Nord Stream 2 is major leverage against Russia: Ex-German ambassador

Russia will lose tens of billions of dollars if a pipeline project to transport gas to Germany is scrapped – and this threat is something Europe can use to put pressure on Moscow, according to a former German ambassador in the USA

“I think the pipeline represents a major lever for us, if we manage it intelligently,” said Wolfgang Ischinger, who is now chairman of the Munich Security Conference.

Nord Stream 2 is a gas pipeline from Russia to Germany that will transport 55 billion cubic meters of natural gas to Europe each year if approved by regulators. It is contentious because it bypasses countries like Ukraine and Poland, which strongly oppose it, and the project has been caught up in the geopolitical debate.

Meanwhile, the United States and its European allies have been alarmed by a build-up of Russian troops on Ukraine’s border, with many experts fearing Moscow would invade its neighbor.

Some European leaders have suggested the pipeline should be added to a list of potential sanctions against Russia.

Could this backfire on you?

There is no way Russia wants its traditional source of income to be affected, Ischinger told CNBC’s Hadley Gamble on Tuesday.

“If we have to close this pipeline project, Russia will definitely lose, you know, tens of billions of dollars or euros in the future,” he said. “It cannot be in Russia’s interest at all.”

Yet blocking the pipeline may just as well backfire on the EU.

About 43% of total gas imports into Europe come from Russia, according to Eurostat. Europe has been in the throes of an energy crisis since last year, facing record gas prices as part of the lifting of Covid-19 restrictions, which have put pressure on depleted natural gas stocks. Governments’ goals to switch to cleaner energy have triggered a higher demand for gas because it is considered cleaner than some other fossil fuels.

A worker adjusts a pipeline valve at the Gazprom PJSC Slavyanskaya compressor station, the starting point of the Nord Stream 2 gas pipeline, in Ust-Luga, Russia on Thursday, January 28, 2021.

Bloomberg | Bloomberg | Getty Images

Benchmark natural gas prices have more than quintupled in the past year, and the outlook remains bleak for consumers and businesses – threatening the regional economic recovery – largely due to lower gas flows in from Russia.

It will be “painful” for Europe to limit gas from Russia and there could be more energy shortages, but Moscow should expect Europe to respond if military activities intensify, he said. said Ischinger.

“It’s a leverage. I think Russia definitely has an interest in pursuing its sources of revenue by providing gas and oil … to its partners in Western Europe,” Ischinger also told CNBC. “We have to handle it carefully, but intelligently.”

Western officials have accused Russian President Vladimir Putin of using energy as a political weapon, which Moscow denies. Russia also denies claims by the United States for an invasion of Ukraine.

Boldest Words from Germany

The key to watch is the change in your policy coming from Germany, the final destination of the Nord Stream 2 pipeline. Former Chancellor Angela Merkel, who resigned in December after 16 years in power and had a warmer relationship with Putin that many of its Western counterparts, supported the pipeline and, in early 2021, called US sanctions “unacceptable.”

Germany’s new leadership has taken a very different stance. The country’s new Foreign Minister, Annalena Baerbock, said Germany could not approve the pipeline in its current form, saying in December that “as it is, this pipeline cannot be approved as it is. that it is”.

“To assert rather than to imply his foreign policy influence on the issue is a radical departure from the approach we saw under Merkel, and Baerbock is seen as keen to upset the foreign policy-making of the country. ‘Germany,’ said Maximilian Hess, a researcher at the Institute for Research on Foreign Policy. . Baerbock also raised concerns over Ukraine and EU energy legislation which Hess said “will appeal to critics of the pipeline in Washington and the eastern EU.”

The position is not finalized, however, as the position of the rest of the German government on the issue is not yet clear. “Uncertainty remains as to a possible retreat of German industry and the unity of the coalition on the issue,” added Hess, “which they avoided mentioning directly in the coalition’s program.”

– CNBC’s Silvia Amaro and Holly Ellyatt contributed to this report.

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