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Whose Pipeline Is It Anyway?

It has taken three years and one pipeline for the Trump administration to respond to Vladimir Putin’s increasingly hostile Russia. Since ascending to the White House, Donald Trump has repeatedly expressed his intention to cut the US’s contribution to NATO –– an indispensable counterbalance to Russia in Europe –– and in one particularly stunning display at a 2018 summit, professed his faith in Vladimir Putin’s word over US intelligence assessments on Russian election interference. But recently, one of Russia’s more ambitious economic plans has become the subject of an unlikely, bipartisan rebuke from Congress and the Trump administration. The Nord Stream II pipeline (NS2) –– an ongoing project intended to expand direct natural gas exports from Russia to Germany –– seemingly conjured the administration’s fears of a German economy “captive” to Russian influence. Citing concerns of Russian expansionism, the Trump administration, in December, approved a round of economic sanctions on companies tied to NS2.

While Putin’s Russia undoubtedly poses a legitimate threat to western democracies –– look no further than the annexation of Crimea and later interference in the 2016 US presidential election –– the recent outcry over NS2 is exaggerated, and part of a greater policy program rife with contradictions. Criticisms of NS2 typically follow the same line of argumentation: Germany currently sources 40 percent of its natural gas from Russia, and doubling it via the completion of NS2 will simultaneously boost German reliance on Russian gas and heighten Russia’s political leverage over Germany and its Eastern European neighbors. However, this criticism overstates the extent to which Germany will have to rely on Russian gas and ignores the pivotal role Germany has played in countering Russian aggression and defending vulnerable Eastern European states. 

Take the oft-used argument that NS2, in bypassing Ukraine, will deprive the beleaguered nation of transit fees and weaken its stance against Russia. In March 2018, a bipartisan coalition of US senators articulated this concern in a letter to Treasury Secretary Steven Mnuchin, writing, “by circumventing Ukraine, Nord Stream II will remove one of the biggest reasons for Russia to avoid large-scale conflict in Eastern Ukraine—as the Kremlin is well aware.” But in light of recent negotiations between Russia and Ukraine over gas transport, it seems the senators’ fears have not borne out in reality, in large part due to German intervention on the matter. This past December, Russia and Ukraine reached an agreement guaranteeing the continued transit of Russian gas through Ukraine after the NS2 is completed. Additionally, Russia agreed to accede to an international court arbitration forcing the predominantly Russian-owned natural gas company –– Gazprom –– to reimburse Naftogaz, Ukraine’s state energy company, after years of legal disputes following the annexation of Crimea.  According to the Financial Times, absent German insistence that Ukraine’s interests be met, Russia would have been less likely to make those concessions. Indeed, less than a month after the senators drafted their letter to the treasury secretary, German Chancellor Angela Merkel threatened to abandon the project altogether if Ukrainian interests were not preserved. 

 Guaranteeing energy flow through Ukraine was certainly not, however, the sole instance in which Germany has confronted Russia in regard to its relationship with Eastern Europe. For decades, Germany has imported large quantities of natural gas from Russia yet has continued to challenge the Kremlin when Europe’s geopolitical interests are at stake. Angela Merkel joined the resounding sanctions regime imposed on Russia after the 2014 annexation of Crimea, and recently vowed to continually renew the sanctions until the Kremlin relinquishes Ukraine’s sovereign territory. Even if the post-annexation sanctions regime puts the bilateral economic relationship between Germany and Russia at risk, Merkel has nonetheless conveyed a willingness to step in when the Kremlin abrogates geopolitical norms, and even imperiled the NS2 project for the sake of protecting the Ukrainian economy via the aforementioned negotiations. Germany has long benefited from Russia’s cheap source of energy, but to insist that this mutually beneficial energy exchange amounts to tacit German accession to any form of Russian aggression ignores established precedent.

" Germany has long benefited from Russia’s cheap source of energy, but to insist that this mutually beneficial energy exchange amounts to tacit German accession to any form of Russian aggression ignores established precedent."

Given Russia’s geopolitical escapades of the last decade, it is not entirely out of character for US officials to be suspicious of the Kremlin’s motives. But considering Europe’s shifting energy trends and Russia’s own economic constraints, it is difficult to see the Kremlin waging an energy war that would inevitably hamstring its own economy. Completion of NS2 will vastly expand German imports of Russian gas, but natural gas only accounted for 20 percent of Germany’s total energy consumption in 2016. While natural gas will likely rise as a proportion of German energy consumption, it is important that this increase be placed in the context of broader energy trends. Germany has set a target for generating 65 percent of its energy consumption from renewable sources by 2030, and accessing inexpensive natural gas reserves from Russia eases this transition away from fossil fuels. Pushing Germany to pursue costly expeditions for alternative sources of natural gas could only undermine German efforts to decarbonize, thereby impeding German progress toward energy independence. 

Even with the additional political leverage the Kremlin gains from the completion of NS2, Putin will unlikely use the pipeline as an economic weapon, lest his domestic economy suffer the ramifications. Russia’s geopolitical ambitions have been constrained by its perennial economic woes, and the oil market –– the Russian economy’s lynchpin –– is a particularly sensitive area. The 2014 oil market collapse, which came on the heels of the post-Crimea sanctions, plunged the Russian economy into a recession and tanked Putin’s approval ratings. Putin, who has a history of conducting foreign policy on the basis of his approval ratings, would be wise to avert an energy standoff with the EU, especially with the Russian economy in jeopardy. Besides, the oil market’s tepid response to this past year’s war-mongering in the Persian Gulf –– a product of soaring US shale production –– has shown the international community that the oil price shocks of the 1970s are a geopolitical weapon of the past. Therefore, it is hard to see the Kremlin using NS2 to inflict any significant lasting economic pain.

Given these economic and political realities, one might wonder why, exactly, the Trump Administration has chosen the NS2 as a front to counter Russian expansionism. Only one month before Trump introduced sanctions on the NS2 project, the administration announced cuts to the US contribution to NATO, which could only bolster Russia’s political influence over Europe –– at the very least symbolically. It is true that Trump has long sought to scale back commitments to NATO and broader contributions to international security, but the administration’s emphatic concerns over a single pipeline seem to be incongruous with their concurrent retreat from the European security apparatus. The least cynical interpretation of this apparent contradiction might be that the administration is simply pursuing, albeit somewhat recklessly, the most fiscally conservative approach to countering Russia. But perhaps the administration is also acting with profit in mind. Consider the burgeoning US fracking industry: The Shale Revolution has precipitated a sharp rise in US natural gas reserves, and the administration’s staunch proponents of shale production have recently sought out the EU as a growing market for US energy exports. It is possible, then, that the Trump Administration’s pursuit of a market for US shale production in the EU is really just masquerading as a vague concern for German security. 

Again, it is not an unfounded concern –– the Kremlin certainly poses a real threat to the democratic integrity of the entire EU. But if the Trump administration truly wishes to grapple with Russian aggression, its narrow focus on a single pipeline –– in the context of a broader policy program replete with contradictions –– is far from the appropriate response to counter Putin’s expansionism. While NS2 will undoubtedly alter the relationship between Germany and Russia, claims of German “captivity” are dramatically overblown, especially when considering the fortitude with which Merkel has handled negotiations with Russia thus far. Interfering with the German government’s ability to conduct its foreign policy independently will only alienate the US from Europe’s largest economy and a crucial ally in the broader Western stance against Russian expansionism.

Image via Flickr (rickz)

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