Political hot air threatens to blow up Russia’s gas supply dominance

Linda J. Dodson

There is scepticism that Germany would back away, however. With the pipeline almost finished and permits granted, doing so would provoke fierce legal clashes, for a start. Merkel wants a joint European response to the poisoning and, at a meeting on Tuesday, “played down” the possibility of halting the pipeline, Reuters reported. Opinion was divided on an EU response involving Nord Stream 2, she indicated. Peter Altmaier, the economy minister, was also said to be cautious.

Most (55pc) Germans do not support halting the project due to the Navalny case, according to an online survey of 5,064 people for Der Spiegel last week, while 31pc were in favour and others undecided.

“Our base case is that it goes ahead,” says James Huckstepp, European gas analyst at S&P Global Platts. “We expect it will come online in the second quarter of next year, delayed from the first quarter.”

Ana Stanic, founder of energy practice E&A Law, adds: “I think in the cool light of day if Germany does want to take a political stand, it will need to find a joint European stand, and it will need to be directed at Russia rather than at a commercial project in which 50pc of investment has come from European companies.”

If the project does not go ahead it is unlikely to lead to gas shortages, S&P believes. But it would increase reliance either on Russian supplies through other routes, or on gas shipped in from around the world, including from Qatar. Wholesale prices could increase by up to 5-10pc in 2022, hitting consumers and potentially increasing the amount of coal used instead of gas.

Yet, with Navalny still in hospital and the Kremlin resisting calls to co-operate in an inquiry, attitudes in Germany may harden further.

“There are a lot of people in Germany who believe the best way to change people’s behaviour is to pull them close,” says Dr Marcel Dirsus, non-resident fellow at the Institute for Security Policy at Germany’s Kiel University. “But overall, I think the anger in German politics towards the Russian government is real and to an extent unusual.”

Backers will have to wait and see. “We are monitoring the current developments in the case of Alexei Navalny and in the relationship between Russia, and Germany and the European Union, very closely,” says Wintershall Dea.

Nord Stream 2 declined to comment “on political debates” but added: “Nord Stream 2 and the companies supporting our project remain convinced that the soonest possible commissioning of the pipeline is in the interest of Europe’s energy security, climate objectives, competitiveness, and prosperity of European businesses and households.”

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