Dead-end strategy over Nord Stream 2, will it succeed?

Hectic efforts are made by America to bring a halt to the completion of Nord Stream 2 which is more than 95% complete and is ready for operation by end September 2021.  Russian Foreign Minister Sergey Lavrov called it “Dead-End Strategy”. Will this business strategy work or backfire?

Russian firm Gazprom has mapped out win-win business strategy in formulating gas pipeline with European consumers especially Germany which alone imports more than 40 billion cubic meters (bcm) per annum. Incidentally, Russia supplies around 35% of this quantum along with Norway and Netherlands footing the balance. Of late, Netherlands is scaling back supply due to increasing domestic demand.

Gazprom the Russian energy giant, which already runs Nord Stream pipeline from Vyborg in Russia to Greifswald in Germany has planned Nord Stream 2 to augment supply to fill the shortage caused by the scaling down of supply by Netherlands. This is Nord Stream 2 which runs parallel to the existing pipeline but with a change of origination point from UST-LUGA in Russia.

Both pipelines runs through exclusive economic zones of five countries namely, Russia, Sweden, Finland, Denmark and Germany and in that order. Nearly 50% of the cost is financed by five energy giants ENGIE, OMN, royal Dutch shell, Uniper and Wintershall.

The objective of the Nord Stream 2 is to supply gas to Germany and other European countries by passing transit states. A key imperative for Russia is to bypass Ukraine whose land based pipeline was used to transport gas before and after World War2 due to her difference with the current leadership in Ukraine. Second objective is to ensure uninterrupted supply of gas to Germany with aggregated capacity of 110 bcm.

The approach of completion of Nord Stream 2, which began in earnest in September 2018 has raised concerns in the minds of Americans who consider Germany as a vassal state.  In simple terms the American policy is to” keep America in, Russia out and Germany down”. Using the strategy of blocking at the dead-end, America seeks at worst to stop the project forever and at best to delay the project while extracting concessions from both Germany and Gazprom. 

As Chairman Angela Markel, Foreign Minister Heiko Maas and majority of the people of Germany are backing the project to hilt, the US ability to manoeuvre is very much limited. A recent unofficial suggestion by America that she be given the right to turn off the sluice valve of gas pipeline in times of emergency is not only a hare-brain one but a non-starter! 

 

Cheers! 

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist