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Ross McCracken

Ross McCracken

Ross is an energy analyst, writer and consultant who was previously the Managing Editor of Platts Energy Economist

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The Great Power Politics Behind Nord Stream II

Pipeline

Nord Stream II is proving to be one of the most politically contentious pipelines of all time. The project is making gradual progress, but remains vulnerable to the fragile state of the EU-Russian energy relationship. This took another body blow November 25 with the Russian seizure of two Ukrainian gunboats and a tug boat by force in the Kerch Strait, which links the Black and Azov Seas.

The significance of Nord Stream II goes far beyond the volumes of gas it will carry. By forming a critical element of Russia’s ambitious plans to bypass the Soviet-built Ukrainian Gas Transmission System (GTS), it will potentially leave a power vacuum in the heart of central Europe, and nature, as the saying goes, abhors a vacuum.

US President Donald Trump has waded into the debate, arguing that Nord Stream II will make Europe, and Germany in particular, ever more dependent on Russian gas. Trump advocates US LNG as an alternative.

Pipeline economics

However, both Russia’s ability to circumvent the Ukrainian GTS and Trump’s ambitions for US LNG may be over-stated.

In Europe, LNG provides a price ceiling for, rather than competition to, Russian pipeline imports. Volumes of the latter have risen in the last two years to record levels at peak demand times. In contrast, Europe’s LNG terminals saw utilisation rates of just 27% on average in 2017, up from 25% in 2016.

So unimpressed is Germany with LNG that it has yet to construct its first…

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