American Shale Gas versus Nord Stream

Author: Michele Janin Homrighausen & Nasrullah Ali

As they say there are no permanent friends and foes in international relations rather there are permanent interests; sometimes attractive while sometimes repulsive. The German-Russian relations are no exception to this trend and play an important role in the contemporary and dynamic European politics. Despite remaining against each other in the past, the traces of détente – Ostpolitik still remain visible between both the countries. Being one of the largest and major actors in European politics, Germany these days is being criticized by the United States President for being pro-Russia despite being a member of the North Atlantic Treaty Organization (NATO). While on the other hand Mr. Trump himself keeps a soft heart for Mr. Putin thus leading to an interesting yet uncertain state of affairs.

Convergence of German and Russian interests, have also started causing unease in some Eastern European states. It is believed that the slightly pro-Moscow stance of Berlin is due to its ongoing energy projects with Russia. Despite the fact that both, Russia and Germany have differences of opinions on the Crimean issue but due to their mutual interests in the Nord Stream 2 pipeline project which will allow Russia to export more natural gas to Northern Europe, both have put their differences aside for now. However, the pipeline may result in less Russian gas being transported via Ukraine, depriving Kiev’s struggling pro-Western government of transit fees that are a vital source of her revenue.

It is quite interesting to note that the energy project between both states worries the US the most. Trump’s comments on the Nord Stream Gas pipeline seem to pressurize Germany to surrender to the American interests or in other words to go for the American shale gas instead of the Russian natural gas.

The US approaching Germany to prefer its shale gas over Russian gas is primarily due to the fact that it enjoys some of the cheapest market-rate gas prices in the world due to the surfeit created by the shale boom, but the country lacks appropriate infrastructure to transport shale gas to the ports from where it will be transported as liquefied natural gas(LNG) to Europe. Secondly, once the additional costs of liquefaction, shipping and regasification are added, the total cost rises well above those in Europe.

Moscow and Berlin are of the opinion that the US is not actually as concerned with Europe’s energy security as with its own profit. In fact, the US wants to export surplus from the shale gas boom to Europe via its LNG. Therefore, Putin is not in a position to turn back on its bilateral projects. Likewise, Germany also sides with Russia over the gas pipeline project. Berlin brushed aside the US concerns suggesting that President Trump appears to be protecting its own interests.

Just as Russia cannot visualize a future in which Europe could live without her gas exports, it is difficult to imagine Moscow surviving without the European market, especially the German market, which is the second largest importer of Russian natural gas

Moreover, Putin sees Trump’s comments as a technique merely to coerce Germany towards USA’s shale gas. Until now, however, Russia and Germany both haven’t seemed to succumb to the pressure. Angela Merkel further argues that Europe should also look at its own interests, especially since the Russian gas is cheaper than the American shale gas.

On the other hand, just as Germany is dependent on Russia for gas, Russia is also dependent on Germany. Mainly because sixty-seven percent of Russia’s tax revenues come from energy exports, Russia needs this trade even more than that of the European Union.

According to a report by ‘Trading Economics’; Russia’s economy is highly dependent on its exports commodities with the revenues from the sale of crude oil, petroleum products, and natural gas accounting for about a “half of Russia’s federal budget”.

This makes one thing vividly clear. A long term shut off of gas would likely be improbable. Just as Russia cannot visualize a future in which Europe could live without her gas exports, it is difficult to imagine Moscow surviving without the European market, especially the German market, which is the second largest importer of Russian natural gas.

History and the recent developments between the Germans and Russians hints at a future with strong bilateral ties between the two, to pursue mutually beneficial interests- which won’t be impeded by the likes of a third party such as the US.

In a nutshell, be it the criticism on NATO or the Helsinki Summit on German leadership towards its cultivation of better relations with Kremlin, there is no silhouette of doubt that Germany has helped Russia to recover from its isolation. Moreover its relations with Moscow are exceptionally good for a nation that is part of both the NATO and European Union. Germany is aware of the fact that succumbing to pressure is not at all an option for her- especially since it only serves the costly interest of the US. Moreover Washington should not treat this flourishing friendship between the two European nations as an enigma- as we live in an international community which functions on the basis of mutual interests.

Janin studies Political Science and Social and Cultural anthropology at Goethe-University Frankfurt am Main, Germany. While Nasrullah Ali is a freelance writer and studies International Relations at the University of Pécs, Hungary. He tweets @NAliBaloch

Published in Daily Times, August 31st 2018.

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