GAZPROM REDUCES GAS FLOW THROUGH UKRAINE AS NORD STREAM 2 NEARS COMPLETION


23/07/2021




Robert HARNEIS -TDO- (FRANCE)- Gazprom has reduced volumes through Ukraine as it prepares to put Nord stream 2 into service. This has caused prices in the EU to rise to a 13 year high.

One of the twin lines in the Nord Stream 2 pipeline network is now complete, despite heavy opposition from the United States. 

When both lines are complete, the new twin pipeline will double the capacity of the existing Nord Stream line under the Baltic, to 110 billion cubic meters per year, potentially increasing Gazprom’s sales to Western Europe.

This gives Russia and its EU customers the possibility of switching supplies away from the pipeline network through Ukraine.

The United States has opposed the new pipeline on the grounds that it increases EU dependence on Russia as a gas supplier. They have also urged the EU to block the project so as to retain the gas transit through Ukraine worth 2 billion euros in fees.

Russia and Germany have always maintained that the project is purely economic. Germany needs to buy gas to replace nuclear power and Russia needs to sell it. The EUs traditional sources of gas in the UK, Holland and Norway are running out.

The pipeline is owned by Gazprom the Russian state gas company and jointly financed by German Wintershall Holding et E.ON Ruhrgas, Dutch United Gas and French company Suez.

Moscow has alleged that the real motivation of the US is to make the EU buy US LPG from fracking despite it costing on average 30% more.

The US has objected to NATO allies sending money for gas to Russia, which they say enables Russia to arm itself against Europe.

The German reaction has been one of patient persistence. They need the gas and it would be political suicide for any German government to cave in to the US on the issue. Berlin finds it difficult to take Washington’s objections seriously when the US itself imports LPG gas from Russia. Washington has also bought helicopters from Moscow for use in Afghanistan and cooperated in space. Europe has bought Russian gas since Soviet times.

Ever since the 2004 when the strongly anti-Russian Poland and Baltic states joined the EU, the European Commission has been paralyzed by divisions within its membership. Brussels’ diplomatic stance has been weakened by the fact that the EU actually helped fund Nord Stream 1.

It is generally believed that the initial Nordstream project was pushed through by Gerhard Schröder two weeks before he lost the German Chancellorship to Angela Merkel in 2005. Schröder, a firm believer in good Russo-German relations is now President of Nordstream AG. His father died before he was born, fighting in Russia and he has two adoptive Russian children.

In fact the Russian President sought and got an undertaking from Merkel that if elected she would go ahead with the project, without which he would not agree to start. It is also important to remember that Nordstream was proposed in 1997 before any one in Europe had heard of Vladimir Putin.

The US and its allies can console themselves that they have delayed the pipeline for a year by sanctions and during that time forced the Russian government to agree a five year contract during which gas will continue to flow through Ukraine. They are uncomfortably aware that any reduction in cash poor Ukraine’s income will have to be made good by the US and the EU.

The imminent completion of the full Nordstream project, despite extreme hostility from Washington, is a triumph for Vladimir Putin. It completes Moscow’s triple pipeline strategy of Nordstream, Turkstream under the Black Sea and Power of Siberia to China.

No doubt the fact that the port of Mukran, the German logistics base for the project, is in Angela Merkel’s own parliamentary constituency has helped things along.

US President Biden has waived sanctions against Nordstream 2 AG “because the pipeline is almost completely finished”.

Putin has recently said that Russia would be willing to take euros in payment for natural gas. "The euro is completely acceptable for us in terms of gas payments," he said. "This can be done, of course, and probably should be done." All payments for Russian gas to the EU to date have been denominated in dollars.


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