Opinion

Nord Stream 2 can wait

Gazprom is pushing ahead with plans to build a second gas pipeline under the Baltic sea, straight form Russia to Germany. Supporters claim that Ukraine cannot be relied on as a transit partner, and that Europe will need more gas in the future. Georg Zachmann is unconvinced, and argues that the project should wait.

By: Date: June 13, 2017 Topic: Energy & Climate

This opinion piece was also published in Rzeczpospolita and Tagesspiegel.

Gazprom wants to build a second gas pipeline under the Baltic straight from Russia to Germany. Nord Stream 2, as the project is called, has provoked controversy in Europe – but the pipeline is planned to be in use as soon as 2019. Supporters of Nord Stream 2 make two bold claims: Ukraine is apparently an untrustworthy partner for gas transit, and Europe supposedly needs more Russian gas. Both arguments are questionable, and there are good reasons to put the project on ice.

First of all, transporting gas through Ukraine is not a major supply risk for Europe. It is almost impossible to imagine that today’s Ukraine would even consider interrupting the flow of gas to the EU. After all, Ukraine benefits greatly from the EU’s political and economic support. Kiev would not want to jeopardise that. Moreover, any break in gas transit would provoke the building of a pipeline avoiding Ukraine, and thereby actually endanger Ukraine’s own gas supply. This is because Ukraine gets a third of its gas supplies from the EU, in the form of reimports from Slovakia.

On the other hand, Ukraine would be sure to see the building of Nord Stream 2 as a clear sign of distrust from Europe. Indeed, Ukraine has redoubled its efforts to reform its gas sector, and the changes are already bearing fruit. The state-owned gas company needs much less public subsidy, and gas consumption is massively reduced. Western gas companies are setting up in the Ukrainian market, and there is justified hope that in some years Ukraine will be able to meet all its own gas needs from domestic production.

Without gas transit through Ukraine, EU countries would not really have enough gas to supply Ukraine from the west. These supplies consist overwhelmingly of gas that originally flowed into Slovakia through Ukraine. Therefore, bypassing Ukraine with Nord Stream 2 would force Kiev to return to buying gas directly from Gazprom. This dependant relationship would probably be more than just economic in nature. Is that really a situation that the EU wants to encourage?

The second main argument for Nord Stream 2 is that falling gas production in north-west Europe makes additional infrastructure for Russian imports necessary. But increasing needs can be met for at least the next decade using existing pipelines: in 2014 there was 100 billion m3 of unused capacity from Russia. What’s more, renewable energies and improvements in energy efficiency offer hope that gas demand might actually fall. Even if the need for imports does suddenly shoot up, Europe is still in no danger of a gas supply crisis. Necessary extra gas can easily be imported from overseas at any time using the existing liquid gas terminals.

In fact, Nord Stream 2 could weaken Europe’s resolve to find alternatives to Russian gas. Gazprom would surely try to use the new pipeline at full capacity, and the constant stream of gas could be flexibly priced to react to any competition. This would make the development of other supplies and energy sources difficult over the coming decades.

Nord Stream 2 is of strategic importance for Russia and the EU, in terms of both energy and geopolitics. But the interests of the two partners do not neatly overlap. Building the pipeline too soon would leave Ukraine dependent on direct Russian gas exports, and hinder the search for alternative supplies in Europe. In any case, risks around transit or demand over the next 5-10 years seem to be manageable with the existing infrastructure.

So the best idea is simply to wait on making the decision. If it becomes clear that a route bypassing Ukraine is needed, or additional imports become necessary, the plan can always be taken back down from the shelf. But for the moment the project would do the EU more harm than good.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to communication@bruegel.org.

View comments
Read about event More on this topic

Past Event

Past Event

Renewing the 2050 Roadmap

The objective of this brainstorm session is to explore how we can improve the quality and the impact of the revisited 2050 Roadmap, set the agenda for revising it, increase ownership of it and analyze the methodological basis of the 2050 Roadmap.

Speakers: Georg Zachmann Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 22, 2017
Read article More on this topic More by this author

Blog Post

Lights on, Africa! Europe must coordinate support for electrification

Patchy access to electricity remains a major challenge for sub-Saharan Africa's economic development. The EU and its member states have many programmes to support electrification in Africa, but fragmentation reduces their impact. A single platform for European support would provide the necessary coordination and leverage.

By: Simone Tagliapietra Topic: Energy & Climate Date: June 20, 2017
Read about event More on this topic

Past Event

Past Event

Future of the European energy industry

Closed-door brainstorming workshop about how the European energy system is changing because of decarbonisation and digitalisation.

Speakers: Simone Tagliapietra Topic: Energy & Climate Location: Milan Date: June 14, 2017
Read article Download PDF More on this topic More by this author

Policy Contribution

Electrifying Africa: how to make Europe’s contribution count

Electrification is one of sub-Saharan Africa’s most pressing socio-economic challenges. Europe has created a myriad of fragmented initiatives to promote electrification in sub-Saharan Africa, limiting their efficacy. This sub-optimal situation should be changed by coordinating the initiatives of European institutions and EU countries through a unique platform: the EU Electrify Africa Hotspot.

By: Simone Tagliapietra Topic: Energy & Climate Date: June 8, 2017
Read article More on this topic More by this author

Opinion

Europa sinnvoll gestalten

Die Debatte um die Zukunft Europas sollte gerade in Deutschland konstruktiv geführt werden. Es profitiert von einer stabilen EU und trägt entscheidend zur Fortentwicklung Europas bei. Einer zentralen Diskussion wird man sich stellen müssen: Wie kann die Stabilität des Euroraums erhöht werden? Der hier skizzierte Ansatz wäre eine Möglichkeit für einen Kompromiss.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: May 10, 2017
Read article More by this author

Opinion

Is the EastMed gas pipeline just another EU pipe dream?

Is the EastMed pipeline really a feasible project? The answer to this question is not simple, but the EastMed plan sounds unconvincing.

By: Simone Tagliapietra Topic: Energy & Climate Date: May 10, 2017
Read article Download PDF

Policy Contribution

Central Asia at 25

After a decade of growth based on hydrocarbon booms, Central Asian countries are faced with increasing challenges to complete their transitions to a market economy and towards economic development and integration.

By: Uuriintuya Batsaikhan and Marek Dabrowski Topic: Global Economics & Governance Date: May 5, 2017
Read article Download PDF More on this topic

Policy Contribution

The global decline in the labour income share: is capital the answer to Germany’s current account surplus?

Analysing the major divergences between the three largest euro-area countries in terms of unit labour costs and current accounts, to the broader debate on labour income shares. Data suggests that capital and labour have been complements.

By: Bennet Berger and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: April 26, 2017
Read article More on this topic More by this author

Blog Post

Global decarbonisation: a wake-up call for the Middle East and North Africa

Many countries in the MENA region are heavily dependent on oil and gas for exports and taxes. But global decarbonisation could undermine revenues, even though MENA exports are globally competitive. This threatens the MENA region's social contract, so economic diversification needs to start now.

By: Simone Tagliapietra Topic: Energy & Climate Date: April 11, 2017
Read article Download PDF More on this topic More by this author

Working Paper

The political economy of Middle East and North Africa oil exporters in times of global decarbonisation

Middle East and North Africa (MENA) oil exporting countries are still not adequately equipped to prosper in a decarbonising world. Decarbonisation should therefore represent an incentive for MENA oil exporters to pursue structural processes of transition from rentier to production states.

By: Simone Tagliapietra Topic: Energy & Climate Date: April 11, 2017
Read about event More on this topic

Past Event

Past Event

Towards EU-MENA shared prosperity

The second edition of the "Platform for Advanced & Emerging Economies Policy Dialogue" will discuss global supply chains, energy and security.

Speakers: Abdelhak Bassou, Jean-Francois Dauphin, Maria Demertzis, Karim El Aynaoui, Larbi Jaidi, Marion Jansen, Giacomo Luciani, Rania Al-Mashat, Iverna McGowan, Jolana Mungengová, Francis Perrin, Francesco Presicce, Simone Tagliapietra, Valeria Talbot and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 10, 2017
Read article Download PDF More on this topic More by this author

Policy Brief

The carbon buyers’ club: international emissions trading beyond Paris

The effort to define rules for international emissions trading faces the strong desire of nation states to develop their own climate policies, which collides with the need for tradable units in one country to be equivalent to tradable units in another country. To overcome this dilemma Georg Zachmann proposes a club of carbon-buying countries that would regulate only imported mitigation outcomes.

By: Georg Zachmann Topic: Energy & Climate Date: April 4, 2017
Load more posts