The Nord Stream 2 (NS2) pipeline planned in Baltic Sea to take natural gas from Vyborg, Russia to Greifswald, Germany and be completed by end of 2019 promises all to reap billions of euros of profit. That is the mantra repeated by people working for the project when one says he doubts profitability of the mega project. That despite the conditions where natural gas price is down more than by half during these past two years.
It’s rather sure that NS2 is profitable for the five large West-European energy companies – Uniper and Winterhsall (Germany), OMV 8Austria), Engie (France) and Shell (UK, Holland). They all own ten percent of the Swiss-registered Nord Stream 2 AG – totalling 50 percent.
Firstly, private groups do not tackle large projects like this without smelling profits. But the projects does have the other party, Russian state energy giant Gazprom with 50.002 percent. They would be pumping the gas into the pipeline. Also, they have installed the CEO of the company Matthias Warnig who also heads the firm which built Nord Stream 1 (NS1) and is in close circle of Russian president Vladimir Putin.
Possibly, NS2 will end up profitable for Gazprom but one cannot be sure. Their Baltic representative, a Latvian called Romans Baumanis, it naturally will be. But an extra question arises: is building a pipeline costing about €10–11bn cheaper (i.e. more profitable for Gazprom) than repairing the Druzhba pipeline passing through Ukraine and other East-European nations, or building a new pipeline on dry land? Mr Baumanis says it is, and also safer than using the 50 years old and leaking Druzhba.
But the man cannot show us the math as that would mean exposing the company’s business model. Estonian economy ministry vice chancellor Ando Leppiman says any new investment will end up paid by consumers. «With lots of alternatives for gas supplies into Europe, including the emerging LNG market, and the gas prices falling, the economic gain of the costly Nord Stream 2 poses questions, as well as motivation of parties involved,» said Mr Leppiman.
Considering Gazprom owned by Russia which supports the separatists who triggered the Ukrainian conflict, what might be their actual interests? Government Office coordination director Kristjan Prikk says NS2 is part of Russia’s foreign policy ambition to break Europe into East and West Europes again. «In this context, NS2 will boost Russian leverage in Western Europe,» said Mr Prikk, adding that both NS1 and NS2 increase Russia’s options to manipulate Eastern members of EU with gas supplies.
It just so happens that in 2019, as the gas pipe is supposed to be ready, the gas contract between Russia and Ukraine also expires – having historically been a tool for Russian extortion. In light of the new developments, Ukrainians will end up paying Western European gas prices to Russia. Transit billions would also be lost for other Eastern European countries.
As for Ukraine, people might turn back towards Russia in their hearts, considering the inevitable hardships.
Whence the German interest towards Nord Stream 2?
Firstly, it is a big source of income for their companies and state treasury. Also, natural gas is ideal for reserve energy source with renewable energy fluctuations – coal is environmentally dirty, nuclear energy unpopular in wake of Fukushima.
- ando leppiman
- Kristjan Prikk
- nord stream
- nord stream 2
- renewable energy
- romans baumanis