Sanctioned Nord Stream 2 Faces Another Risk: Germany’s Greens

U.S sanctions won’t be the thing to stop the controversial Nord Stream 2 pipeline being built. The challenge of whether it will ever be used lies with the shifting German political sands favoring a Green government.

The Biden administration is weighing further sanctions on the almost completed pipeline, that will run natural gas from Russia to Germany, even as construction is due to restart in Danish waters.

The project had the backing of German Chancellor Angela Merkel, but she’s exiting the scene and faith in her conservatives slumped to its lowest in a year ahead of September federal elections. In two regional votes, it was the Greens that emerged as big winners and king makers in the next ruling coalition.

For fans of the project, the danger is that even if the 1,230-kilometer (764-mile) pipeline gets fully built, it could lay idle. The Greens are unequivocal in their opposition but it may also not be their biggest priority.

Nord Stream 2 “is causing grave geopolitical problems and it contradicts European climate targets,” Green co-leader Annalena Baerbock said at a news conference on Friday in Berlin. “This means that this pipeline should not be completed - that’s what we want to state clearly.”

Sanctioned Nord Stream 2 Faces Another Risk: Germany’s Greens

The government’s economic case for the pipeline is clear - Europe will need more gas as it phases out dirtier fossil fuels and Germany switches off nuclear power. While natural gas is the cleanest form of fossil fuel, it’s still a source of greenhouse-gas emissions and its production is blamed for polluting methane leaks.

Merkel’s government says the project’s commercial value outweighs any concerns and will give added flexibility to the European power mix. That’s not a view shared by the U.S. some European countries who say that the pipeline could increase the Kremlin’s leverage over Germany and her allies.

Merkel rejected the latest sanction threats from the U.S. on Friday.

“Our position has not changed,” Merkel’s spokesman Steffen Seibert said on Friday in Berlin. “We reject extraterritorial sanctions as they have been threatened and imposed by the U.S.”

Another risk to completion is the lack of certification that would enable operations to start. Even after companies pulled out of the supporting the pipeline because of sanctions Russia was able to replace the vessels, insurers, logistics companies and other suppliers. It is still unclear whether Russia has found a solution to replace Norske Veritas Holding AS, which provided a specialized verification and certification service to the project. Without that service gas may never be able to run along the pipeline.

Nord Stream 2 could still hire any third party that can provide the certificate of compliance documenting that installations fulfill legislation, according to the Danish Energy Agency. But there are limited options available to meet such specific demands.

The fact remains that the pipeline is 95% complete. The Danish section is set to resume later in March and last until the end of the third quarter. Apart from operations in the Danish exclusive economic zone, Nord Stream 2 will also need to lay several kilometers of gas pipes in German waters.

©2021 Bloomberg L.P.

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