A creative way for the United States and Germany to end the crisis over Nord Stream 2 would be to convince Gazprom to increase the amount of gas it pumps through Ukraine, because the increased gas revenue might provide the Biden administration a reason to not impose sanctions, argues Steve Pifer. This post originally appeared in Euractiv.
As Russia and Gazprom push to complete the last kilometers of the Nord Stream 2 gas pipeline, the Biden administration faces a dilemma. Opinion in Congress and Washington is dead set against the project, but President Biden does not want a big fight with Chancellor Merkel.
On February 18, Washington announced sanctions on the ship laying Nord Stream 2 and its owner. They amount to little and will not placate pipeline opponents. However, a better gas transit contract for Ukraine could provide a way to move past U.S. pipeline sanctions.
When, or if, completed, Nord Stream 2 will bring up to 55 billion cubic meters of gas per year from Russia under the Baltic Sea to Germany (in 2019, Germany consumed 95 billion cubic meters of gas). Its 1,200 kilometers are 94% complete. Of course, it needs to be 100% to work.
A geopolitical or a commercial project?
Americans and many Europeans outside of Germany see Nord Stream 2 as a geopolitical project. A purely commercial venture would have updated existing pipelines that transit Ukraine, Belarus and Poland — at a fraction of the cost of a new undersea pipe. Moreover, Nord Stream 2 will not bring new gas; it will simply divert gas from those other pipelines.
Moscow engaged in this expensive undertaking to circumvent Ukraine and deny gas transit revenues to Kyiv. That is part of a multi-vector Russian effort to weaken its western neighbor.
Given the Kremlin’s egregious misbehavior — the conflict in Donbas, killings and attempted killings of regime opponents, and cyber and disinformation campaigns — Nord Stream 2 offers a big target for U.S. sanctions. Congress has happily obliged, authorizing sanctions against entities that take part in construction of, provide services for, or certify the pipeline.
In a February 17 letter, a bipartisan group of congressional representatives expressed their readiness to work with the executive branch “to counter Russian malign influence, including by ensuring Nord Stream 2 is never completed.” They will not regard the administration’s new sanctions as enough and will press for more.
Germany’s dilemma: finish the pipeline while avoiding sanctions
Berlin, hoping to finish the pipeline, seeks to persuade Washington that it will ensure that a regulatory mechanism will act to constrain any Russian market manipulation attempts; provide support to build terminals that could receive American liquified natural gas; and agree that certain Russian actions could trigger a halt to gas imports via Nord Stream 2.
These proposals will not suffice for pipeline opponents. A regulatory mechanism makes sense, but who knows now how it will work in practice? Liquified natural gas (LNG) terminals will not overcome the price advantage that gas shipped by pipeline enjoys. And Americans and Germans could well differ over what Russian actions should justify turning off the gas flow.
Others in Berlin suggest a moratorium to allow time to sort things out, bringing in not just the Russians, but perhaps also the Americans, Poles, Ukrainians, and European Union. This idea has two variants. One would impose a moratorium now; the other envisages completing the pipeline and then pausing before actually beginning the flow of gas.
The second variant would not go down well with skeptics in Washington. What if the pipeline is completed but discussions among the parties fall into deadlock? Would Berlin and Moscow just go ahead and let the gas begin to flow?
Wanted: a creative way forward
One other measure could help resolve the question and obviate sanctions. Russia’s Gazprom is committed to sending 40 billion cubic meters of gas per year through Ukrainian pipelines through the end of 2024. If Gazprom could be persuaded to increase the amount of gas it pumps through Ukraine’s pipelines and extend the period of the contract, that would provide a tangible benefit for Kyiv.
Securing significant additional gas transit revenues for Ukraine would give the Biden administration a reason not to impose sanctions to block Nord Stream 2’s completion and ammunition to fend off criticism from those who want the pipeline to remain unfinished.
Such a deal offers a win-win-win: Kyiv could secure a needed plus-up in revenues to its state budget, while Washington and Berlin remove an obstacle from their bilateral agenda. This problem cries for a solution. U.S. and German officials ought to have the creativity to solve it.
AAPI Heritage Month: Safeguarding Asian American inclusion and belonging
President López Obrador's extension of the term of Supreme Court chief Arturo Zaldívar is part of his strong effort to recentralize power in the Mexican presidency and hollow out the independence and power of other Mexican institutions. His other moves to bend the justice system to his will include a reform that lowered the salary of judges but did not improve the quality of prosecutors and his unwillingness to allow an independent selection of the attorney general, with López Obrador himself retaining the power of appointment. His latest move with the two-year extension of Zaldívar’s term is especially worrisome. Zaldívar is also the president of the powerful Federal Judiciary Council. The council appoints and dismisses judges, sets career advancement rules and disciplines judges. Zaldívar will be setting the council’s and, thus, the whole judiciary’s, agenda and priorities for two years. This allows López Obrador to influence how courts will rule in cases regarding the executive branch, what cases they take up and the legality of new policies. These moves are taking place when the effectiveness of the judiciary in Mexico remains limited and deeply concerning. The attorney general’s office has proven weak, unwilling to take up key cases such as against the suspects in the brazen attack on Mexico City’s security minister, Omar García Harfuch—an event that symbolized the impunity with which Mexican criminal groups operate. Mexico’s justice system showed itself equally meek and disappointing in inadequately investigating the alleged complicity of former Mexican Defense Minister Salvador Cienfuegos and dismissing the case, potentially the most significant case of corruption and criminal collusion charges against a high-ranking Mexican official in two decades. A decade and a half after Mexico initiated its justice system reforms, 95 percent of federal cases still go unpunished. President López Obrador has scored some points, but the already precariously weak rule of law in Mexico, and thus the Mexican people, will suffer.