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UKRAINE

Germany halts controversial Nord Stream 2 pipeline

Germany on Tuesday put on ice the controversial Nord Stream 2 pipeline in response to Moscow's recognition of two breakaway regions in eastern Ukraine, finally halting the €10 billion project that has long irked allies.

Olaf Scholz
Chancellor Olaf Scholz (SPD) waits in the chancellory ahead of the Nord Stream 2 announcement. Photo: picture alliance/dpa | Kay Nietfeld

Berlin had over the years doggedly pursued the pipeline which was set to double natural gas import capacity from Russia, despite opposition from the United States and Eastern Europe which fear it would leave the continent too dependent upon Russian energy.

Through controversies that had weighed on German-Russian ties — from the poisoning of Kremlin critic Alexei Navalny to several spying scandals to a series of cyberattacks, the German government had pushed on with the project, which was finally completed last year and was awaiting regulatory approval.

But hours after Putin’s decision on recognising separatists in eastern Ukraine, German Chancellor Olaf Scholz said on Tuesday he had asked for the approval process to be halted, despite a severe energy crisis that has sent gas prices soaring in Europe.

“That sounds technical, but it is the necessary administrative step so there can be no certification of the pipeline and without this certification, Nord Stream 2 cannot begin operating,” he said.

Germany will now begin a new assessment of how it can meet its energy requirements, he said. “The situation has fundamentally changed.”

The White House immediately hailed the decision, while Ukrainian Foreign Minister Dmytro Kuleba called it “a morally, politically and practically correct step in the current circumstances”.

Meanwhile Dmitry Medvedev, vice president of Russia’s council of security said Germany was just shooting itself in the foot.

“The German chancellor Olaf Scholz has asked to suspend the certification of Nord Stream 2… well, welcome to the new world where Europeans will soon pay €2,000 euros for 1,000 cm3 of gas,” he tweeted.

Earlier Tuesday Ukrainian leader Volodymyr Zelensky had demanded an immediate halt to Nord Stream 2, arguing that Russia was wielding the pipeline as a “geopolitical weapon”.

At a press conference in Berlin with visiting Irish prime minister Micheal Martin on Tuesday afternoon, Scholz warned Russia that a decision to halt the Nord Stream 2 pipeline project was only one “concrete” step and that further sanctions could follow.

READ ALSO: OPINION: Germany has scuppered Nord Stream 2 but there are questions left to answer

“There are also other sanctions that we can introduce if further measures are taken, but for now, it’s a matter of doing something very concrete,” he told journalists.

However, he urged both Russian and Western leaders to keep talking in order to prevent a worsening of the situation in Ukraine.

As well as initial sanctions, continued diplomacy is “important to prevent a further escalation and thus a catastrophe” in the region, Scholz said.

“This is the objective of all our diplomatic efforts,” he said.

Rising tensions

The Nord Stream 2 project has long been a source of tension with Berlin’s allies, who have argued that it would give Moscow too much leverage by increasing Germany’s energy dependence.

Even as Russia massed over 100,000 troops on Ukraine’s borders, Scholz refused to utter the name of the pipeline when asked about possible sanctions against Russia.

Former chancellor Gerhard Schroeder’s involvement as chairman of the Nord Stream AG shareholders committee has also become a source of embarrassment for Germany as the West faces off with Russia in the worst crisis since the Cold War.

The mixed messaging over the gas pipeline had led NATO partners, including the United States, to question if Germany was on board as the West sought to hold off what it viewed as an expansionist Russia.

Nord Stream 2

Part of the Nord Stream 2 pipeline in Lubmin, Mecklenburg Western-Pomerania. Photo: picture alliance/dpa | Stefan Sauer

With doubts swirling, German ministers found themselves forced to reiterate repeatedly that they would indeed pull the plug on the pipeline should Russia march on Ukraine.

Kyiv, in conflict with Russia since Moscow’s 2014 annexation of Crimea, has long been a critic of Nord Stream 2.

The pipeline bypasses Ukraine’s own infrastructure, depriving it of around a billion euros annually in gas transit fees and, Kyiv fears, removing a key check on potential Russian aggression.

President Volodymyr Zelensky has insisted that Nord Stream 2 poses a serious global security threat.

“We view this project exclusively through the prism of security and consider it a dangerous geopolitical weapon of the Kremlin,” he said last year.

READ ALSO:

What is Nord Stream 2?

Running from Russia’s Baltic coast to northeastern Germany, the 1,200-kilometre (745-mile) underwater Nord Stream 2 follows the same route as Nord Stream 1, which was completed over a decade ago.

Like its twin, Nord Stream 2 would be able to pipe 55 billion cubic metres of gas per year from Russia to Europe, increasing the continent’s access to relatively cheap natural gas at a time of falling domestic production.

Russian giant Gazprom has a majority stake in the €10 billion project. Germany’s Uniper and Wintershall, France’s Engie, the Anglo-Dutch firm Shell and Austria’s OMV are also involved.

Economy Minister Robert Habeck (Greens)

Economy Minister Robert Habeck (Greens) at a press conference on Tuesday. Photo: picture alliance/dpa/dpa Pool | Roberto Pfeil

Europe’s top economy imports around 55 percent of its gas from Russia — up from 40 percent in 2012 — and believed the pipeline has a role to play in the transition away from coal and nuclear energy.

But it will now have to accelerate its build up of other energy sources — including importing LNG from elsewhere — in order to meet its energy needs.

Vice-Chancellor and Energy Minister Robert Habeck admitted on Tuesday that there will be “consequences in terms of energy policy, geopolitics and strategy” for Germany.

“We will not forget this winter anytime soon,” Habeck said.

READ ALSO: How will the Nord Stream 2 freeze affect Germany’s gas supplies and prices?

By Femke Colborne

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UKRAINE

Germany and G7 to ‘develop a price cap’ on Russian oil

G7 leaders, including Germany, have agreed to work on a price cap for Russian oil as part of efforts to cut the Kremlin's revenues. Here's a look at what's been happening at the summit in Bavaria.

Germany and G7 to 'develop a price cap' on Russian oil

The Group of Seven leaders will “task ministers to work urgently towards developing, consulting with third countries and the private sector in an effort to develop a price cap around oil”, a senior US official told reporters.

The goal of the plan is to starve the Kremlin of its “main source of cash and force down the price of Russian oil”, the official said.

The official announcement is expected to come in the final communique later as a three-day G7 summit in the Bavarian Alps draws to a close.

The United States has led the push for an oil price cap at the gathering of the club of rich nations — which also includes Britain, Canada, France, Germany, Italy and Japan.

The move is designed to place Vladimir Putin’s regime under increased economic pressure and to punish the hostile nation for its ongoing invasion of Ukraine. 

“There is consensus emerging… that the price cap is a serious method to achieve that outcome,” President Joe Biden’s national security advisor, Jake Sullivan, told reporters at Germany’s G7 summit on Monday. 

READ ALSO:

While the West has already imposed multiple layers of sanctions on Russia in response to Putin’s order to invade Ukraine in February, the targeting of the oil industry represents the highest economic stakes so far.

The idea is that consumer countries would effectively set a low price for Russian oil, while Moscow, needing the revenue, would have no choice but to accept.

There are major questions, however, about unity among consumer countries and whether Russia really would cave in or instead might retaliate by cutting energy supplies to Europe.

Energy exports are Russia’s biggest revenue earner, while Western countries are among those most heavily dependent on imported oil and gas.

According to Sullivan, the main obstacle to the idea is not so much willingness to go ahead but sorting out the immensely complex logistical and technical aspects.

“The single biggest factor here is that this is not something that can be pulled off the shelf,” Sullivan said.

“It is a new kind of concept to deal with a particularly novel challenge, which is how to effectively deal with a country that’s selling millions of barrels of oil a day and (to) try to deprive it of some of the revenues.”

Spillover fears

With soaring fuel prices at the heart of painfully high inflation in Germany and other G7 countries, leaders want to be sure that any oil price cap would also “minimise the spillovers and the impact on the G7 economies and the rest of the world.”

“The G7 leaders are going to acknowledge those two objectives and also acknowledge that the path forward is to urgently direct ministers to work on achieving a price cap which can, in our judgement, best achieve both of those objectives simultaneously,” the senior US official said.

The idea of price capping Russian oil — and also gas — has support from Italy and also France.

READ ALSO: IN PICTURES: Germany hosts G7 summit with Bavarian twist

Elmau Castle, Bavaria

The leaders of Group of Seven rich nations hold a meeting at Elmau Castle in Bavaria. Photo: picture alliance/dpa | Michael Kappeler

The French presidency has however said the measure would be “much more powerful if it came from the producing countries”, and that it was necessary to work with OPEC+ and other oil producers around the world.

The United States and Canada, which are far less reliant on Russia as an energy supplier, have banned all Russian oil imports. Europe is seeking to lessen its own reliance.

In another measure meant to punish Russia and increase assistance to pro-Western Ukraine, the G7 plans to turn funds raised in recently imposed trade tariffs on Russian exports into assistance for Ukraine.

G7 leaders “will seek authority to use revenues collected by any new tariffs on Russian goods to help Ukraine and to ensure that Russia pays for the cost of its war”, the senior US official told reporters.

Condemnation of civilian attacks 

A missile strike on a shopping mall in Ukraine’s Kremenchuk city, which occurred while leaders were meeting in Bavaria’s Schloss Elmau, also drew fierce criticism from the political leaders. 

Russia’s “brutal” missile strike on the crowded shopping mall in central Ukraine constitutes a war crime, the G7 leaders said, vowing that Putin and those responsible would be held to account.

“Indiscriminate attacks on innocent civilians constitute a war crime,” the leaders said in a statement. “We solemnly condemn the abominable attack.” 

Ukraine accused Russia of deliberately targeting civilians, with President Volodymyr Zelensky calling it “one of the most brazen terrorist acts in European history” in his evening broadcast posted on Telegram.

“A peaceful town, an ordinary shopping centre — women, children ordinary civilians inside,” said Zelensky, who earlier shared a video of the mall engulfed in flames with dozens of rescuers and a fire truck outside.

Alongside measures like the cap on oil, the leaders of the seven wealthy nations also discussed weapons deliveries to the Ukraine, the ongoing food crisis caused by the war, and measures to tackle climate change. 

The industralised nations have pledged a total of $14 billion to help tackle food shortages and have called on countries to avoid stockpiling food in the wake of the crisis.

The war in Ukraine, a country known as Europe’s breadbasket, has pushed up food prices and led to shortages, as Russia’s blockade of Black Sea ports prevents millions of tonnes of grain from being shipped out.

This has led to fears of famine in developing nations as well as soaring prices in economies like Germany. 

READ ALSO: Germany will see further food price hikes, says minister

‘Continued support’ 

Addressing the leaders by video link, Zelensky had urged them to “intensify sanctions” to help end the war before the bitter winter.

“We will continue to provide financial, humanitarian, military and diplomatic support and stand with Ukraine for as long as it takes,” the G7 said in a statement on the summit’s second day.

Chancellor Olaf Scholz (SPD), who was hosting the summit, said on Monday that the Group of Seven would continue to turn up the heat on Putin in order to ensure a swift end to the war. 

“As G7 we stand united on Ukraine’s side and will continue our support. For this, we all have to take tough but necessary decisions,” Scholz tweeted, thanking Ukrainian President Volodymyr Zelensky for addressing world leaders by video link.

“We will continue to increase pressure on Putin. This war has to come to an end.”

READ ALSO: Macron, Scholz and Draghi meet Ukrainian president in Kyiv

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