Page 4 - FSUOGM Week 32 2021

FSUOGM COMMENTARY FSUOGM
Is Nord Stream 2 good for Europe?
The agreement between Berlin and Washington might be good news for all involved, including Ukraine
EUROPE
WHAT:
Nord Stream 2 will provide economic and political benefits for Europe.
WHY:
It will provide extra low-cost gas to support Europe's post-pandemic economic recovery, and the agreement between Germany and the US that allows the project to go ahead is good for Western unity.
WHAT NEXT:
ItwillbeuptotheEU to compensate Ukraine for the lost gas transit revenues, and the announcement of a new green fund for the country seems to fulfil that role.
COUNTLESS officials and political commen- tators have slammed the recent agreement between Germany and the US that allows the completion of Russia’s embattled Nord Stream 2 pipeline as a victory for Moscow and a defeat for the West.
The project jeopardises European energy security, leaves Ukraine at risk of increased Rus- sian interference and will give Russia greater political influence both in Berlin and Brussels, its critics say. Yet it is also worth looking at the potential economic benefits that Nord Stream 2 could bring about, both for Germany and Europe, not to mention the improvement in Western unity now that Berlin and Washington have reached a compromise. The agreement is of course very good news for Russian Presi- dent Vladimir Putin. But an argument can be made that it is also beneficial for all parties, even including Ukraine.
Economic benefits
It is no surprise that Germany has remained staunchly supportive of the pipeline, despite US pressure and several crises in political relations with Russia over the years. Having more low- cost gas supply will help the German economy rebound from the pandemic, particularly in its chemicals and other manufacturing industries.
Despite concerns that Europe relies too much on Russia for its energy, Russia remains Europe’s largest gas supplier and there is good reason for this. While LNG may periodically become more competitive than Russia’s pipeline gas, the latter is by and large the most affordable source of sup- ply to many European markets.
These benefits extend to Europe as a whole. In a study in 2017, albeit commissioned by the Nord Stream 2 operating company, the Euro- pean Economics Institute estimated that the resulting drop in LNG imports thanks to Nord Stream 2’s operation would result in a 13-32% reduction in wholesale gas prices in Europe.
Critics of Nord Stream 2 often argue that Rus- sia can abuse its dominant position in the Euro- pean gas market for commercial or political gain. And there are many precedents for this kind of behaviour. But thanks to concerted EU efforts over the years to expand gas infrastructure and liberalise the market, it is more difficult for Rus- sia to act in this way.
Europe has opened a number of new LNG import terminals and cross-border pipelines over the past decade, providing alternative sources of supply to markets that once relied on Russia for all of their gas needs. Further- more, Gazprom can no longer include destina- tion clauses in its contracts and must provide
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w w w . N E W S B A S E . c o m Week 32 11•August•2021