Merkel has a hot rise with Nordstrom 2 pipeline

  • Biden agrees to waive sanctions on Nordstrom 2 completion.
  • Merkel trailblazer as improvement in US-German relations.  
  • Merkel pushes for Ukraine green energy transition.
Angela Merkel

Why is Merkel’s temperature hot?

Answer: Merkel finally gets the green light from the US on the Nordstrom 2 gas pipeline transporting gas from Russia directly to Germany.

After three US presidents’ opposition towards the Russian-funded gas pipeline, German Chancellor Angela Merkel has got the green light from US President Biden for the completion of the Nordstrom 2 pipeline project. This news comes one week after Merkel’s first visit to Washington this month which, although the visit lacked substantial results, seemed just enough for Biden to budge on the US imposed sanctions on Swiss-based company Nord Stream AG and its CEO Matthias Warning.

Nordstrom 2 is the second pipeline project carrying Russian gas to mainland Europe and has become a major foreign policy obstacle for the US and Germany and one of the most controversial energy projects in transatlantic relations. At 98% completion, Biden’s decision seems more symbolic than practical but nonetheless is a major accomplishment for US-German relations and Merkel who has been supporting the project since its inception in 2015. 

What is changing Merkel’s temperature?

Answer: The Biden Administration’s decision to waive sanctions, Ukraine’s exclusion from talks, and criticism among allies.

In January of this year, the Trump administration imposed sanctions on Russian companies and ships working on the completion of this European pipeline. On July 19th, President Biden announced the waiving of such sanctions, receiving ample criticism from both Republicans and Democrats in Congress who have been calling for increased penalties to prevent the completion of the pipeline. Biden’s decision marks an end to three US presidents’ antagonism toward the project and seems to be salvaging US-Germany relations after the Trump Administration.

Biden has defended his decision by stating that creating an obstacle for the pipeline did not make sense given the point of completion of the project but continues to receive backlash for being “soft” on Russia and for having “given in” to Merkel. With US opposition out of the way, the Russian-funded pipeline is said to be completed by the end of the year, leading Merkel to a victory. 

Given that the strongest and most steadfast opponent has rolled over, Merkel will see the benefits of Nordstrom 2 which will double the amount of gas to the country and cut the transport route by 2000 kilometers, thereby cutting costs, a deal explained by Merkel as being purely economic. Nonetheless, Merkel is surrounded by countries who are not as easy to shift their policies on Russia as the US and view the US-Germany agreement as a betrayal of European allies, especially those used to being strong-armed by Russia.

With the most to lose, Ukraine has pulled the shorter end of the stick. Being the most concerned with the project, Ukrainian President Volodymyr Zelensky has complained about being left out of the discussions and is concerned about the isolation of Ukraine which relies on transit income from Russian gas being transported to the rest of Europe. As it currently stands, Ukraine receives between two and three billion US dollars from Russian pipelines through its territory, and benefits from the economic buffer it has created between the country and Russia. 

Additionally, forming part of the Normandy Format, along with France and Russia, Merkel has lost some credibility when it comes to assuring the country’s security and has placed Germany in a precarious position with their allies. Within Europe and among German allies criticism runs deep over concerns for Ukraine’s and the Baltic’s security.

Poland has been vocal in arguing that the US-Germany agreement poses security threats to the region while other regional players and the US fear that the pipeline will empower Russia to use energy as a weapon against its neighboring countries. As a means to counter this concern, Merkel has agreed to take collective European action, through imposing sanctions and other penalties, in the case that Russia oversteps Merkel’s drafted conditions in the Nordstrom Agreement. 

At home, public opinion remains divided. Merkel has received opposition from the extreme right, the extreme left, the green party, and even her own CDU party but this strong opposition will not be divisive in determining or limiting her future steps as Merkel is set to leave office in September. In a sense, it seems that Merkel is simply trying to tie up loose ends on unfinished business before the new Chancellor, which is yet to be decided, implements their own agenda. Thus, obtaining the go-ahead from Biden was an extremely important push for this deal and for Merkel’s last month in office. 

What is driving Merkel?

Answer: The desire to achieve her personal goal of green energy for Europe and Germany.

Germany is an energy importing country and imports approximately 94% of the natural gas it consumes from abroad. Given the country’s historical strong reliance on coal, a non-renewable energy source, Merkel has been focusing on diversifying the country’s energy portfolio. Proponents of the pipeline project, including Merkel, argue that Nordstrom 2 could help Germany meet its carbon emissions goals of becoming nearly carbon neutral by 2050 by switching from relying on coal to gas, which provides a cleaner alternative and balances out the fluctuations of renewable energy. 

Not only looking to diversify into gas but also sustainable energy sources, one of Merkel’s interests is in helping the transformation of Ukraine to a green energy exporting country as Germany will always rely on energy imports. Thus, Merkel is pumping $175 million into a new green fund for Ukraine to improve its energy independence with renewables. Given the criticism of geopolitical and security challenges posed by Nordstrom 2, Merkel is also striking a deal with Biden to extend the flow of Russian gas through Ukraine for another ten years. For Merkel, a consolidated European Union is important, and given the ongoing strategic challenge of Ukraine, staying engaged on this matter is of utmost importance for Germany.

What does this mean for you?

Answer: Merkel and Biden push for Ukraine to become a green energy exporter. For Biden, it is a means to undermine Russia while looking to increase US liquified natural gas (LNG) exports to Europe.

Given the divisive set of opinions about whether Nordstrom 2 should proceed, its completion may assist Germany in fulfilling its climate goals, detach Ukraine from relying on Russia to keep its economy afloat, and help the overall transformation of Ukraine to a green economy and a green energy exporter. Although being excluded from the negotiating table, Ukraine is set to benefit from the increased attention that the country is being given as there seems to be a newfound commitment on the part of Washington and Berlin. Biden and Merkel have agreed to invest in green energy across Europe, with a strong focus on transforming Ukraine from a country reliant on the transit of Russian gas to be independent of it. 

For Ukraine, it is becoming increasingly clear that the only sustainable future for the country is one focused on sustainability and independence from Russia. If Biden, Merkel, and her successor can succeed in making Ukraine a green energy hub, which has the potential of being 90% reliant on renewable energy, then the country will no longer have to rely on Russia and can circumvent the weaponization of energy altogether. 

 For Biden, investing in Ukraine is a way to undermine Russian presence in the region by having a Ukraine that is no longer reliant on Russia for energy or the income generated from its transit. Not only does it serve Biden’s sustainability cause, but it also strengthens the US stronghold on a political ally that could increasingly undermine Russia. On the other hand, Biden is also interested in securing US exports of liquified natural gas (LNG), or “freedom gas,” to Europe, which formed part of the premise for sanctioning Nord Stream 2.

However, US sanctions on the pipeline did not only drive a stake through the already struggling US-Germany relationship but also did not secure Merkel’s go-ahead for US gas imports. As Nordstrom 2 was widely accepted by the German public and the majority of the political class, US sanctions can be considered to undermine German sovereignty over a lucrative economic, albeit politically sensitive, project. In general, transatlantic relations work better when one country is not undermining the other and when foreign policy concerns don’t get in the way of the energy interests.  

Arielle Combrinck

Research & Analysis Member