After Russian President Vladimir Putin had recognized the Donetsk People’s Republic and Luhansk People’s Republic as independent and sovereign states in violation of international law, Germany has responded by halting the certification process of the Nord Stream 2 gas pipeline. Germany is Russia’s biggest gas customer.
“It is important to launch new sanctions now in order to prevent an escalation and a disaster,” Scholz stated. “These are difficult hours for Europe, and almost 80 years after the end of the Second World War, we might see a new war in Eastern Europe,” he continued. He further went on to say that this suspension of the certification process was necessary to send a clear signal to Moscow, punishing the mobilization of troops into Donetsk and Luhansk, regions of which are part of Ukraine but was recognized by Russia.
The proposed Nord Stream 2 gas pipeline was notably completed last September. However, its certification has been put on hold by German regulators. Germany’s western allies, namely the United States, the United Kingdom, and Ukraine itself, have opposed the pipeline since 2015 as it increases the influence of the Kremlin across Europe. Without the certification, the pipeline cannot pump and supply gas across the Baltic Sea, reducing Russia’s $1 Billion dollar a day revenue stream from oil and gas exports.
The $11 billion gas pipeline is owned by Russia’s state-owned energy giant, Gazprom, which has the capacity to deliver 55 billion cubic meters of gas per year, with Germany benefitting most from the pipeline as a source of natural gas for as many as 26 million German homes and would make up more than 50% of Germany’s annual consumption worth over $15 billion.
With energy being a major political issue in Europe and where Russia is the biggest gas supplier in central and eastern Europe, the gas pipeline is one of the bargaining chips Germany has to keep Russia at bay. However, this comes with the consequence of alienating Russia from Germany, setting gas prices higher for other countries reliant on Russia for their energy supply due to transportation costs, bringing Europe to a possible energy crisis. The pipeline itself saves Germany about $1 billion to $2 billion a year as it would save them transit through Ukraine.
Russia’s energy minister Nikolay Shulginov stated that Europe would not be able to source natural gas from anywhere else if the pipeline was discontinued and if countries were to boycott Russian natural gas. Furthermore, Deputy Chairman of Russia’s Security Council Dmitry Medvedev, in retaliation to Germany’s sanction, tweeted:
German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline. Well. Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!
— Dmitry Medvedev (@MedvedevRussiaE) February 22, 2022
German Chancellor Olaf Scholz and the rest of the German government had tried to keep the Nord Stream 2 gas pipeline out of the talks with regard to Russian economic sanctions, most recently when US President Joe Biden had announced that he would bring an end to the Nord Stream 2 gas pipeline during a meeting with Scholz during the first week of February. When asked by a journalist how he would exactly put an end to the energy project, he just stated that he promised that he could do it and proceeded to say that he had full confidence in Germany.
The German Chancellor, being cautious of his words during the conference, did not explicitly say or mention the Nord Stream 2 gas pipeline then, stating, “We are acting together, we are absolutely united, and we will not taking [be taking] different steps, we will do the same steps, and they will be very, very hard to Russia, and they should understand.” The Chancellor exercised caution as providing cheaper gas had been one of the issues Scholz’s Social Democrats (SPD) had relied on for votes as the high prices of gas hit Germany’s low-income workers.
United States Press Secretary Jen Psaki welcomed Germany’s decision to suspend the certification. In a tweet, she said that the United States and Germany have been in close consultation ever since Russia’s announcement to recognize the breakaway states and continued on to say that the US would be imposing its own set of sanctions. Ukrainian Foreign Minister Dmytro Kuleba also approved of the move, saying that he “expressed my conviction that in this new reality Germany can do even more for peace in Ukraine and wider Europe.”
@POTUS made clear that if Russia invaded Ukraine, we would act with Germany to ensure Nord Stream 2 does not move forward. We have been in close consultations with Germany overnight and welcome their announcement. We will be following up with our own measures today.
— Jen Psaki (@PressSec) February 22, 2022
It seems that Germany has now taken a definite side. Prior to the decision to halt the gas pipeline, Germany was facing extreme criticism and flak from their Western allies as he was lukewarm to condemn Russia due to the economic gains Germany would obtain from the pipeline. Notably, the German government offered to send 5,000 helmets to Ukraine instead of weapons or other firearms, which drew the ire of current Kyiv mayor and former World Heavyweight Boxing Champion Vitali Klitschko. Klitschko then went on to say that he thought the gesture was a joke and that it had left him speechless.
“Now it’s up to the international community to react to this one-sided, incomprehensible and unjustified action by the Russian president,” the German Chancellor stated in Berlin, continuing to say that breaking international law won’t go without consequences.
On the financial side of the recent sanction, natural gas prices in Europe surged to a new high on Tuesday where it had leaped to $89.54 per megawatt-hour from $81.04, according to a report by CNN. However, the Head of Gas Analytics at Independent Commodity Intelligence Services has said that the sanctions that hit Nord Stream 2 shouldn’t affect the prices for the incoming winter season. Reports have also said that liquified natural gas (LNG) from the United States and Qatar could help Europe with gas disruptions brought upon by high gas prices. However, the overall long-term supply of gas to Europe in the case that Russia stops supplying gas to several countries will be felt across households as analysts predict a shortage of LNG if such a draconian measure were to be implemented by the Kremlin.