The Green Brief: Nord Stream 2 – chronicle of a death foretold

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After Vladimir Putin ordered Russian troops over the Ukrainian border, Berlin had no other choice but to shelve the controversial Nord Stream 2 gas pipeline linking Germany directly to Russia.

This decision was a long time coming. For months, pressure has mounted on Berlin to pull the plug on the controversial pipeline, which is fiercely opposed by Ukraine, Poland and other central and eastern European countries.

It was also resisted by the European Commission, which scrambled to amend the EU’s gas directive at the last minute in November 2017 in a bid to ensure the pipeline observes EU single market rules preventing the same company – Gazprom in this case – from simultaneously owning a pipeline and supplying it with gas.

But it was pressure from the United States which proved decisive. During German Chancellor Olaf Scholz’s inaugural visit to Washington earlier this month, US president Joe Biden declared Nord Stream 2 would be axed if Russia decided to invade Ukraine.

“If Russia invades, that means tanks or troops passing the border of Ukraine, then there will be no longer a Nord Stream 2. We will bring an end to it,” Biden announced, during the joint press conference with Scholz.

At the time, the German Chancellor remained silent next to the US President, refusing to repeat the warning in clear terms. Until the last moment, Scholz kept the door open, hoping that diplomacy would bring Putin back to the negotiation table.

His hesitations were understandable. Germany is fully dependent on imports for its natural gas supply, with Russian pipeline gas representing 32% of all imports, well above Norway (20%), and the Netherlands (12%), according to December 2021 data by ICIS analytics.

The question is what happens next. The shelving of Nord Stream 2 itself will not disrupt gas supplies to Germany because the pipeline never entered into service.

What matters more is the 40% of European gas consumption that currently still relies on Russia. And here, all options are still on the table.

The EU, the US and the UK have coordinated a package of sanctions against Moscow. And even though those sanctions aren’t specifically targeted at the energy sector yet, it makes little doubt that they will affect Russian gas supplies to Europe at some point. 

As a matter of fact, they already have. Last week, European Commission President Ursula von der Leyen said contingency plans were underway to import gas from the United States, Qatar and other potential suppliers in case of a partial disruption of gas imports from Russia.

“We have also spoken to major suppliers of LNG … in order to ask whether we could swap contracts in favour of the EU,” von der Leyen said, adding that Japan was willing to do this. Earlier this month, EU officials said similar contacts had been made, agreeing on contract swaps with South Korea.

Those arrangements are only temporary of course. And it’s not impossible that Nord Stream 2 will be revived one day on the back of a diplomatic resolution to the Ukraine crisis.

But whatever the outcome, one thing is now increasingly clear: this crisis has already seriously damaged Russia’s reputation as a reliable energy trading partner. That damage is probably permanent and irreversible now.

The immediate price for European consumers will be eye-watering – LNG imports from Qatar or the US will always be more expensive than cheap pipeline gas from Russia. 

“Welcome to the brave new world where Europeans are very soon going to pay €2,000 for 1,000 cubic meters of natural gas!” tweeted Dmitry Medvedev, the former Chairman of Gazprom and close ally of Vladimir Putin.

All this gives the EU further ammunition to accelerate the energy transition. “We are still too dependent on Russian gas. We have to strategically diversify our suppliers and massively invest in renewables,” von der Leyen said.

In the longer term, this crisis could go down in history as the turning point where Europe started definitively turning its back on fossil gas.

– Frédéric Simon

This week’s top stories

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News from the Capitals

BERLIN. Forest destruction in Germany more drastic than thought. Almost 5% of Germany’s total forest areas have been destroyed since 2018, according to new data based on satellite images, making deforestation a much larger problem than previously thought. Read more.

BUCHAREST. Romania to reduce fuel excises in bid to calm down prices. The government coalition agreed Tuesday on further measures to tackle the major increase in energy prices. One of the measures taken into account is halving the excise tax for fuels. Read more.

HELSINKI. Targeted measures to compensate for increased energy prices in Finland. The government has decided on temporary, targeted measures to alleviate the problems caused by soaring energy prices. The measures focus on transport, agricultural entrepreneurs and households. Read more.

MADRID. EU’s Simson in Madrid: Brussels mulls ‘different scenarios’ for gas supply if war in Ukraine. The EU executive is considering different scenarios for natural gas supply if Russia partially or totally restricts its exports to Europe, EU Energy Commissioner Kadri Simson stressed on Monday at a conference in Madrid. Read more.

DUBLIN. Irish opposition demands scrapping of carbon tax increase to fight cost of living crisis. Opposition party Sinn Féin will this week table a motion to scrap the increase in carbon tax scheduled for this spring in response to Ireland’s cost of living crisis. Read more.

PRAGUE. Energy policy dominates Fiala’s first Brussels visit. Energy policy was the main topic of discussion between European Commission President Ursula von der Leyen and Czech Prime Minister Petr Fiala (ODS), who visited Brussels for the first time Thursday. Read more.

BRATISLAVA. Slovak households’ energy prices stabilised until 2024. Electricity prices for Slovak families will not increase until 2024, the government and Slovenské elektrárne a.s., the largest electricity producer in Slovakia, has agreed. The government claims that the state will enable households to save more than €1 billion. Read more.

SOFIA. Bulgaria looking for ‘green’ and nuclear investments in US. The Bulgarian government has sent a high-level delegation to the US to secure “green investment”, modular nuclear reactors and the import of electricity storage technologies. The delegation is led by the powerful Deputy Prime Minister and Finance Minister Asen Vassilev. Read more.

BUCHAREST. Romania’s energy ministry prepares calls for energy projects. The Romanian Energy Ministry is preparing to launch calls for green energy projects funded from the National Recovery and Resilience Plan (NRRP). Read more.

ZAGREB. Croatian opposition slams government’s energy price measures. The package of measures to cushion energy price rises presented by the government has been welcomed by the entrepreneurs’ association, but attacked by the opposition. Read more.

SKOPJE | ATHENS. North Macedonia to reserve capacities at Alexandroupolis LNG terminal. The government decided to start signing agreements related to the reserve capacities of liquefied natural gas (LNG) at the floating LNG terminal in Greece’s Alexandroupolis, which is currently under construction. Read more.


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On our radar

23 FEBRUARY. European Commission proposal on sustainable corporate governance

2 MARCH. Joint European Action for more affordable, secure and sustainable energy

17 MARCH. Environment Council.

23 MARCH. Nature protection package: Revision of rules around sustainable use of pesticides and nature restoration targets.

30 MARCH. Circular economy package 1:

  • Sustainable products policy initiative, including a revision of the Ecodesign Directive
  • Review of the Construction Product Regulation
  • Proposal for a Regulation on substantiating environmental claims using the Product/ Organisation Environmental Footprint methods (green claims)
  • Strategy on sustainable textiles
  • Empowering consumers for the green transition 

5 APRIL. Emissions and pollutants package:

  • Revision of the Industrial Emissions Directive and update of the European Pollutant Release and Transfer Register (E-PRTR)
  • Review of EU rules on fluorinated greenhouse gases
  • Regulation on substances that deplete the ozone layer
  • Development of post-Euro 6/VI emission standards for cars, vans, lorries and buses 

3 MAY. International partnerships and energy package:

  • New strategy on international energy engagement
  • Joint Communication on a partnership with the Gulf

25-27 MAY. G7 meeting of climate and energy ministers.

7 JUNE. Joint Communication on international ocean governance

27 JUNE. Energy Council.

28 JUNE. Environment Council.

20 JULY. Circular Economy Package 2:

  • Policy framework for bio-based, biodegradable and compostable plastics
  • Review of the Packaging and packaging waste directive to reinforce the essential requirements for packaging and establish EU level packaging waste prevention measures and targets
  • Review of the Urban Wastewater Treatment directive 

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