Russian gas pipeline to Germany sows divisions in Europe and beyond

Reporting from Moscow —  Denmark’s rocky Bornholm Island and the Baltic Sea waters surrounding it have been the subject of many territorial battles over the centuries.

These days, they are the focus of a geopolitical struggle surrounding a controversial gas pipeline project designed to transport Russian gas directly to Western Europe.

Russia’s state energy giant Gazprom says it is nearing completion of the Nord Stream 2 pipeline, set to stretch 765 miles under the Baltic from a port north of St. Petersburg, Russia, directly to Germany.

But as the pipeline’s steel and concrete construction gets closer to Danish waters near easterly Bornholm Island, Denmark has stalled the pipeline’s completion by refusing to grant the project construction permits in its territorial waters.

By doing so, Denmark has created another crack in the rift between those European Union and NATO members already divided by the pipeline’s association with Russia.

The United States, which critics point out wants to sell energy to Western Europe itself, and many of its allies in Europe and NATO, namely Poland, the Baltic States, Ukraine and others, oppose the pipeline, saying the $11-billion project would increase Moscow’s ability to use gas supplies as a diplomatic weapon.

Eastern European leaders in particular fear it will increase Moscow’s influence in the region.

But Germany, Europe’s biggest economy, remains firm as Nord Stream 2’s strongest proponent, saying the pipeline will ensure the continent’s energy security.

Project officials say more than two-thirds of the pipeline is already completed, with permission secured to construct through the maritime territories of Russia, Finland, Sweden, and Germany. Only Denmark stands in its way.

“They are almost getting to the point where they have built everything except what is in the Danish zone,” said Hans Mouritzen, a senior researcher on foreign policy at the Danish Institute for International Studies.

“Denmark needs a good relationship with Germany,” Mouritzen said. “But the Germans are phasing out coal, and they are phasing out nuclear power plants, so they really need this gas.”

Denmark, like many of its European allies opposed to Nord Stream 2, sees the Russian gas pipeline as a risk because it would allow an aggressive Moscow to use gas supplies as a diplomatic weapon.

Nord Stream 2 is a project of Russian state energy firm Gazprom, which has partnered with major European energy companies — including Germany’s Uniper and BASF’s Wintershall unit, Anglo-Dutch firm Shell, Austria’s OMV and France’s Engie — for 50% of the construction funding.

Europeans, particularly Germany, worry about energy security as European gas production is set to fall by 50% over the next 20 years, even as European demand is forecast to continue at the current pace.

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The European Union already gets 50% of its gas supplies from Russia, some of it flowing through the nearly parallel Nord Stream pipeline, which was completed in 2012. Other gas comes via Soviet-era gas pipelines traveling across Ukraine.

More than any other opponent of the pipeline, Ukraine fears it will be the biggest loser once Nord Stream 2 is completed.

The proposed completion date coincides with a renewal date for Gazprom’s supply and transit deal with Ukraine. That has Ukrainians, who are at war with Russian-backed separatist militias in its eastern regions, worried.

Ukraine relies on Gazprom’s transit pipelines, which wind across Moscow’s former Soviet neighbor and supply both natural gas and revenue from the transit fees. Gazprom CEO Alexey Miller has said the gas company will eventually reduce gas transit through Ukraine’s pipelines and use only the Baltic Sea routes. That would be a potential loss of billions of dollars in revenue for Ukraine. The Eastern European nation would then need to buy gas from other sources.

Ukrainians have lobbied hard for the U.S. and its European allies to reject the Nord Stream 2 project. Ukrainian officials point to three occasions between 2004 and 2013 when Russia shut off the flow of gas to Ukraine during contract negotiations or diplomatic standoffs and put Europe’s gas supply in jeopardy.

This month, newly elected Ukrainian President Volodymyr Zelensky made his first European tour and met with German Chancellor Angela Merkel in Berlin. In addition to pushing Germany to continue its pressure on Russia because of Moscow’s support for separatist militias in eastern Ukraine and its annexation of Crimea, Zelensky urged Merkel to consider the impact of Nord Stream 2’s construction on Ukraine energy and economic stability.

Zelensky said his country’s role in transporting and storing Russian gas is “a guarantee of energy security for both Ukraine and Europe.”

Merkel sought to reassure Ukraine that it had it stood behind Kiev in its fight against Russian aggression but stopped short of saying Germany would reconsider its approval of Nord Stream 2.

“I have repeatedly said to the Russian president that for me the issue of Ukraine being a transit country for gas is essential, so very, very important, and President Putin has always stressed to me that he understands that,” Merkel said in a joint news conference.

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The United States has placed sanctions on Moscow for its incursions into eastern Ukraine and annexation of Crimea and agrees that European reliance on Russian gas creates a risk.

Trump has threatened sanctions on Western companies associated with the project.

The U.S. has its own interest in overtaking Russia’s share of the European gas market via America sales of liquefied natural gas, or LNG. In recent years, America has become a global leader in LNG exports, with many of those shipments going to Europe.

Last month, at an economic forum in St. Petersburg, former German Chancellor Gerhard Schroeder accused the U.S. of prioritizing its commercial interests in LNG sales to Europe to gain political influence on Denmark to delay the pipeline’s construction.

“Denmark is putting Europe’s energy security at risk,” said Schroeder, who is the Nord Stream 2 project chairman.

Nord Stream 2 has submitted two pending permit applications with the Danish Energy Agency for routes running north and south of Bornholm. In March, the agency asked the pipeline project to submit another application for a route that would run south of the island but not in Danish territorial waters.

In an emailed statement, the Nord Stream 2 press office expressed frustration with Denmark’s refusal to accept the pending applications.

“Asking for a third route option to be developed, despite two fully processed, ready-to-be-permitted applications on the table, can only be seen as a deliberate attempt to delay completion of the project,” the statement said

Denmark’s Energy Agency will finish its review of the pipeline’s third permit application on July 17. A final decision deadline has not been set, agency spokesman Ture Falbe-Hansen told Danish news agencies on June 20.

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Twitter: @sabraayres

Ayres is a special correspondent.