The Political Reality of Nord Stream 2 and Germany’s Response to the Navalny Incident

The Nord Stream 2 megaproject made its way back into the spotlight after Russia’s poisoning of opposition leader Alexei Navalny last month. Germany, which took Navalny in for treatment, has faced pressure from its European partners and the United States to end the energy venture. With the pipeline 94% complete, German Chancellor Angela Merkel’s choices on how to proceed could decide the future of European energy security and challenge Germany’s de facto role as a European leader. In an age of rising and revanchist powers, Germany, the United States, and the EU should use the Navalny incident as a point of convergence.

Nord Stream 2, which will supplement the primary Nord Stream with an additional 55 billion cubic meters of natural gas per year through a direct undersea route from Russia to Germany, has been controversial since its inception in 2015. Gazprom, a Russian state-owned energy giant, is the sole operator of the project, for which it secured funding from four European companies. Merkel has long contended that the pipeline is a “purely commercial” undertaking, meant to make energy more secure, affordable and steady for German consumers and eventually the broader Northern European market. As Germany moves away from nuclear and coal to green alternatives, it will need to rely on natural gas as a stopgap solution in the near-term to power its large economy. 

The U.S. government maintains that Nord Stream 2 presents geopolitical problems that would ultimately render Europe less secure. Namely, the project would make Russia capable of circumventing Ukraine, which would undercut Kiev’s energy supply and rob it of the transit fees imposed on Russia. Gazprom will decommission pipelines in Ukraine through its optimization program and consolidate supply into a single route. This is a risky move, both because repairing underwater pipelines is costly and time intensive, and because it makes supply inflexible—what happens in the winter months when energy demand is high and the Nord Streams lack capacity? It also would enable Putin to turn off the gas tap in a single swipe, as he did in 2009. 

Today, the United States’ long-standing opposition to Europe’s greater dependence on Russian gas zeroes in on stopping Nord Stream 2 at all costs. At the end of last year, Washington escalated sanctions on companies involved with the project, which effectively halted development and caused Gazprom to proceed on its own. And just recently, three prominent United States Senators proposed secondary sanctions on the small German port town of Sassnitz by sending a letter to the port’s owner, intimating that forthcoming “crushing legal and economic sanctions” would be “fatal” for the town. This kind of economic statecraft between allies is aberrational—it is one thing to attempt to influence Berlin, but threatening ordinary citizens only amplifies Germany’s widespread resentment for the United States and President Trump. 

All eyes are now on Merkel as to how she will proceed. Since Navalny’s poisoning, a number of  European leaders have spoken out against the project, including France’s President Emmanuel Macron and Poland’s Prime Minister Mateusz Morawieck. But perhaps the most noteworthy criticism came from EU Commission President Ursala von der Leyen, who signaled her opposition in her State of the European Union address last month: “those that advocate closer ties with Russia, I say that the poisoning of Alexei Navalny with an advanced chemical agent is not a one off. We have seen the pattern in Georgia and Ukraine, Syria and Salisbury—and in election meddling around the world. This pattern is not changing—and no pipeline will change that.” 

Yet, Merkel seems unlikely to budge after the Novichok incident. She has continued to push the idea that the project is purely commercial, telling the press that, “Nord Stream 2 should be completed,” adding that she doesn’t, “think it is appropriate to link this business-operated project with the Navalny question.” Rallying behind her are the German industry lobbies and investors who bankrolled the project. How would they be compensated for losses? What to do with the hundreds of kilometers of pipeline under the Baltic Sea, a truly sunk cost, would be even more difficult to decide

When there are larger threats in the world, it is essential that Germany, the United States, and the EU act together and appear strong. Germany should begin by accepting the reality of what Nord Stream 2 is and what it has always been: a commercial and political Gordian knot. Untying the knot should start with the completion of the pipeline. Germany cannot afford to lose credibility with European investors, nor could it compensate those investors, as doing so would contradict schwarze Null or “black zero,” Germany’s fixation with maintaining a balanced budget. 

Germany should marry European solidarity with its own interests by raising the issue of energy security from the state to the multinational level. The greatest pushback on Nord Stream 2 has come from Eastern European countries, who are no strangers to the threats posed by a deeper reliance on Russian energy. Germany should reassure these partners that it will use its enhanced bilateral relationship with Russia to advocate for their interests. One way to do this would be to press Russia to renovate its land based pipelines that connect Russian gas to Eastern Europe instead of decommissioning them. At the end of last year, Chancellor Merkel helped negotiate a five year gas transit deal between Ukraine and Russia, ensuring that Ukraine would still receive some money for transporting Russian gas through its territory. She should extend this agreement before leaving office next year. 

On the other side of the Atlantic, the United States should pull back its sanctioning of German citizens. German Finance Minister Olaf Shulz recently offered the United States 1€ billion to invest in two terminals that would directly receive American liquid natural gas (LNG) in exchange for letting Nord Stream 2 be finished. The United States should accept this offer and negotiate for more. Taking up Mr. Schulz’s offer would show the German people that the Americans are willing to compromise and acquiesce to foregoing market dominance.

In Brussels, Germany could cooperate more fully with the EU to sanction Russia. Members of Merkel’s own Christian Democrats have defended Nord Stream 2 in part because they believe that, “Russia is more dependent on revenue from natural gas than Germany is on supply. Once the pipeline is turned on,” they say,” Russia will be less likely to misbehave in ways like the Navalny attack because such actions might lead to sanctions.” The EU should give teeth to this rather naive assessment. That requires Germany to join the ranks of other member states to vote unanimously for pressing sanctions. The Navalny incident has garnered opposition to Nord Stream 2 within many European capitals previously in favor of the project. Even Italy, which has a long history of energy trade with Russia, said it would back sanctions alongside Germany. 

It is important to keep in mind that Russia and other adversaries salivate over watching the West self-destruct. The Navalny incident, however brutal it was, should be used as an assembly point at which Germany, the United States, and the EU can determine a more secure energy future that works for everyone.