Nord Stream, Natural Gas and Russia-Ukraine Tensions

For all of its inherent drama and gravity, the Russian Federation’s intimidation of the Ukraine may only amount to a rather risky attempt at cornering a market.  

By the time Russian troops began to gather at the Ukrainian border, Gazprom, the Federation’s state-owned firm in charge of the nation’s major natural gas deposits, had already been on the outs with Naftogaz, its Ukrainian counterpart, for nearly two decades. In the years before Nord Stream, Naftogaz’s pipelines were one of Gazprom’s only means of accessing European markets, transporting up to 70% of the Russian firms’ supply to the West, so the Ukrainian firm could demand hefty transit fees. But as early as 2005, Gazprom smelled blood. 

Repeatedly, Naftogaz was caught siphoning supplies intended for European customers, to which the Russian response was, typically, to step on the entire continent’s dose. These were genuine offences, but they must have struck the Russian state as opportunities, too, for the tightening of Gazprom’s stranglehold in Europe.  

Although some European countries get their gas from somewhere in the Single Market (the UK, for instance, receives only 3% of its gas imports from Russia), the economies of certain countries are hyper-sensitive to fluctuations in the volume and price of Russian gas; indeed, as a bloc, the European Union receives 40% of its imported natural gas from Russian companies. Therefore, by punishing Naftogaz in this way, it was possible to demonstrate just how dependent certain European nations were on Russian gas.  

And with the opening of Nord Stream 1 in 2011, as Kyiv began to lose its leverage as one of the Federation’s only routes to the West, Russia could begin to pose an ultimatum: the sovereignty of the Ukraine or the economies of Europe?  

The closing of the trap, of course, is Nord Stream 2.  

Completed in the Winter of 2021, Nord Stream 2 is a two-string pipeline that stretches for 745 miles from Ust-Luga in south-western Russia to Greifswald in north-eastern Germany. All in all, the construction of the line has cost the Russian Federation £8.3bn. It would be no surprise, then, if the European Commission’s refusal to allow Gazprom to commence operations was the cause of considerable frustration in Moscow. 

The new pipeline is capable of transporting 55 billion cubic metres every year, doubling the capacity of the Nord Stream system as a whole; in total, the system can bring 110 billion cubic metres into the European Union via Germany. The original Nord Stream pipeline, which is the longest sub-sea pipeline in the world, was completed almost a decade ago in 2012 and runs directly parallel to this new addition, terminating in the same location at Greifswald. Both Nord Stream 1 and 2 are supplied by the Gryazovets-Vyborg branch of the Northern Lights grid, which transports gas out of the Yamal peninsula and other Siberian fields, which are some of the most abundant deposits of natural gas on the planet. 

The original Nord Stream pipeline was designed as a circumvention of those countries – particularly, the Ukraine – which were previously the Russian Federation’s only means of selling to Europe. And should it come online, Nord Stream 2 would only strengthen this initial independence – indeed, it promises to obsolesce the Central and Northern Corridors. 

With Nord Stream 2, then, the Russian Federation has finally finessed its checkmate of the European Union. Either the European Union gives the green light to the pipeline, cementing Gazprom’s dominance but sparing the Ukraine, or the Commission holds fast in its obstruction of Nord Stream 2, thereby prompting an invasion of the Ukraine that would most likely result in Gazprom absorbing Naftogaz. In either scenario, then, the result is the same.  

It seems that European nations are hoping to form a coalition of states capable of intimidating the Russian Federation into withdrawing from the Ukraine without certifying Nord Stream 2. According to analysts, Putin is notoriously averse to open warfare, so the strategy follows precedent. But, of course, only time will tell.