepting. Merkel and President Frank-Walter Steinmeier immediately pressured Paris and, particularly, Bucharest (which currently holds the EU presidency) to water down the proposal. The resulting compromise denies other EU member states and the European Commission any influence on the process of commissioning the pipeline. Gazprom will still be forced to transfer operative ownership of the project to another company – most likely, a Gazprom subsidiary similar to the one that operates the European Gas Pipeline Link interconnector – and to allow other providers to access to the pipeline. Neither provision will change much: such a subsidiary would have the opportunity to hire loyal politicians as board members and thereby widen the Russian corruption network in Germany. And other, non-Russian suppliers cannot access the pipeline because it lies on the seabed. The decision of whether to involve other Russian companies in Nord Stream 2 rests with President Vladimir Putin. As such, the watered-down version of the proposal is only a compromise in the sense that it is better than nothing.

The German government’s handling of the project will cause lasting damage. Several of the arguments Berlin put forward in support of Nord Stream 2 have been revealed as lies:

  1. Nord Stream 2 is a commercial project. 
    This argument holds that the pipeline will fit within the EU’s legal framework and that there are no grounds to interfere with business initiatives unless they violate existing rules. It is now clear that the German government actively intervenes to preserve a regulatory ecosystem in which the project can survive.
     
  2. German energy supply is separate from German foreign policy. 
    German pipelines only come about due to the heavy political support they receive. This erodes the trust placed in Germany to uphold EU sanctions, for two reasons. Firstly, because the Yamal gas field – which feeds the Nord Stream pipelines – is difficult to exploit, the project will only be a long-term commercial success if the EU lifts its sanctions on the Russian energy sector. Secondly, if many smaller states are prevented from conducting business with Russia but Berlin provides political cover to deals with the country it sees as strategically important, the European sanctions debate will descend into cynicism.
     
  3. The Christian Democratic Union (CDU) and the Social Democratic Party (SPD) have substantively different views of Nord Stream 2. 
    In the past, SPD cadres led the way in openly advocating for the pipeline project, while the chancellery remained silent on the issue. Many of Germany’s European allies hoped a new German government would take a different approach to Nord Stream 2 or that Merkel and other key figures would prove trustworthy because they had no personal involvement in pushing for the project. But Merkel has now personally defended the project, citing the usual arguments of lobbyists for Nord Stream 2 and thereby toxifying her and the CDU on the European stage. Indeed, many European opponents of the project now see Germany as a whole as the problem.
     
  4. The German government is a multilateralist protector of the rules-based order. 
    Germany’s behaviour shows that it only accepts the rules when convenient, and otherwise uses unilateral bullying tactics to preserve regulatory loopholes that favour German interests. While it loves to rant about Trump’s disruptive and confrontational behaviour, the German government hardly behaves any differently when its interests are at stake.
     
  5. The EU is a rules-based organisation in which all member-states have equal rights. 
    While this is the case on paper, the Nord Stream 2 case is widely perceived as one more example of double standards that favour Germany. The EU has prevented Italy, Bulgaria, Hungary, Greece, and Slovakia from engaging in bilateral pipeline projects with Russia under its Third Energy Package. Yet Germany has used a loophole in European regulations to launch the kind of project that others have been denied, and to strengthen its position in the European gas market. Having seen another major European power become increasingly willing to bend and break the rules, Italy is now more likely than ever to demand exemptions from the Stability and Growth Pact.

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