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Guest Blog: Just Say No to Europe and Nord Stream 2

15 Mar 2016, Posted in All Posts, Analysis, Blog Posts
Written by Debra CaganSenior State Department Fellow at the Center for Transatlantic Relations, Johns Hopkins, SAIS

One would think that with plunging oil and gas prices, with suppliers tripping over themselves to desperately gain market share in a flooded market, and more choices than ever in securing gas for the European market, that Western Europe would recognize that it might be time to cut the umbilical cord with Russia and Gazprom. But in a logic defying scenario, many West European countries are intent upon embarking on yet another huge business venture with Gazprom which would tie them for years to come to a dependence on Russia for their natural gas supplies.

It is not as though this dependence hasn’t cost them dearly in the past. These same countries somehow think that because this time the transit route will be different, they will avoid having their supplies disrupted by those independent-minded pesky East European countries which somehow always get in the way of the free flow of gas by having political and territorial sovereignty views not shared by Russia. After all, they will tell you, “it’s just a business deal.”

Quite right, it is a business deal that will ensure continued Russian presence and political disruption in the heart of Western Europe, and will further divide and isolate those countries further east, indeed the most vulnerable, which are dependent on the current transit route for their own energy needs and income. As Gazprom proudly notes, “There are no transit countries for Nord Stream. This reduces Russian gas transmission costs and eliminates any possible political risks. Nord Stream will provide customers in Western Europe with the most reliable gas deliveries.” What is left unsaid is that the current political risks and reliability of gas deliveries are of Moscow’s own making. Russia, unlike the West Europeans, knows this is so much more than just a business deal.

This will not be the first, nor sadly the last time Russia is able to split Europe along geographic boundaries. But to be aided and abetted in this latest monopolistic endeavor by other members of the European Union is truly regrettable. The European Union (EU) has effective competition rules on the books and has not been shy in enforcing them particularly when they have been applied to countries within the EU which are not seen as economic leaders. Whether this is just coincidental and is not intended to show favoritism is unclear. The jury, as they say, is still out. But if the EU approves Nord Stream 2, having virtually the same characteristics as the dead on arrival South Stream (another Russian venture that transited different countries), you can guarantee that there will be accusations of cronyism and favored nations that will always trump EU rules and regulations.

Here across the pond, we in the United States have done little to offer our closest European Allies a viable alternative to the Russian guarantees of easy access to natural gas. While U.S. producers are closing down production, laying off workers and even venting gas because they cannot afford to keep producing at current prices, we have not done nearly enough to level the regulatory playing field so that U.S. producers can compete freely with other exporters in Europe. Keeping in mind that some of the main U.S. competitors will never play by the same rules, to some of them rule of law is simply a suggestion, U.S. producers are already at a disadvantage.

Finally, what is truly perplexing is that Western Europe, having suffered numerous times in the past from energy being used as a political weapon, is so eager to walk back down the aisle with the one country, which is an absolute master of this game. And, as if this is not difficult enough to understand, Europeans are clamoring to join energy forces with the recently de-sanctioned Iran, another country which politicizes virtually everything. The only lesson learned seems to be that no lessons have been learned, and that with fingers crossed, this time the outcome will somehow be different.

DISCLAIMER: The views expressed in this article are those of the author and not necessarily those of the U.S. Government.