President Biden and Chancellor Angela Merkel agreed to disagree on the Nord Stream 2 gas pipeline project of Gazprom during Merkel's visit to Washington.
Per a Reuters report, President Biden said, "Good friends can disagree," with regard to the pipeline, which the United States opposes with the argument that Russia could use it to penalize Ukraine.
Germany, however, needs a lot more natural gas as it shuts down coal and nuclear plants in its own green push and has staunchly defended Nord Stream 2. This has strained bilateral relations because, in addition to geopolitical concerns, the U.S. also produces a lot of liquefied natural gas that it needs to export, and Germany is one logical destination.
The Biden administration has been criticized for mellowing out on Nord Stream 2 after the State Department waived sanctions on German entities involved in the pipeline project in a sign of goodwill.
There was really no other way things could have ended during that visit. The interests of Germany and the United States totally diverge here. The U.S. wants to export its LNG, and Germany is willing to buy some of that, as long as the price is right, as a German minister said a couple of years ago when the Trump administration was pushing for more U.S. LNG imports and the cancellation of Nord Stream 2.
Germany, on the other hand, needs gas, wherever it comes from. What many commentators on the topic seem to forget is that it is already receiving billions of cubic meters of gas via the Nord Stream 1 pipeline. The current project is simply an expansion of an already existing pipeline.
True, this would mean less gas going through Ukraine. It is the responsibility of the Ukrainian authorities to diversify their revenue sources instead of relying overwhelmingly on gas transit fees from a state with which it has had less than friendly relations for years.
By Irina Slav for Oilprice.com
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The Europeans and the whole world know that US opposition to Nord Stream 2 is motivated by self-interest, namely selling American LNG to the EU and not EU security.
The Iron lady of Europe Angela Merkel knows that too and that is why she has stood her grounds against threats of sanctions by the Trump administration. Moreover, the EU countries can look after their own interests.
The German Chancellor told President Biden that Germany will buy increasing volumes of American LNG provided the price is right.
Poland and the other small Baltic States who were incited by the United States to raise their objections against Nord Stream 2 inside the EU did so because of their enmity to Russia and not on the basis of sound economic arguments.
As for Ukraine, as long as it stays away from the EU and NATO, it has President Putin’s word that it will continue to receive Russian gas shipments destined for the EU albeit at reduced levels for the next five years. Meanwhile, the Ukraine authorities have to diversify their revenue sources instead of relying overwhelmingly on gas transit fees from Russia.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London