USA and Germany achieve breakthrough at Nord Stream 2

After years of dispute, the USA and Germany have achieved a breakthrough in the conflict over the German-Russian Nord Stream 2 pipeline.

Both countries released a joint statement on Wednesday. Foreign Minister Heiko Maas (SPD) was relieved to have found a constructive solution with the USA. Germany and the USA want to support Ukraine in building a “green energy sector” and work to secure gas transit through Ukraine in the next decade. “As a transatlantic partner, we are firmly on the side of Ukraine,” said Maas.

The almost completed Baltic Sea pipeline is supposed to bring Russian gas to Germany – bypassing the Ukraine, which is dependent on the income from the gas transit. The USA had massively criticized Nord Stream 2 for years, but now want to forego further sanctions. The statement warns Russia against using energy as a political «weapon» – this is the biggest fear in the US.

The breakthrough at the greatest point of conflict should also help to facilitate the desired restart in German-American relations after the difficult years under the former US President Donald Trump. “The agreement also shows that Germany and the USA have moved closer together again,” said Federal Economics Minister Peter Altmaier (CDU).

The joint declaration by the USA and Germany states that it is in the interests of Ukraine and Europe to continue gas transit through Ukraine beyond 2024. Until then, there is a contract between Ukraine and Russia. The transit fees are immensely important for Ukraine.

Germany therefore undertakes to use all available means of influence in order to enable Ukraine’s gas transit agreement with Russia to be extended by up to ten years. A special envoy should be appointed for this purpose. Negotiations should start as soon as possible, but no later than September 1st. The United States is committed to its full support for these efforts. Germany also agreed to provide technical support in connecting the Ukrainian power grid to the European power grid.

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The statement goes on to say: Should Russia try to use “energy as a weapon” or commit further aggressive acts against Ukraine, Germany will act at the national level and press for effective measures including sanctions in the European Union. The aim would then be to limit Russian capacities for exports to Europe in the energy sector, including gas – or to take effective measures in other economically relevant areas. “This pledge aims to ensure that Russia does not use a pipeline, including Nord Stream 2, to achieve aggressive political goals by using energy as a weapon,” it said.

At the same time, Ukraine should be supported in becoming less dependent on Russian gas. Germany wants to set up and manage a “Green Fund” for Ukraine, which is intended to promote the energy transition, energy efficiency and energy security in Ukraine.

“Germany and the United States will endeavor to encourage investments in the Green Fund for Ukraine of at least one billion US dollars, including from third parties such as the private sector,” it said. Germany will initially pay at least 175 million US dollars (almost 150 million euros) as a donation into the fund and work towards increasing its commitments in the coming budget years. The fund should promote the use of renewable energies, facilitate the development of hydrogen as an energy carrier, increase energy efficiency, accelerate the coal phase-out and support carbon neutrality. In total, Germany is promising Ukraine financial aid amounting to 245 million US dollars (208 million euros).

The top US State Department diplomat Victoria Nuland said at a hearing in Congress on Wednesday that the administration of US President Joe Biden continues to believe that Nord Stream 2 is “a bad deal” that will reduce Europe’s dependence on Russia Boost energy. “This is a bad situation and a bad pipeline, but we have to help protect Ukraine and I feel that with this agreement we have taken some important steps in that direction.”

Clear criticism, however, came from Poland and the Ukraine. In a joint statement from the foreign ministries, both countries warned that this decision had created “a political, military and energy threat to Ukraine and Central Europe”. At the same time, it increases the potential for Russia to further destabilize the security situation in Europe. “Unfortunately, the previous proposals to cover the security deficit can be seen as insufficient to effectively contain the threats posed by Nord Stream 2,” it said in the statement.

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Praise came from Moscow: “This agreement gives us the opportunity to finish the construction of Nord Stream 2 in peace and quiet and to fully commence operations,” said Vladimir Jabarow from the Federation Council – the upper house of the Russian parliament – of the Interfax agency. At the same time, he set conditions for a possible extension of the transit agreement through Ukraine: Ukraine should prove itself as a “constructive partner”. Under “normal conditions” nobody would put pressure on Ukraine. Kremlin spokesman Dmitry Peskov told the Ria Novosti state agency that negotiations on a new transit agreement should only be of a purely “commercial character”.

According to the government, Chancellor Angela Merkel (CDU) called Russian President Vladimir Putin on Wednesday – the topic was Nord Stream 2. Merkel is likely to have explained the breakthrough in the dispute with the United States to Putin.

As the operating company explained in mid-July, the Baltic Sea pipeline should be completed in a few weeks. “We assume that the construction work will be finished at the end of August,” said the CEO of Nord Stream 2 AG, Matthias Warnig, the “Handelsblatt”. 98 percent of the pipeline has now been completed. The aim is to put the natural gas pipeline into operation this year.

The German economy in Russia praised the agreement between the US and Germany. “It is a good sign that Washington and Berlin have settled their dispute (…) and that the gas connection, which is extremely important for Europe, can be completed,” said the President of the German-Russian Chamber of Commerce (AHK), Rainer Seele. “Especially in difficult times it is important that there are such lighthouse projects between Russia and Europe.”

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Biden and Merkel vowed a new start in German-American relations in Washington last Thursday, after difficult years under Biden’s predecessor Trump. Biden said that he had again expressed his concerns about the pipeline to Merkel. Russia should not use this to “blackmail Ukraine in any way”.

After the meeting in Washington, Merkel said that Nord Stream 2 was an additional project and not an alternative to gas transit through Ukraine: “Our understanding was and is and will remain that Ukraine remains a transit country for natural gas.” Merkel made it clear that they would “act actively” if Russia did not redeem Ukraine’s right to gas transit.

In the USA there has been cross-party resistance to Nord Stream 2 for years. The agreement is therefore likely to meet with strong resistance in Congress. There, many Republicans reject the project and demand sanctions, as do some of Biden’s Democrats.

Critics see the pipeline as a geopolitical project by Russia that threatens Europe’s energy security. They also complain that the pipeline could harm Ukraine. Kiev is dependent on billions in revenue from Russian gas transit. Proponents of the pipeline, on the other hand, accuse the USA of only wanting to sell their own, more expensive gas in Europe.

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