The Baltic Sea is an area of significant geopolitical interest. It’s surrounded by several nations, notable among which are Russia and Ukraine. These two countries are currently immersed in a complex crisis that’s creating ripples across global energy markets due to its influence on key infrastructures such as the Nord Stream Pipeline.
Nord Stream Pipelines: An Overview
The Nord Stream Pipeline comprises two key components; Nord Stream 1 and Nord Stream 2. They’re located near Denmark and Sweden in the Baltic Sea. Premierely, leaks were discovered in these pipelines just before the inaugural operation of the Baltic Pipe, an infrastructure designed to transport gas from Norway to Poland. This new pipeline development serves as Poland’s strategy to reduce its dependence on Russian energy supplies.
In more detail, the Nord Stream consists of two underwater pipelines with two lines each. Built in 2011, the Nord Stream 1 stretches across 1,224 km from Vyborg in northwest Russia to Lubmin in northeastern Germany through the Baltic Sea. Nord Stream 2 stretches from Ust-Luga in Leningrad to Lubmin and was finished in September 2021. Once fully functional, it can transport 55 billion cubic meters of gas per year.
Together, these twin pipelines can collectively ferry a whopping 110 billion cubic metres (bcm) of gas annually to Europe, promising to do so for at least five decades. Their routes cross the Exclusive Economic Zones (EEZs) of Russia, Finland, Sweden, Denmark, and Germany, and the territorial waters of Russia, Denmark, and Germany. In Germany, they hook up to the OPAL (Baltic Sea Pipeline) and NEL (North European Pipeline), which extends to the European grid.
Impact of War on Nord Stream’s Supply Chain
Due to the sanctions imposed on Moscow by the European Union in response to the Russia-Ukraine crisis, Russia lessened its gas supply to Europe. In July 2022, flows through Nord Stream 1 were cut to a mere 20% of its capacity. The following month, Russia constricted this further by halting operations on Nord Stream 1 in totality, stating reasons related to maintenance. Gas mogul Gazprom attributed this move to an oil leak in a turbine on the Nord Stream 1 pipeline.
But the story doesn’t end there – despite being completed, Nord Stream 2 couldn’t start operations because Germany withdrew from the project in response to Russia’s invasion of Ukraine. This pipeline was expected to double Russia’s energy exports to Europe, heightening it to 110 billion cubic meters. But with the shutdown of the Nord Stream pipeline, and winter fast approaching, Europe is battling against rising energy prices and a tough time ahead.
Significance of Nord Stream for Europe and Russia
From a European perspective, Nord Stream is critically significant. With an annual requirement exceeding 100 billion cubic metres (bcm) of natural gas and around 40% of it sourced from Russia, it’s challenging to find alternatives to Russian gas owing to Europe’s ever-increasing dependence on gas imports amid falling domestic production. Also, many businesses in Europe have heavily invested in Nord Stream 2, creating pressure on governments. Even more, any attempt to reduce Russian gas would escalate already soaring gas prices, a move that wouldn’t be popular domestically.
For Russia, the world leader in natural gas reserves, about 40% of its budget derives from sales of gas and oil. The completion of Nord Stream 2 is particularly important to them as it eradicates risks associated with transporting gas through transit nations, reduces operational costs by eliminating transit fees, and grants it direct access to Germany – its vital European customer. Moreover, it significantly increases Europe’s dependence on Russia while ensuring a reliable customer base.