As the geopolitical conflict between Europe and Russia is on the rise, Germany has suspended approval of the controversial Nord Stream 2 natural gas pipeline project from Russia to Germany. What prospects will it face?
Hopes of Beixi 2 opening up to deliver large amounts of natural gas to Europe before the critical winter arrives once again appear bleak.
After the German energy regulator suspended approval of the Beixi No. 2 natural gas pipeline project, the wholesale price of natural gas in the United Kingdom and the European Union rose sharply by 17%.
Why did Germany suspend the approval of this project in the face of world energy shortages? When will the completed Beixi No. 2 project be “ventilated” with Europe?
German political and regulatory agencies
Beixi 2 is a natural gas pipeline from Russia to Germany via the Baltic Sea bottom.
Before Beixi 1 and 2, Germany imported natural gas from Russia through other European land countries, including Belarus, Ukraine, Poland and other countries in Eastern Europe.
As early as the term of former German Chancellor Schroeder, Germany and Russia have already begun to study the joint venture to open the North Stream Natural Gas Pipeline project to avoid various political and economic problems that may arise from the natural gas pipeline bypassing Eastern Europe. Schroder also personally served as a director of the Beixi Natural Gas Pipeline Project Company.
German Chancellor Merkel continued to promote the implementation of Beixi 2 project. But some critics in the West, including Germany, claim that this pipeline will increase Europe’s energy dependence on Russia.
After the 2021 general election in Germany, Merkel’s ruling coalition went down, and some of the new German government who won the election had already opposed Beixi 2.
The pipeline was completed in September 2021, but has been plagued by delays.
The German energy regulator stated that the pipeline operating company needs to comply with German law before it can certify the 10 billion euro (8.4 billion pounds) project.
Economic and political factors in Eastern Europe and the United States
The Beixi No. 2 project will bypass Eastern European countries such as Belarus, Ukraine, and Poland. These countries rely on existing pipelines to obtain substantial financial income and will be severely hit by the loss of transit fees. The loss of transit fees in Ukraine alone is estimated to be as high as US$2 to US$3 billion per year.
Ukraine inherited the main pipelines and facilities of Europe’s second largest gas transmission network after Russia from the former Soviet Union, which is equivalent to 1/5 of the annual natural gas demand of the entire European continent. Therefore, related facilities and work have a huge impact on Ukraine’s economy.
After the news of Beixi 2’s completion, European natural gas prices fell sharply. Russia has always accused that one of the main reasons why the United States opposes North Stream 2 is that the United States wants to sell higher-priced American shale oil and gas to Europe.
In addition to economic factors, the relationship between Ukraine and Russia has been deteriorating since 2014. In the second half of 2021, conflicts and conflicts will continue, and there may even be concerns about border wars.
Ukrainian President Zelensky described Beixi 2 as a “dangerous geopolitical weapon”, saying that Russia would use it to attack Ukraine and Eastern European countries.
Both the United States and the United Kingdom supported Ukraine in the conflict between Ukraine and Russia, and imposed sanctions on Russia on the project.
The outgoing German Chancellor Merkel also stated that if Russia uses the Beixi 2 pipeline project as a geopolitical weapon against Ukraine, it may impose further sanctions on Russia.
The decision of the German regulatory agency to suspend certification was unanimously welcomed by Ukrainian energy companies and Polish gas companies. They called for EU energy unity to ensure supply security.
EU energy demand
The Beixi No. 2 pipeline project consortium declined to comment on Germany’s suspension of approvals and possible delays in the project.
According to the EU’s natural gas policy, natural gas producers must be separated from companies that own pipelines.
But Germany’s energy supply is heavily dependent on natural gas imported from Russia. At present, Russia has supplied about 40% of the EU’s natural gas, more than Norway’s supply to the EU.
The Beixi No. 2 pipeline operating under the Baltic Sea will double Moscow’s natural gas exports to Germany, and it will also make Germany a natural gas distribution center in Europe.
For Western European countries, this project will also avoid economic costs and political uncertainties caused by natural gas passing through Eastern Europe. In addition to complicated factors such as Ukraine, the conflict between Belarus outside the EU and Poland threatened to cut off Russia’s natural gas pipeline through the country to Western Europe.
In addition to large energy and chemical companies such as Uniper and BASF in Germany, the consortium of Beixi 2 project also holds shares in other large European companies, including British and Dutch Shell, and large energy companies from Austria and France.
The German government emphasized that natural gas will continue to make a significant contribution to Germany’s energy supply in the next few decades, and stated that compared with other fossil fuels, natural gas is more beneficial to the climate because it produces less carbon dioxide.
Energy politics and prospects
However, some environmental protection organizations in Germany oppose the Beixi No. 2 project, believing that it is incompatible with Germany’s emission targets in the fight against man-made climate change.
When the German regulatory agency suspends the approval of this project, it also stated that only after the operator of the Beixi No. 2 project pipeline is reorganized in accordance with German law, certification and approval will be possible.
The regulator said its approval process will continue to be suspended until the main assets and human resources are transferred from its current Swiss-based company to a newly formed German subsidiary that owns and operates the German part of the pipeline.
The certification decision of the German regulatory agency may suspend the Beixi 2 project for several months, because it will require a green light from the European Commission after it has been approved by Germany.
The Reuters report quoted a source from the German government that Beixi 2 may not be expected to start until March 2022; however, some analysts told Reuters that it is estimated that the certification “will not be completed until April next year at the earliest.” The EU begins the next phase of “stricter” review.
In the United States, although the United States still stated that it will continue to sanction the Russian companies participating in Beixi 2, Bloomberg quoted an unnamed American official and reiterated the United States’ commitment not to impose sanctions on German companies participating in the project. This commitment was made by the United States during Merkel’s last visit to the United States as prime minister.
Another point that surprised some observers is that Moscow, which has always been tough, understands Germany’s delay in approving Beixi-2, saying that it needs patience.
Reuters reported that the Kremlin stated that it was a “complex process” when it first made a comment after learning of the delay in Beixi No. 2 approval and certification, and that it did not believe that the decision was due to political factors. drive.
There are currently shortages in the global energy market. International financial institutions such as Goldman Sachs warned that Europe may encounter difficulties such as power outages in the winter of 2021.