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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Germany Clashes With The U.S. Over Energy Geopolitics

The United States and the European Union (EU) are at odds over more than just the Iran nuclear deal – tensions surrounding energy policy have also become a flashpoint for the two global powerhouses.

In energy policy, the U.S. has been opposing the Gazprom-led and highly controversial Nord Stream 2 pipeline project, which will follow the existing Nord Stream natural gas pipeline between Russia and Germany via the Baltic Sea. EU institutions and some EU members such as Poland and Lithuania are also against it, but one of the leaders of the EU and the end-point of the planned project—Germany— supports Nord Stream 2 and sees the project as a private commercial venture that will help it to meet rising natural gas demand.

While the U.S. has been hinting this year that it could sanction the project and the companies involved in it—which include not only Gazprom but also major European firms Shell, Engie, OMV, Uniper, and Wintershall—Germany has just said that Washington shouldn’t interfere with Europe’s energy choices and policies.

“I don’t want European energy policy to be defined in Washington,” Germany’s Foreign Ministry State Secretary Andreas Michaelis said at a conference on trans-Atlantic ties in Berlin this week.

Germany has to consult with its European partners regarding the project, Michaelis said, and noted, as quoted by Reuters, that he was “certainly not willing to accept that Washington is deciding at the end of the day that we should not rely on Russian gas and that we should not complete this pipeline project.”

In July this year, U.S. President Donald Trump said at a meeting with NATO Secretary General Jens Stoltenberg that “Germany is a captive of Russia because they supply.” Related: The Implications Of A Fractured U.S., Saudi Alliance

“Germany is totally controlled by Russia, because they will be getting from 60 to 70 percent of their energy from Russia and a new pipeline,” President Trump said.

Germany continues to see Nord Stream 2 as a commercial venture, although it wants clarity on the future role of Ukraine as a transit route, German government spokeswoman Ulrike Demmer said last month.

Nord Stream 2 is designed to bypass Ukraine, and Ukraine fears it will lose transit fees and leverage over Russia as the transit route for its gas to western Europe.

Poland, one of the most outspoken opponents of Nord Stream 2, together with the United States, issued a joint statement last month during the visit of Polish President Andrzej Duda to Washington, in which the parties said, “We will continue to coordinate our efforts to counter energy projects that threaten our mutual security, such as Nord Stream 2.”

The United States looks to sell more liquefied natural gas (LNG) to the European market, including to Germany, to help Europe diversify its energy supply, which is becoming increasingly dependent on Russian supplies. Related: High Prices Benefit Iran Despite Lost Oil Exports

The president of the Federation of German Industry (BDI), Dieter Kempf, however, told German daily Süddeutsche Zeitung last month, that he had “a big problem with a third country interfering in our energy policy,” referring to the United States. German industry needs Nord Stream 2, and dropping the project to buy U.S. LNG instead wouldn’t make any economic sense, he said. U.S. LNG currently is not competitive on the German market and would simply cost too much, according to Kempf.

The lower price of Russian pipeline gas to Europe is a key selling point—and one that Gazprom uses often. Earlier this month Alexey Miller, Chairman of Gazprom’s Management Committee, said at a gas forum in Russia that “Although much talk is going on about new plans for LNG deliveries, there is no doubt that pipeline gas supplies from Russia will always be more competitive than LNG deliveries from any other part of the world. It goes without saying.”

The issue with Nord Stream 2—which is already being built in German waters—is that it’s not just a commercial project. Many in Europe and everyone in the United States see it as a Russian political tool and a means to further tighten Russia’s grip on European gas supplies, of which it already holds more than a third. But Germany wants to discuss the future of this project within the European Union, without interference from the United States.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on October 17 2018 said:
    Despite threat of sanctions by the United States and opposition by Poland, the Ukraine and Baltic States, Nord Stream 2 is unstoppable.

    The United States’ opposition to Nord Stream 2 is mainly motivated by self-interest and partly by Russia’s tightening grip on European gas market. However, the more pressure the US exerts on the European Union (EU) to abandon the project, the more defiant the EU and Germany become.

    Germany has made it clear that Washington shouldn’t interfere with Europe’s energy choices and policies and that European energy policy shouldn’t be defined in Washington. Moreover, Germany sees the project as a private commercial venture that will help meet rising natural gas demand in Germany and the EU. Germany was certainly not willing to accept that Washington is deciding at the end of the day that the EU and Germany in particular should not rely on Russian gas and that Germany should not complete this pipeline project.

    Nord Stream 2 is designed to bypass Ukraine, and Ukraine fears it will lose transit fees and leverage over Russia as the transit route for its gas to the EU. However, Russian President Putin said after meeting US President Trump in Helsenki in May this year that he is willing to continue transporting some volumes of Russian gas supplies to the EU through the Ukraine provided Gazprom and the Ukraine settle legal issues between them.

    Part of US opposition to the Nord Stream 2 is that it hopes to sell more of its LNG to the EU. And while the EU is willing to buy US LNG as part of its energy diversification, it is not prepared to buy it at any price. US LNG currently is not competitive on the EU market.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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