Economy & Politics

GaspipelineNord Stream 2: Can Germany Afford to Exit?

It is currently uncertain whether the Nord Stream 2 gas pipeline will be completedimago images / Ukrinform

Shortly before the finish line, Nord Stream 2 can still fail. Around 150 kilometers of the Baltic Sea pipeline with a total length of 1,230 kilometers still have to be built. But after the poison attack on Russian oppositionist Alexej Navalny, the German government is no longer ruling out a construction freeze. Therefore the question arises: Can Germany afford to forego the project?

The core argument of the proponents that Germany is dependent on the pipeline for reasons of energy security does not apply. Gas demand can be met even without Nord Stream 2.

The background: The gas sources in Europe will increasingly dry up in the coming years, which is why more and more must be imported. Gas is one of the most important fuels for heating in Germany. The main gas suppliers are Russia, Norway and the Netherlands. In the meantime, in-house production is falling continuously.

Germany relies primarily on Russia for its gas supply – according to the German Institute for Economic Research (DIW), the Federal Republic of Germany currently obtains around 40 percent of its natural gas from Russia. And with the commissioning of the new pipeline, the dependency may increase further due to the additional capacities.

There are definitely alternatives. “We don’t need the pipeline because of energy security, there is enough infrastructure that can be used,” says DIW energy expert Claudia Kemfert in an interview with ntv.de. According to DIW, the further decline in domestic production can be offset by increased imports from North Africa and liquefied natural gas (LNG). “The gas demand can be met via existing pipelines in Europe,” said Kemfert. Many LNG terminals in Europe are underutilized and there is an oversupply of gas on the international markets.

“Energy supply is secured”

Even Nord Stream 2 assumes that Germany is not dependent on the project. A brochure published last year stated that the impending import gap could be closed “either with liquefied natural gas from around the world or Russian pipeline gas”. “The corresponding share of these supply sources will be decided by the market.”

According to Kemfert, Germany can even do without Russian natural gas entirely. There is enough gas, said the economist. “Should Russia turn off the gas tap completely, the energy supply in Germany would still be secured. However, Europe has to help some Eastern European countries. “

The price differences are manageable. A study by the University of Cologne commissioned by Nord Stream comes to the conclusion: “If Nord Stream 2 were used, the average, volume-weighted gas price in Poland in 2030 would be around five percent below the gas price that would be set without the additional reference route would. Poland will therefore benefit from Nord Stream 2 to the same extent as Germany. “

DIW expert Kemfert is more careful with her cost calculation. “It depends,” she says when asked whether liquefied gas imports are cheaper or more expensive than gas of Russian origin. “At the moment, the price of natural gas is very low overall, which also makes liquefied gas cheap.” Pipeline gas is also often subject to fixed gas prices. That leaves little flexibility and reactions to changes in international markets.

Companies have invested billions

So Germany can definitely live with a stop at Nord Stream 2 – but you have to accept that gas prices will rise somewhat. In addition, compensation payments may become due to the companies involved. “That would be a large amount. That would then also have to be paid in case of doubt, “said Greens boss Annalena Baerbock on ZDF. However, she also pointed out that a number of legal questions relating to the operation of the natural gas pipeline from Russia to Germany had not yet been resolved: “Those who invested there, they were all the time facing the risk that it was still legally possible is not finally sealed. ”Therefore one shouldn’t shy away from demolishing Nord Stream 2.

What is certain is that if it were to be abandoned, investments in the billions – including German companies – would literally be sunk in the Baltic Sea. In the event of a construction stop, investments of 8 billion euros would have to be written off, says Timm Kehler, board member of Zukunft Erdgas, an initiative of the German gas industry. Furthermore, the already accrued costs for the connection pipelines of 4 billion euros would have to be paid by the gas customers without these being used. Around 120 companies from twelve European countries are directly involved in the construction and operation of the pipeline.

In addition to the economic dimension, there is also the political dimension. Critics of the project warn of increasing dependence on Russia, which under President Vladimir Putin has already used gas as a means of political pressure. Putin had already turned off the gas tap several times in the dispute with Ukraine. Some of the older pipelines run from Russia through Ukraine and Poland, for which countries charge fees. Russia bypasses the old routes with the Baltic Sea tubes.

Proponents argue that even during the Cold War, gas and oil were reliably supplied by the Soviet Union, which was the opponent of the system at the time. Russia will also ensure the supply – if only because energy sales are Russia’s most important source of income.

An exit from Nord Stream 2 would be a turning point in political relations with Russia. Should the federal government withdraw its support for the project, it would not only show a clear edge against Moscow, but also clear away one of the main issues at stake with the USA. US President Donald Trump is attacking the pipeline with sanctions – and wants to achieve, among other things, that Europe buys more gas from the United States obtained through fracking.

The article first appeared on ntv.de.

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