President Biden’s Pipeline Paradox

That action on climate change would be the top priority for the Biden administration became obvious on the campaign trail. That other priorities of an even more political nature might occasionally trump it was not so obvious then. It is only now that some of these realities are beginning to emerge, with seemingly inconsistent action on projects such as Gazprom's Nord Stream 2 and TC Energy's Keystone XL. When earlier this year the Biden administration lifted some sanctions on German entities involved in the Nord Stream 2 project, it caused shocked some Republicans who promptly laid out their misgivings in a letter.

"We fear that this discrepancy can only be explained by the desire to leave room for a deal through the back door with Germany. Any deal that does not stop the completion of Nord Stream 2 would be misguided," they wrote in March.

The Nord Stream 2 project is one of the few topics on which this administration and the previous one appear to be in complete agreement. The official reasons that both the Trump administration and the Biden administration have repeatedly given are Europe's energy security, which will be compromised if Russia's share in gas imports rises.

The unofficial but pretty obvious actual reason for Washington's opposition is the fact that Russian gas is a direct competitor of American gas. The Biden administration's Energy Department even branded American gas as "molecules of freedom" to promote it in Europe. Still, Germany wanted Nord Stream 2, and it looks like it will get it. 

This has prompted another letter by Republican legislators.

According to this letter, what the Biden administration is doing is basically serving Europe's energy security on a plate to Moscow, with House Republican Leader Kevin McCarthy saying in a tweet, "Given your open hostility to domestic pipelines like the Keystone XL pipeline, it is baffling that you are willing to green-light Russia's Nord Stream 2 pipeline. Put simply, you are prioritizing Russian jobs over American jobs."

It is obvious that a parallel between Nord Stream 2 and Keystone XL is not exactly fair: one is a foreign project for foreign consumers while the other is a U.S. project. For all the might of the U.S. financial system that has allowed it to punish nations and businesses across the world, the sanction weapon is not universal, as proved by the move to lift sanctions on German participants in the project.

And yet, a comparison in the attitude of the Biden administration to different pipeline projects would be interesting. Yadullah Hussain provided just such a comparison in a recent article for Canada's Financial Post, noting the inconsistent attitude of the White House to Nord Stream 2 and Line 5. While he acknowledges the marked differences between the projects, such as that one transports oil and the other less polluting gas, Hussain notes that Canada, just like Germany, is an ally to the United States, and yet it is effectively being treated worse than Germany.

Related: Oil Rig Count Falls As U.S. Drillers Exercise Caution

The reasons for this perceived inconsistency are purely geopolitical: as Hussain himself notes, the U.S. had to mend fences with Germany after Trump's term in office, while Canada has invariably been a staunch ally of its southern neighbor. There is something else as well: perhaps Biden simply realized there are not enough sanctions in the world to stop Nord Stream. After all, let's not forget that sanctions imposed on the Russian participants in the project are still in effect, but it is nearing completion despite these.

In the meantime, Keystone XL was officially shelved by its developer TC Energy and now another Canadian pipeline company, Enbridge, is fighting for its Line 5 pipeline against Michigan state. According to the operator of the infrastructure, which Michigan's Governor Gretchen Whitmer wants to shut down, such a move would lead to shortages of feedstocks for U.S. refineries and soaring propane prices. It would also constitute a violation of a bilateral treaty from the 1970s that stipulates no pipeline transporting hydrocarbons between the U.S. and Canada could be shut down unless there's an accident.

Here, the motive of the opponents is purely environmental. To be thorough, there was an attempt by Energy Secretary Jennifer Granholm to paint the Nord Stream 2 project as an environmental threat, too, calling Russian gas "the dirtiest in the world," which in turn prompted Russia's Deputy PM Alexander Novak to note the carbon footprint of shale gas extraction. This budding debate never managed to escalate beyond the amusing stage, but the question of whether the environment is really the top priority for the Biden administration remained open.

Line 5 is as essential for the energy security of Michigan and other states in the vicinity as Nord Stream is for Germany. Both provide energy that cannot be sourced as easily or cheaply from other suppliers. The U.S. has political arguments against the Russian project and environmental arguments against the Canadian project, but in the end, both are likely to be trumped by the fundamental market forces of supply and demand.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

• Reuters: U.S. Agrees To Lift Iran Oil Sanctions
  
• Can The Middle East Survive Without Oil?
• Solar Has An Unlikely New Enemy