Tag: Germany

Every day the Nord Stream 2 project is becoming more and more popular. We hear dispersedly about those benefits and prospects which this project promises. Nevertheless, so frank euphoria is absolutely strange. In fact, not all countries will benefit from the project, but in consequence we will pay off all together.

At first sight it may seem that Germany’s energy dependence on Russia, which with implementation of Nord Stream 2 will increase from present 55% to 80%, will create problems both economic and political only for the Germans. At the same time, you should not forget that Germany, despite the undoubtedly strong economic positions, is a member of the European Union. According to the European legislation its problems in case those arise (and they will arise of course) will lay down on shoulders of all the European community. And only some experts have already paid attention that Nord Stream 2 project’s price may actually be too high. That is exactly what Thierry Bros, who is a Senior Research Fellow at the Oxford Institute for Energy Studies where he is in charge of the Quarterly Gas Review, a visiting professor at SciencesPo Paris and a senior expert at Energy Delta Institute, is telling. According to him, “there is the issue of the European legislation. We have legislation on security of supply binding us to act collectively. If a country is exclusively dependent on one supplier, does it meet the N-1 regulation (readiness for action in case of the disruption of a major gas source)?

What if there is a problem? It does not have to be the Russians; it can be a technical problem…

According to the legislation, in case there is a problem in Germany, we will have to switch off the French, the Polish, the Hungarians, and the Italians to provide gas to the Germans. Germany is not following all those EU rules. The problem is that – contrary to what Angela Merkel and Vladimir Putin stated at their August meeting – Nord Stream 2 is a political project, not only commercial. Eventually Angela Merkel had to admit after many, many months that Nord Stream 2 is not only commercial, but also a political project. And if it’s political, it has to be discussed with the other EU Member States.

Brussels has tried to stop Nord Stream 2 in different ways, because it wants some Ukrainian transit. A WTO ruling is generally in favour of Brussels’ decisions. The Commission now knows it can push for more unbundling. The power of Brussels is a bit stronger. Germany shows absolutely no sign of willingness of entering into a decent, fair bargaining.

Merkel was one of the leading figures at the European level when France had a weak government. That’s over. France is back on track, Greece, Portugal and Spain are back on track. There is a unity.”

It is also necessary to remind that earlier, in Vilnius, heads of parliaments of Poland, Lithuania and Latvia signed the letter with the danger warning of Nord Stream 2 gas pipeline addressed to heads of parliaments of the European countries. Later Nord Stream 2 was also opposed by Estonia.

It is absolutely clear that Nord Stream 2 not only violates the provisions of the European legislation in the energy, which reduces monopoly power of electricity and gas suppliers, but it poses obvious threat for all EU MS. Nevertheless, despite all ‘not benefits’ and disagreement of many states, the project of the gas pipeline construction is being still implemented. Let’s ask for whose benefits the European politicians supporting the Nord Stream 2 project act?

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Modern world experiences a very difficult period of economic cataclysms, geopolitical and military conflicts, breach of international treaties, and post-war transformations in Europe. In this atmosphere of mistrust, contradictions and political pressure any economic project should be estimated comprehensively and giving due account to all positive and negative sides. Today the Nord Stream 2 project is the most contradictory both in economic and political dimensions. It provides a new weapon which by design, image and likeness may be compared to the well-known group of Trojan viruses. This malicious program cause harm to the target computer systems. It appears to be a useful software at first glance, though it will do damage once installed to your computer. Whether this program would be more or less aggressive depends directly on intention of its author. Well, we may say that the Nord Stream 2 is of the same poisonous for the European safety! It may legitimately penetrate into Europe, and, unfortunately, involves far-reaching harmful geopolitical consequences. Non-exhaustive list of possible malicious effects of this project within the integral system of the European community you may see below.

· Construction of the gas pipeline by Russia undermines collective energy supply security of Europe. It will divide Europe making a part of the EU countries dependent on the Russian energy resources to such an extent that Eastern and Southeast Europe will find themselves in power isolation. Implementation of the project will increase the Russian share in German gas market to above 50% enabling Kremlin to strengthen the pressure upon US allies within the European states through traditional tactics of manipulations with gas supply. Even today German support of gas pipeline construction gives Russia confidence in lack of unity within the EU as well as in high bribability and corruptibility of Western states.

· The Nord Stream 2 project violates provisions of The European Union’s Third Energy Package governing reduction of monopoly in gas and energy supplies. The competitiveness of EU suppliers of energy carriers has been threatened. At the same time Russia considers the Nord Stream 2 as a tool for counteraction to development of the EU power policy. Besides it, they expect to create strong prerequisites for strengthening contradictions between those states consuming and those transiting natural gas to Europe.

· The project is designed to level down position of the Ukrainian gas transmission network in delivery of the Russian natural gas to the West, while its elimination from transportation of the Russian natural gas to EU states will cause serious turbulence in stability of deliveries. In addition, the Nord Stream 2 will definitely give Moscow a free hand which annexed Crimea and occupied a part of Donbass right after construction of the first stage of the Nord Stream gas pipeline. The threat of further escalation of conflict in the region, or, even worse, of creating the new flash points of military conflicts in Europe will increase!

· The Nord Stream 2 will by no means promote diversification of gas supply to the European Union and will not provide access to the new gas sources.

· The Nord Stream 2 gas pipeline may exert only negative impact on ecosystem of the Baltic Sea.

· Construction of the Nord Stream 2 gas pipeline will unambiguously lead to increase in military presence of Russia on the Baltic Sea. This would be a threat for Europe – the gas pipeline will expand possibilities of Russian espionage actions which they currently deliver in the European states.

It is unlikely that the above arguments of harmfulness of the Nord Stream 2 project are unknown to the European establishment and EU officials of the European Union. Probably, they are well-known, and many of them do not approve intention of Germany towards its implementation.

In their turn, Russia seek promotion of the Nord Stream 2 project at the EU level frankly intimidating officials with expansion of a large-scale internal crisis in the European Union through levelling the interests of certain EU vanguard states. Nevertheless, the gas pipeline is unprofitable to the German business as well, since it challenges the whole Third Energy Package. However, if Germany opposes its construction, Mr. Putin will be very dissatisfied, which is apparently unfavorable situation for Germany. Well, probably the time came to take courage and apply the anti-virus program?

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As “Süddeutsche Zeitung” wrote, Vladimir Putin had assured the chancellor Angela Merkel that in case of need, Russia, from its own resources, would be ready to finance the construction of “Nord Stream 2”. At the same time counteraction to construction of the second branch of the gas pipeline on the ground of the Baltic Sea is one of fundamentals of the Polish foreign policy. And it is natural. Each serious buyer (and not only of gas) shall have alternative channels of supply.

However, it is worth asking a question: who “in fight for “Nord Stream 2” has more problems: Poland diversifying its procurement or Russia for which it becomes more and more difficult to earn from hydrocarbons from year to year. Let’s compare a situation with the Russian export of wheat. Now Russia is its largest exporter in the world. Its export has increased – in quantitative expression – by 36%. However, if we take into account export cost, it decreased by 1,8%. It means that Russia sells more and more, but the Russian growers earn from export less and less. If more precisely, the state pays extra for export, for example, at the expense of subsidies for transportation and also builds additional storages. We may see a situation which economists call inefficient investments.

Gas is not wheat, but the principle of inefficient investments remains the same. Let’s consider, for example, the Russian “Gazprom”. Recently there was 25 years from the moment of its creation. Russians analyze a way passed by the corporation for these years. Conclusions are not optimistically at all. Notwithstanding the fact that for the last 18 years the Russian economy has received from hydrocarbons export an astronomical amount of 3,5 trillion dollars, its dependence on oil and gas export has not decreased, but increased. In 2000 the share of hydrocarbons in export made 52%. In 2017 this figure was 55%.

It means that the federal budget of the Russian Federation depends on export of hydrocarbons more and more. In 2000, the budget received 25% of income, now – 40%. Of course, a problem is not in percentage, but in the amount of revenues. There are no doubts that as a result of an oil boom Russia had much more money. But it, contrary to statements of the Russian politicians, did not create alternative sources of replenishment of the budget in better days. They have not prepared for the worst times in the event of prices or demand for the Russian gas are much lower. They have not changed economy structurally. It seems that Russia has put everything on one “gas card”.

Long-term plans of “Gazprom” provide stable and significant growth in export in the European market. By 2035, according to analysts of group, production will fall in Europe, and consumption will increase. As a result, purchase by Europeans will increase from current 300-325 BCM of gas up to 393-459 billion. Proceeding from these calculations the Russian giant estimates to put into operation eight new areas of extraction of hydrocarbons in 2027, from which three, located in Eastern Siberia, transfer gas to Asia. The others will make deliveries to Europe.

As the practice of the last years has shown the fact of ownership of the gas pipeline does not mean its use.

The Sakhalin-Khabarovsk-Vladivostok pipeline was filled less than 40% till 2016. Later such data were kept a secret. Actually, it was not better in a case of “Nord Stream”: in 2012 – 67% of its capacity were used, in a year – 57%, then 35%, and in 2015 only 29% were hardly used!!! Only in 2016-2017 the pipe was filled almost for 100%.

The situation around the well-known gas agreement with China (there is no in practice) is similar, but nevertheless Russia is building “Power of Siberia” gas pipeline. It is building, paying more and more, but there are no prospects of profit. The consortium on construction of pipelines has 20 years’ tax exemption, and “Gazprom” received similar one but 15 years’ tax exemption. Moreover, the former Deputy Minister of Energy of the Russian Federation Vladimir Milov reported that the debt of the Russian companies of extraction of hydrocarbons to China has already exceeded 70 billion dollars. Conditions of both credit and commercial contracts are the most carefully protected secrets. According to Mr. Milov, after discover of huge reserves of slate gas in China, Russia will never be able to earn from supplies to China.

There is also other problem. It is difficult to consider “Gazprom” as effectively operated company. If in 1999 the company extracted 546 billion cubic meters of gas a year, then 18 years later this figure decreased up to 472 billion cubic meters while the staff of the company for this period increased from 298 thousand to 467 thousand persons.

In the Russian oppositional circles, the opinion is widespread that the expediency of many projects of “Gazprom” is equal to zero, and it is only about how to make good money on construction of pipelines, stations for gas liquefaction and all other infrastructure. This year it has turned out that construction of “The Turkish stream” will cost one billion US dollars more, than it was estimated, and a land (Russian) part of “Nord Stream-2” has already rose in price for the last three years for 25%. On paper, from the Russians point of view, everything looks perfectly. Expenses on delivery of 1000 cubic meters of the Russian gas to Germany make about 400 euros while liquefaction and delivery of the same volume of the American gas cost 500 euros. The difference is not big, but it may so happen that in the next years it will quickly disappear. And what will be if development of the European market is not such as estimated by “Gazprom”?

Significant increase in a share of renewable energy in power balance of the main buyer and the most important partner of Russia – Germany recorded in the present coalition agreement may become the main reason. The agreement has a paragraph that partners in the coalition will seek to increase volumes to the level of 66% in 2030 (from present 33%). If it occurs, the strategy of “Gazprom” will be undecided. Instead of stable growth there will be the highest level of demand stagnation.

Other factor is Qatar which has recently declared that it wanted to increase gas export from 77 to 100 BCM. It is about the liquefied gas which is generally delivered to Europe. The Polish press has already written tens of articles about plans of export growth of hydrocarbons by producers from the United States. The coast of Cyprus has also new perspective fields, the pipeline from Algeria to Italy and from Morocco to Spain is planned. As a rule, the market of the liquefied gas (LNG) slowly, but becomes the world market, and this tendency cannot be terminated in the long term. If Russia, for credit money (because the second branch is under construction for expensive credits) wants to construct and drown it in the Baltic Sea, let it make. Poland and Europe shall take care of that Russia will sell gas so cheap that all this grandiose action will be unprofitable.

Source: http://serwisy.gazetaprawna.pl/energetyka/artykuly/1282247,nord-stream-2-pozwolmy-mu-zbankrutowac.html

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