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Sunday, February 5, 2023

Nord Stream is Russia’s latest tool for coercion and control in Europe

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Until June 2014, the Nord Stream-1 gas pipeline lived up to its branding as a secure gas supply for Europe. The twin pipes could deliver more than half of Germany’s annual gas needs. They did so for close to a decade despite Russia’s first invasion of Ukraine in 2014, subsequent sanctions and the first 110 days of Russia’s much larger and bloodier second invasion of Ukraine earlier this year.

But then, Russia cut flows through the pipeline in June under the pretext that it needed a compressor turbine that was being repaired in Canada before it was detained due to sanctions concerns. This act opened a new energy coercion front. It created an instrument of reflexive gas control that feeds key European constituencies selected information and steers them toward the decisions Moscow wants them to make. Gazprom will henceforth fuel European gas buyers’ hopes of restored flows by rhetorically presenting itself as a dedicated gas supplier while, in practice, acting to maximize uncertainty.

“Turbine-gate” offers an excellent example. The June supply reduction sparked weeks of diplomatic wrangling between NATO allies and Ukraine and ultimately, the turbine was urgently flown back to Germany for transport to Finland and onwards to a Russian compressor station. Yet the German economy ministry recently revealed that the turbine’s expected return to service date had originally been scheduled for September. 

In other words, Gazprom created a false pretext for supply cuts and deployed it to distract and manipulate Western governments. When Canada, the U.S. and Germany all insisted on the turbine’s (in fact) premature return to service, this demonstrated an enduring Russian veto over thoughts and actions in capitals that Ukraine increasingly depends upon for its physical survival.

Gas as a tool of reflexive control requires that flows continue, but that they occur under conditions of uncertainty. It also requires creating an atmosphere of conditionality that blames the consumer for what could or actually does go wrong. European (and North American) decision makers should thus expect Russia to keep them on tenterhooks as winter approaches.

Here are some actions to expect from Russia. 

First, there could be continued manipulation of flows and irregular decreases and increases in volume (including under the guise of force majeure) that spike European gas prices and force additional industrial shutdowns. Gazprom might then temporarily boost flows under self-serving “humanitarian” auspices if European residential consumers face real gas shortages. Nonetheless, lingering uncertainty fueled by volatility will sap confidence, thwart businesses’ ability to plan and likely hinder industrial restarts. Sidelining Europe’s industrial capacity would magnify the political consequences of economic downturn and split popular opinion regarding the national interest of confronting Russian aggression in Ukraine. It will also likely impede European states’ ability to timely and sufficiently produce the military hardware and munitions needed to contain and deter future Russian aggression in Eastern and Central Europe.

Second, as alternative gas supply projects approach final investment decision points, Gazprom will also likely dangle supply agreements currently priced at levels intended to inject uncertainty into the minds of liquid natural gas (LNG) project developers and their financial sponsors. Additionally, Russia will also have heightened incentives to encourage destabilizing behavior by Iran, as this would reduce confidence in the security of natural gas supplies from Qatar.

Moscow might also potentially foment further insurgent activity near the Rovuma LNG project in Mozambique (where Putin confidante and Rosneft CEO Igor Sechin served in the 1980s, likely as a KGB officer) and in other gas-rich zones around the world that could eventually supply LNG to Europe and reduce dependence on Russian gas. If concerns about Russian interference to stifle the emergence of competing gas supplies seem overstated, consider that former NATO Secretary General Anders Fogh Rasmussen apparently believed Russian interests supported anti-fracking groups in Europe in an attempt to ensure the continent’s dependency on Russian gas.

While Russia’s June Nord Stream-1 supply curtailment sacrificed Gazprom’s commercial interests by destroying buyers’ trust, it advanced the Kremlin’s strategic goals. Keeping gas flowing, even erratically, will generate needed revenues and even more importantly, fuel rifts between European countries and likely, within societies themselves by pitting industrial, residential and commercial interests against each other. 

Turmoil serves Russian interests. While the pre-2021 Russian gas sales calculus was 99 percent commercial, 1 percent geopolitical, the new formula is probably closer to 50-50 and maintaining reflexive control will be a paramount objective.

Gabriel Collins is the Baker Botts fellow in Energy & Environmental Regulatory Affairs at Rice University’s Baker Institute. Anna Mikulska is a nonresident fellow for the Center for Energy Studies at Rice University’s Baker Institute for Public Policy & senior fellow at the Kleinman Center for Energy Policy and Foreign Policy Research Institute. 


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