Geopolitical implications of Nord Stream 2

Nord Stream 2 (NS2) is a natural gas pipeline that directly connects Russia to Germany, via the Baltic Sea. It was launched in 2015 by Nord Stream 2 AG, a subsidiary of the Russian state-controlled company Gazprom.

It follows a similar route to the original Nord Stream pipeline that was completed in 2011 and, once operational, NS2 is expected to double the total capacity of that route to 110 billion cubic metres (bcm) per year. Nord Stream 2 AG estimates this will be enough to supply some 26 million European households and has described the pipeline as essential to enhancing “the EU’s security of supply of natural gas” (PDF).

Construction on the pipeline began in 2018 but it has been delayed due to protracted legal battles and the imposition of US sanctions against companies working on the project in 2019. After nearly five years, and at a reported cost of $11 billion, the pipeline was eventually finished in September 2021. 

However, the pipeline has not been certified by German regulators and is not yet operational.

Opposition to the pipeline

Opposition to the pipeline has been fierce. Russia and Germany’s longstanding view has been that the pipeline is a purely economic project. However, the US, UK and the EU have all expressed concerns over its geopolitical implications.

Critics view the pipeline as a political project of the Kremlin and part of a broader geopolitical strategy to undermine the West by increasing European reliance on Russian gas supplies and potentially giving Russia leverage over security of supply.

In recent months, President Putin has been accused by the EU of “weaponising” Russian gas supplies (PDF) to Europe in order to keep prices high and get the pipeline approved by EU regulators. Allegations which the Kremlin has denied.

Implications for Ukraine

Nord Stream 2 has implications for Ukraine. Although not a huge importer of Russian gas, Ukraine is a major transit country of current Russian gas pipelines into Europe. Transit fees are thought to account for almost 3% of Ukraine’s GDP, which will bring an expected revenue of $2-3 billion annually over the next five years.

The direct supply of gas to Europe via Nord Stream 2 would allow Russia to largely bypass Ukraine, if it so chose, which the Ukrainian Government has described as akin to an “economic and energy blockade”.

As such, there has been pressure to protect Ukraine as a gas transit country. In July 2021, Germany and the US reached an agreement to prevent the pipeline  “ being used as a weapon” against Ukraine.

The current crisis in Ukraine

Already controversial, the Nord Stream 2 project has taken on greater significance amidst the current crisis in Ukraine.

Western nations, including the UK, US, EU and NATO allies, warned Russia that taking military action in Ukraine would have significant economic consequences, and a halt to the Nord Stream 2 project was considered an ultimate sanction.

On 22 February 2022 the German Government halted the certification process for NS2 “for the time being”, and several investors in the project have said they are considering ending their involvement in protest over Russia’s actions in Ukraine.

The longer-term future of the pipeline is now tied to the Ukraine crisis and how that may be resolved, all of which is uncertain. Indeed, media reports on 1 March 2022 suggest that Nord Stream 2 AG is considering filing for insolvency. The company has neither confirmed nor denied the reports.