BY PAUL RODERICK GREGORY
Much has been made of President Biden’s comment that “Nord Stream 2 is a bad deal for Europe.” Yet with the announcement by Secretary of State Antony Blinken that Nord Stream 2 sanctions are not in the U.S. national interest and will be waived, the Russian-financed European pipeline should glide to a speedy completion. There remains only German regulatory approval before Nord Stream 2 will become operational, unless Germany’s September elections yield some major surprises.
The Biden administration’s rationale appears to be that President Trump treated major ally Germany roughly, so we should give Germany what it wants — Nord Stream 2. Let our other European allies simmer; Trump hurt their feelings less than Germany’s, so they don’t count. And, besides, maybe a magnanimous gesture will bring Russia’s Vladimir Putin to a summit with Biden that will solve the world’s outstanding problems.
Trump, the alleged pro-Russian president, fought the Nord Stream 2 pipeline throughout his presidency; in that, he, like Biden, enjoyed the strong backing of the U.S. Senate. Trump wielded sanctions to scare off Western companies involved in its construction, leaving only Russian vessels, associated Russian oligarchs and the Nord Stream parent company, headquartered in Switzerland, at risk of further sanctions. Although the Nord Stream 2 project was launched in 2016, Trump managed to stave off its completion throughout his term before handing off the battle to the Biden administration.
Although the Biden administration promised in Senate testimony to oppose Nord Stream 2, Biden’s lack of interest in sanctions, no matter how bad Putin’s behavior, quickly became apparent. On Biden’s watch, Russian opposition figure Aleksei Navalny was incarcerated in a notorious Russian labor colony, Putin ordered a massive military buildup on the Ukrainian border, the Kremlin initiated a silent takeover of Belarus and generally played the role of spoiler on the international scene.
Although notable for its lack of cohesion, even the European Parliament levied new sanctions on Nord Stream 2, as the international community waited for the Biden sanctions.
The Biden administration’s decision to waive Nord Stream 2 sanctions cites the need to repair relations with Germany that were supposedly strained by Trump’s tough treatment of the Angela Merkel government. Besides, argued Berlin, Nord Stream 2 is simply a commercial project and it is not fair to play politics with it; instead, we need “business as usual.”
The Biden administration, in its sanctions waiver, ignored the fact that most of Germany’s European Union partners have opposed Nord Stream 2, which “stress tests” show is not necessary for European energy security. Germany, which presents itself as the guardian of European unity, seems to have placed its economic interests above the European enterprise. The countries of Eastern Europe and the Baltic States are most opposed to Nord Stream 2, insofar as the existing pipeline system through Ukraine, Poland, and Belarus to the rest of Eastern Europe will be abandoned as Nord Stream 2 comes on line.
Among the early conditions applied by the Merkel government to the project’s approval was the preservation of the existing Ukrainian pipeline system. It is, however, no accident that the gas volumes scheduled to go through Nord Stream 2 will fully displace Ukrainian pipelines. At low volumes, the Ukrainian pipeline system will collapse.
Former Putin advisor Andrei Illarionov points out the enormous political leverage that Nord Stream 2 will bestow on Russia’s Gazprom: Come winter, there can be service interruptions that threaten customers that oppose Russian policies; others may be favored in terms of price and delivery if they bend to Putin’s rule. Russia can continue to squeeze Ukrainian territory, while its European gas customers keep quiet.
It is notable that the Biden decision comes at the right political moment for Nord Stream 2. With a national election scheduled for September, Merkel retiring and scandals threatening the traditional German ruling coalition, the resurgent German Green Party seems scheduled for significant gains. Perhaps there will even be a Green chancellor, or a Green foreign or economics minister. In such a case, the official policy of Germany would turn against Nord Stream 2.
The Greens are on record as strongly opposed to Nord Stream 2, not only for environmental reasons but because it would significantly increase the EU’s dependence on Russian energy and pave the way for escalation against Ukraine. And the Greens already are threatening that they can use regulation to stop Nord Stream 2 in its tracks.
The Nord Stream battle is not over, however, and it is clear why Merkel’s Germany and Russia are trying to present the world with a fait accompli to head off a coming Green counterattack.
I suspect that Biden is playing the Obama administration’s “concessions to get concessions” game. If so, this will not work with Putin, who takes concessions as a sign of weakness. Even more threatening is the fact that Putin will never agree to a Ukrainian settlement that allows for a peaceful, Western-oriented and prosperous Ukraine. This means that the only path to any agreement would be one that sells out Ukraine by reintegrating it back into Russia’s sphere of influence.
Paul Roderick Gregory is a professor emeritus of economics at the University of Houston, a research fellow at the Hoover Institution at Stanford University and a research fellow at the German Institute for Economic Research. Follow him on Twitter @PaulR_Gregory.