Permanent Rupture: The European-Russian Energy Relationship Has Ended with Nord Stream
The blasts that tore through the Nord Stream 1 and Nord Stream 2 pipelines last Monday have already blown up whatever was left of five decades of German energy policy. On Sept. 6, Swedish seismologists reported several underwater explosions off the coast of Denmark. Minutes later, pipeline monitors in Germany reported a 94 percent drop in pressure in the Nord Stream 2 pipeline. Currently, there are three separate major leaks in the controversial Gazprom pipelines that once directly shipped Russian natural gas to German consumers. While the circumstances of the explosions are still unclear, Danish and Polish leaders have stated that the likely cause is sabotage, while a Ukrainian official deemed the explosion a “terrorist attack planned by Russia.”
In the context of Russia’s continued war in Ukraine, these explosions signal a critical juncture in Euro-Russian relations and global energy flows. Indeed, they mark the definitive end of the gas bridge that has linked the fates of Europe and Russia since the 1960s. The violent demise of Nord Stream forces Brussels and Moscow in opposite directions: Europe will now accelerate its clean energy transition and seek closer energy ties with the United States, while Moscow is now China’s gas station. This is not ideal for either side. In the coming years both European competitiveness and Russia’s role on the global stage will diminish.
The End of Ostpolitik
Although the Soviets first began selling energy products to Western Europe in the late 1950s, today’s energy dependency dates back to German Chancellor Willy Brandt’s Ostpolitik. Starting in 1969, Brandt sought to normalize relations between East and West by creating new economic and political links, particularly in the realm of energy. One the policy’s first achievements was a landmark gas deal between the Soviet Union and West Germany in February 1970. The flourishing gas relationship lasted through the collapse of the Soviet Union, German reunification, the chaotic first decade of post-Soviet independence, and more.
In 2011, the Nord Stream pipeline was launched in a splashy ceremony attended by then Russian President Dmitry Medvedev, German Chancellor Angela Merkel, French Prime Minister Francois Fillon, Dutch Prime Minister Mark Rutte, and E.U. Energy Commissioner Gunther Oettinger. At the time, opponents in Poland and Ukraine warned that Nord Stream would cement a dangerous reliance on Russia, which remained Europe’s primary security threat. These states also feared being cut out of the transit game altogether, which would cut into revenues and a weaken a potential deterrent against Russian aggression. But Western European nations considered Nord Stream to be the beginning of a new phase of Ostpolitik. This deep divergence between Eastern and Western Europe would remain a defining cleavage that weakened Europe’s ability to work as a bloc in making cohesive energy security policy.
In 2015, over a year after Russia’s annexation of Crimea, a consortium of Western European firms signed an agreement with Gazprom on the construction of Nord Stream 2, which would double the capacity of Russian gas exports to Germany. The pipeline provoked controversy from the start, which only intensified when Russia began massing its troops along Ukrainian borders in the fall of 2021. On February 22, 2022, newly elected German Chancellor Olaf Scholz halted the certification process on the now complete pipeline, just days before Russian troops invaded Ukraine.
For Germany, abandoning the Nord Stream pipelines signified a fundamental transformation of Germany’s energy security strategy, and its approach to relations with Russia. Germany’s major energy utility companies, including Uniper and RWE, were powerful lobbyists for cheap and plentiful Russian energy, and have historic ties with Germany’s Christian Democratic Union. The strength of Germany’s industrial base was also built on a grand bargain with Russia: Relatively cheap and plentiful Russian energy kept German exports competitive on global markets. Moreover, affordable Russian gas allowed the Christian Democratic Union to work out a deal with the Green Party to wind down nuclear energy and expand renewables.
The deterioration of relations between Russia and the West also took place in the context of a major political transformation in Germany. Scholz took office in December 2021, ending Merkel’s sixteen year tenure as the de facto leader of Europe. Merkel, despite her personal dislike of Vladimir Putin, institutionalized Germany’s commercialization of energy security, overseeing the construction of both Nord Stream 1 and 2. Scholz’s interference in the certification process of Nord Stream 2 was the first major rupture in the Russo-German gas trade, which had flourished since the 1970s. But despite Germany’s disavowal of Russian energy, and the scramble to reformulate German energy security policy, Nord Stream remained in place, pressurized with gas and ready to resume exports if the political calculus shifted.
Cold Winters Ahead
After Russia’s invasion of Ukraine, Western sanctions targeted Russia’s energy sector for the first time. Reports of Russian atrocities at Bucha prompted European leaders to accelerate plans to move away from dependence on now-toxic Russian energy. The European Commission announced a plan, REPowerEU, which sought to cut imports of Russian gas by two thirds by the end of 2022, while Germany announced that it would wean itself off Russian oil and gas entirely by 2024. But replacing 155 billion cubic meters of annual Russian gas imports in a short time span is almost impossible, and analysts believe that REPowerEU is overly optimistic.
Gazprom had stopped shipping gas supplies to Germany via Nord Stream in early September, citing a technical problem that could not be fixed due to Western sanctions. This was a Kremlin attempt at energy blackmail, based on the hope that European leaders, with their economies at risk, would reduce sanctions in exchange for energy. Now, even that possibility is gone.
Adding to the dire picture is the specter of another gas dispute between Russia’s Gazprom and Ukraine’s Naftogaz, which threatens to halt gas supplies to Europe that transit through Ukraine. On Sept. 27, Gazprom announced that it may levy sanctions on Naftogaz, which had filed an arbitration claim against Gazprom for unpaid transit services. Despite the war in Ukraine, Gazprom still sends 42 million cubic meters of gas through Ukraine to European consumers each day, but Ukraine claims that Gazprom has not paid the latest transit bill. In 2006 and 2009, gas supplies to Europe were interrupted during peak usage season because of similar disputes over unpaid gas and transit fees.
European policymakers, despite their eagerness to move away from Russian supplies as soon as possible, did not envision a scenario in which Russian pipeline flows were cut completely. If this happens, the effects will be most keenly felt in Germany, Slovakia, Hungary, the Czech Republic, and Austria, as these states are the most reliant on Russian imports and do not have adequate infrastructure to distribute alternative supplies. Without Nord Stream, if gas transit through Ukraine is also cut, these states will be entirely reliant on pipeline gas from Norway, as well as Belgium and the Netherlands. Winston Churchill famously warned that energy security lies “in variety and variety alone.” Europe now risks discovering why.
Infrastructure at Risk
Germany, Sweden, and Denmark are still investigating the origins of the Nord Stream explosions and leak, but all signs point to a deliberate act. Deep-sea pipeline ruptures are extremely rare in the absence of a major seismographic event such as an earthquake, and causing damage, unobserved, to a pipeline at a depth of 80 meters would require advanced technical capabilities. Most recently, Josep Borrell, the E.U. foreign policy chief, tweeted: “Deliberate disruption of European energy infrastructure is utterly unacceptable and will be met with a robust and united response.”
It is not yet known if Russia sabotaged its own pipelines, but attacks on critical infrastructure are a key tenet of Russian warfighting strategy. In Russian doctrine, the Strategic Operation for the Destruction of Critically Important Targets is designed to inflict material and psychological damage on the enemy through attacking military, economic, or political targets. According to modern Russian operational concepts of war, the space between peace and war is no longer identifiable, and “war” encompasses a variety of acts including economic warfare.
As such, a potential special operation targeting European energy resilience and resolve ahead of winter is entirely plausible. The timing of the explosions coincided not only with Berlin’s first cold snap of the year but also with the public inauguration of Europe’s new Baltic Pipe. This €1.6 billion gas pipeline will transport 10 billion cubic meters of gas annually from Norway through Denmark to Poland, which sees it as a valuable means for diversifying away from Russia. Moscow may have wanted to send a message that it could threaten these efforts as well.
A more prosaic explanation is contractual: Moscow could have set the conditions for force majeure, a contractual provision that allows Gazprom to avoid paying billions in penalties for abrogating its agreements to sell gas to its European consumers through Nord Stream 1. In June, Gazprom declared force majeure and notified its European clients that it was no longer responsible for any gas shortages due to “extraordinary circumstances.”
Regardless of who or what caused them, the Nord Stream explosions highlight the vulnerability of critical European infrastructure. Europe was already in an energy crisis prior to Russia’s invasion of Ukraine, and extremely tight global supply means that European energy infrastructure was already strained. As a result, the potential effects of further sabotage, whether on pipelines or natural gas storage facilities in Germany, Poland, or Lithuania, would be catastrophic.
End of Gas Bridge
Before Monday, the possibility remained that Berlin would reverse course on Nord Stream if the social and political ramifications of recession and economic became too severe. That is no longer the case. In fact, the gas bridge that bound Berlin and Moscow, and provided a framework for Europe’s relationship with Russia, was always doomed. In 2021 Ukrainian President Volodymyr Zelensky said that in 25 years, Europe would no longer need Russian gas. Europe’s plan to achieve climate neutrality by 2050 would, if achieved, also have rendered Russia’s main point of leverage obsolete. But neither the European Union nor Russia had a clear vision of how to manage the intervening transition. Now, the looming divorce is complete, and there is no going back to business as usual between Berlin and Moscow.
For Russia, this means it is committed to accelerate its pivot to premium Asian markets. This primarily means China, which has a voracious appetite for Russian hydrocarbons but is unwilling to pay European prices. This year, Russia became the number one supplier of crude oil to China, supplanting Saudi Arabia, while Russian sales of pipeline gas grew by 65 percent compared to 2021. At their recent meeting at the Shanghai Cooperation Organization summit in Samarkand, Putin and Xi Jinping also discussed further expanding the landmark Power of Siberia, the $400 billion pipeline shipping Russian gas direct to China.
But China is not a substitute for Russia’s exports to Europe. Although it will likely match European demand in terms of volume, Asia will never match Europe as a source of revenue and political influence. Many of Russia’s energy fields, particularly those that were being used to sell gas to Europe, are too far from Asian markets. It will take years, and considerable capital, to reorient Russia’s energy trade from Europe to Asia. But with no other options, Russia and China will nevertheless be forced work more closely together in the energy sphere, dramatically changing global energy flows.
Europe faces a more immediate challenge in finding alternative energy supplies. Given numerous constraints, it is likely that it will have to sharply reduce its energy demand over the next two years. If Russia continues to supply Europe at current rates, Europe could muddle through this winter season with a moderate demand reduction. But this would mean entering summer 2023 with very low amounts of gas in storage. Meanwhile, a dramatic reduction or total loss of Russian gas exports to the European Union would be disastrous for the 2023/2024 winter season.
Over the longer term, Europe will have to reckon with a major industrial transformation. Energy prices will remain elevated for the foreseeable future, making production unprofitable in energy intensive industries. This week, 15 E.U. member states wrote to E.U. energy commissioner Kadri Simson demanding an E.U. ceiling on gas prices to help protect industries that are collapsing under the weight of soaring hikes. A deep recession in Europe is inevitable: Deutsche Bank is predicting that Euro-area gross domestic product will fall by three percent in the next year. European governments are doing their best to shield their citizens and businesses from the impact of the energy crisis by nationalizing utilities, rolling out aid packages such as €100 checks to poor households, and capping energy price increases for households and small businesses. But these interventions are costly, and do not address the inevitable longer term societal adjustments. For decades, the competitiveness of European industry hinged on affordable Russian energy, but this arrangement has now ended. The loss of European competitiveness will disproportionately affect poorer Europeans, who are already voting the radical right back into office.
The Nord Stream pipeline was the last gasp of Ostpolitik and this week’s damage is likely fatal. Even in the midst of an energy crisis that is arguably more severe than that of 1973, it is almost inconceivable that European capitals will go back to pre-war energy arrangements. Even if European unity against Russian aggression does not hold in the coming years, the days of Russian energy dominance in Europe are over. States will accelerate clean energy transition, nuclear energy is poised for a renaissance, and Russia’s place on the European continent will be forever diminished.
Emily Holland, Ph.D., is an assistant professor in the Russia Maritime Studies Institute at the Center for Naval Warfare Studies, U.S. Naval War College. She studies energy politics, Russian and European foreign policy, U.S.-Russian relations, and populist movements in East-Central Europe and Russia. Her book project, Poisoned by Gas, elucidates the relationship between foreign policy, domestic politics, and the natural gas trade in Europe and the post-Soviet space. The views expressed here are hers alone and do not represent those of the U.S. Naval War College, the U.S. Navy, or the Department of Defense.
Image: The Danish Armed Forces