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Commentary | 15 September 2021

Nord Stream 2: Why the US-German agreement is the right way forward

Image of Nils Schmid

Nils Schmid |Spokesperson on Foreign Affairs for the Parliamentary Group of the German Social Democrats

Germany Russia Russia-West Relations United States Global Security

For many years, the debate over Nord Stream 2 has strained the friendship between the US and Germany. To stop the construction of the almost finished pipeline, our fellow parliamentarians in the United States, both Democrats and Republicans, imposed measures of economic coercion. Last year, things escalated to the point where three US Senators wrote a letter to a port in Germany and threatened it with financial ruin. At the same time, US imports of Russian oil increased and Russian gas flowed unopposed into Europe, including through another pipeline in the Baltic Sea: Nord Stream 1.

As a close observer of Russian politics, I have no illusions about the character of the Putin-led government, which is acting ever more aggressively against its presumed enemies from within and from outside. Nor am I arguing that Nord Stream 2 is solely an economic project. As a former Minister of Economic Affairs of Baden-Württemberg, I know that most big energy projects have a political component, which is something that our partners in Ukraine and Poland have rightly highlighted regarding Nord Stream 2. But I was never persuaded by the argument that Moscow’s behaviour could somehow be altered just by stopping the construction of this one pipeline. I have always rejected the attempt to turn Nord Stream 2 into a litmus test for our dealings with the Putin regime, while at the same time Russia receives a huge amount of money from its ongoing oil and gas exports to the West.

The “Joint Statement of the US and Germany on Support for Ukraine, European Energy Security, and our Climate Goals” released on 21 July was a diplomatic breakthrough. It resolved a disagreement that for too long had consumed too much of our attention, which we can now devote to implementing the common agenda set out in the agreement, but also to dealing with other pressing challenges faced by the transatlantic community, such as the systemic competition with China.

The agreement sends a strong signal of solidarity with our partners and friends in Kyiv, as it clearly states that we remain steadfast at Ukraine’s side. Regarding Russia, the joint statement shows that the policies of the US and Germany are closely aligned. The document highlights what responses the Russian government can expect from us for certain actions: “The United States and Germany are united in their determination to hold Russia to account for its aggression and malign activities by imposing costs via sanctions and other tools.” Regarding actions to be taken by the German government, the agreement specifically states: “Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions, to limit Russian export capabilities to Europe in the energy sector, including gas, and/or in other economically relevant sectors.” This is, of course, important, as the effectiveness of sanctions depends on how many countries support them and on how clearly the policy goals of the sanctions regime are defined.

In the short and medium-term, it is important for Ukraine to remain a gas transit country. Germany has therefore played a vital role in negotiating the agreement between Ukraine and Russia that ensures gas transit until 2024. And in the joint statement, Germany has committed itself to work to extend the transit agreement for up to 10 years. But in the long term, the most effective and sustainable way to make Ukraine less dependent on Russian gas and less susceptible to Russian blackmail is to support the country’s green energy transition.

The EU countries have agreed to reach carbon neutrality in 2050. Germany plans to achieve this even before 2045. Since we are simultaneously phasing out nuclear and coal-fired power plants, Germany will be dependent on natural gas in the years to come, as a bridge to the carbon-neutral age. And Nord Stream 2 is important for our security of supply in this transitional phase. But gas will be phased out in the long run and green hydrogen will be the fuel of the future.

A fundamental transformation of our energy production and consumption is already underway – a development from which Ukraine can benefit a great deal. The key to success lies in the development of a competitive green hydrogen industry in Ukraine. And the country has the advantage of an existing pipeline infrastructure, which can also be used for transporting hydrogen to the industrial centres in the West.

One obstacle to achieving this goal is corruption, which the government of President Zelensky is already fighting, a process in which it has our fullest support. In addition, such a far-reaching transformation is costly. In the American-German agreement, we reaffirm our support for Ukraine’s energy transition, energy efficiency and energy security. Germany will therefore establish a Green Fund and provide an initial donation of at least 175 million US dollars. Together with the US, we will also seek to promote investments of at least 1 billion US dollars in the Fund. In addition, the German government is dedicating 70 million US dollars in funding for coal transition support through a special envoy and will assist Ukraine’s integration into the European electricity grid. Supporting Ukraine on its path towards carbon neutrality by promoting renewable energy and green hydrogen production will not only make the country more independent and secure but will also contribute to our global fight against climate change.

The joint statement shows that the US and Germany are united in pursuing their policies towards Russia – a sign of transatlantic strength. We should also keep in mind that we will have to cooperate with Moscow in the future, for example, on nuclear disarmament and climate protection. Stopping the construction of the pipeline at this late stage would have destroyed one of the last bridges to Russia. The completion of Nord Stream 2 was the right way forward, as instead of a huge pipeline ruin on the seabed, we now have a link to Russia, from which both sides can benefit even when our need for fossil fuels decreases. Russia on the one side has a huge renewable energy potential as well as an existing gas infrastructure, which it could use to produce and export green hydrogen and thereby reduce its fossil fuel dependency. Germany on the other side has very ambitious climate goals and will therefore be dependent on the import of green hydrogen. In a hopefully more cooperative future, the pipeline network could also be used to transport green hydrogen from East to West.

The opinions articulated above represent the views of the author(s) and do not necessarily reflect the position of the European Leadership Network or any of its members. The ELN’s aim is to encourage debates that will help develop Europe’s capacity to address the pressing foreign, defence, and security policy challenges of our time.

Image: Wikimedia, Gerd Fahrenhorst