© REUTERS/Fabrizio Bensch

Now that Germany has agreed with France and other member states on new EU regulations for the controversial Nord Stream 2 project, the path for the pipeline to be built seems clear. Nevertheless, the German government is mistaken if it believes that it has satisfied its critics with this deal. Berlin has, from the beginning, underestimated the damage this project would do to its image. Its support for Nord Stream 2 demonstrates how the German government puts the national interest ahead of European and international strategic questions, thereby hurting its credibility in the long-term.

Amid the Russia-Ukraine conflict, and with the help of the Nord Stream 2 pipeline, the discussion about Germany and the EU’s energy independence from Russia has continued to intensify since 2014. The German government claimed for years that this was a purely commercial endeavor. But then in April 2018, at a meeting with Ukrainian President Petro Poroshenko, Chancellor Angela Merkel recognized for the first time that the political factors surrounding Nord Stream 2 also had to be taken into account. By not turning against the project, the German government supported it from the start. Sigmar Gabriel, formerly the economy and energy minister and later foreign minister, assured Vladimir Putin at a 2015 meeting in Moscow that he would personally campaign to have the project under German jurisdiction. While the current agreement does not achieve that, Germany is nevertheless now responsible for negotiating the EU regulations and possible exceptions to them. And yet the objectives and repercussions of Nord Stream 2 go beyond Germany and run counter to German and EU interests.

Russian vs. Ukrainian Interests

From a Russian perspective, building Nord Stream 2 is about securing its most important gas market, the EU, with another pipeline. In addition, Nord Stream 2 and Turk Stream are meant to make the Ukrainian transit-pipeline system superfluous, undermining Ukraine’s bargaining position vis-a-vis Russia and punishing it for its pro-EU stance. At the same time, the pipeline gives political Russia, which is closely tied to the economy, another connection to the EU and makes it possible to create dependencies with businesses and politicians on the local and national levels. Big infrastructure projects with European companies stabilize the Putin system because the Russian firms involved in construction are owned by people close to President Putin and generate additional funds with these projects. That strengthens the Putin system, which is based on loyalty through corruption. The economic cost, then, no longer matters.

The consequences for Ukraine are the loss of transit fees worth 3 billion euros a year and, even more importantly, the loss of a bargaining chip against possible Russian aggression. That can have an effect on the security-policy stability of the Sea of Asov and the Black Sea. If Nord Stream 2 is built by the end of the year, the Kremlin could take it as a signal to conquer the land bridge between Crimea and the Russian mainland and further expand its military activities at Ukraine’s southern ports. Ukraine would no longer have a way to exert pressure on Russia. The fact that EU member states are promoting the project also has a psychological effect, as many Ukrainians ask themselves how much support they are really getting from the EU in their difficult situation.

Domestic Policy Comes First

It all raises the question of to what extent the German government truly realizes the strategic consequences of its policy and how the pipeline undermines other elements of its foreign and security policy. If Foreign Minister Heiko Maas wants to be more considerate of central and eastern European neighbors in the framework of his new European Ostpolitik, the support for Nord Stream 2 is a glaring contradiction. If the German government wants to bring peace to the conflict in the Donbass and stabilize and support reforms in Ukraine in the long-term, it is doing exactly the opposite with this policy. If the cohesion of the EU is a strategic goal of Berlin, then it shouldn’t weaken the EU’s Energy Union. Here is a shortage of foresight and strategic depth in a country that has been discussed as the leading power in Europe and promotes multilateralism as Angela Merkel did at the Munich Security Conference recently.

The support for Nord Stream 2 is not primarily governed by a foreign and security policy logic but rather is part of a domestic negotiation process. If the Chancellor needed the SPD’s support for the sanctions against Russia in the context of the annexation of Crimea and war in eastern Ukraine, then Nord Stream 2 was part of an offer of cooperation made to Russia, under the approach: deterrence where necessary and cooperation where possible. The pressure the federal government faced from economy representatives, but above all from states like Mecklenburg-Vorpommern and Brandenburg, seemed to be more important than the security interests of countries like Sweden, Poland, or the Baltic states. In foreign policy terms, the price for this domestic negotiation process seemed to be calculable. But the longer the chancellor tried to sit this project out—in the process helping it succeed—the worse it got.

Of course, the federal government couldn’t have anticipated Donald Trump using Nord Stream 2 as a bargaining chip for a trade deal with the EU and threatening sanctions to extract more concessions for the export of US-LNG to Europe. But to still believe that economic and energy projects could satisfy the Russian leadership, that political change will follow economic convergence, is a sign of a political inability to learn. Despite trade, Russia is waging war in the EU’s direct neighborhood. Despite the exports of oil and gas to the EU, Russia has annexed Crimea, interfered in member-state elections with disinformation campaigns, and systematically destabilized the western Balkans. A strategic partner has become a strategic adversary, one that is using the pipeline to exacerbate transatlantic and intra-European divisions.

Seeking Strategic Change

The German chancellor’s attempts to get President Putin to keep sending gas through Ukraine after Nord Stream 2 is finished will fail. Doing so would contradict the Kremlin’s strategic objectives of weakening the current Ukrainian leadership ahead of the upcoming presidential and parliamentary elections and keeping Ukraine in its sphere of influence in the long-term. Economy Minister Altmaier will also fail to get Donald Trump to change course by offering to buy more US LNG—Trump is, after all, interested not in Nord Stream 2 but in a new trade deal with the EU. Nor it will be possible to stop the US Congress from sanctioning companies involved in the construction of the pipeline if Democrats and Republicans believe sanctions are in their interest for domestic political reasons. And there is one other key truth: Putin wants this project for the strategic reasons listed above, and he will build it whatever it costs.

If the German government now made a political push to stop the pipeline, the participating companies would take legal action in response to the withdrawal of already approved permits, which could get expensive for Berlin. That’s not to mention the fact that Berlin has no political interest in stopping construction at this point and doing further damage to its relations with Moscow. So Berlin is in a dead-end. Only completing the project can, from this perspective, bring peace and quiet. Is the answer to keep playing for time?

Foreign Policy without Strategy

The fight about Nord Stream 2 and the failure of the sitting-it-out policy are symptomatic of Germany’s loss of prestige and relevance on the international stage. The discussions around this project were supposed to give Germany cause to rethink its foreign policy, which currently lacks both vision and long-term strategy. There is nothing less at stake than the question of whether Germany is still capable of leading the EU when it comes to Russia and Eastern Europe policy, and of being taken seriously by Washington on the important strategic questions. Germany and the EU need a long-term strategy for how to deal with corrupt and kleptocratic Russian elites, and for how to integrate into Europe a Russia that is more than Vladimir Putin. For that to work, Berlin needs to be able to negotiate on equal footing, not to support big infrastructure projects that give the current Russian leadership openings to influence and divide the EU. And for that, in turn, it needs to be capable of military action, willing to intervene in the neighborhood and internationally—within an EU or NATO framework if necessary—and to have a clear definition of what responsibility Germany and the EU want to and can take on in this changing world.

There is no more “comfort zone Europe”. The longer that German elites deny international realities and do not seriously work towards a strategic realignment of their policies towards Russia, China, and the US, the more irrelevant Germany and the EU will become in the strategic power competition of the multipolar world order. Russia is a strategic adversary that is trying to weaken the EU from the inside and in its neighborhood. The EU is no longer a development model for the Russian elite; from a Russian perspective it seems incapable of action. Why make concessions to a weak opponent if those concessions help secure the opponent’s financial survival? Now the task of the German foreign-policy elite is to fill the strategic vacuum. The fight about Nord Stream 2 was supposed to be an opportunity to fundamentally rethink things and leave this dead-end. Only a realigned European Union with a Germany that is capable of action will be able to meet today’s global challenges.

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© REUTERS/Hannibal Hanschke

The German federal government has decided in favor of building liquid natural gas (LNG) import terminals and infrastructure. In March, Chancellor Angela Merkel’s CDU/CSU-SPD government, in its “coalition contract,” pledged to “Make Germany the site for LNG infrastructure.” This is a notable policy change, because in Germany the opposition to LNG imports and use has been so much stronger than anywhere else in Europe.

The aim of this new endorsement is to reduce maritime and roadway heavy-transport emissions. However, many in Germany argue that using “small-scale” LNG in this way, as a “bridging” fossil fuel, is “wasted investment”. They contend that Energiewende-mandated electric vehicles can and will rapidly de-carbonize heavy transport. Still others oppose LNG imports on the grounds that they would unnecessarily diversify Germany’s gas suppliers with the aim of offsetting increasing reliance on Russian pipeline gas. They insist that Russian pipeline gas has been “historically reliable” and is cheaper for Germany than building large-scale import terminals for LNG.

Though the federal bureaucracy had been advancing this policy change for over a year, top government officials did not make any particular effort to bring the issue to public attention or to drum up support. Accordingly, media and public understanding of the federal government’s motivations has been less than ideal.

Small-Scale Imports for Cleaner Transport

There are two main points to understand. First, the aim of the new policy is clearly to address long-standing environmental and competitiveness problems in German marine and heavy road transport: compared to diesel, LNG as a transport fuel is much cleaner, emits less CO₂ and is generally cheaper. Second, the approved small-scale LNG import facilities will not reduce German dependence on Russian pipeline gas, which is used for conventional purposes. The new policy is not intended to reduce dependence on Russian gas and the controversial Nord Stream 2 pipeline, contrary to various press reports.

The first facility to win approval from Berlin (and previously from Brussels) is planned for the North Sea port of Brunsbüttel, near Hamburg. The initial focus on the Hamburg region is logical. From there, LNG can be shipped up the Elbe River as an inland-shipping and road-transport fuel. In addition, there is access to the Kiel Canal, the world’s busiest artificial waterway, where LNG can be used or delivered into Scandinavia and the Baltic region. Hamburg is also Germany’s major container port, and the shipping industry has begun converting engines to LNG fuel globally.

However, as well as facilities for fueling ships and trucks in the immediate port area with liquid natural gas, and shipping some gas onwards, the plan also includes an onshore regasification unit and connections to the existing gas-distribution network for conventional gas applications—heating, electrical generation, etc. Experts feel this will provide the project’s developers with flexibility, as it will take time for LNG road-transport infrastructure to develop in Germany. Currently, it is almost nonexistent.

The €500 million terminal will have facilities to transfer, store, and redistribute the liquid for use as maritime-bunker fuel, road-transport fuel, and various industrial applications. Such direct use of LNG as a liquid fuel, without regasification, is known as “small-scale” LNG. This is distinct from “large-scale LNG,” which involves much-higher volumes that are re-gasified in huge facilities and injected into the gas grid for conventional uses.

A sense of scale is important. The Brunsbüttel facility will receive LNG equivalent to 5 billion cubic meters (bcm) of gas per year. In 2016 Germany consumed 80.5 bcm of gas. So the Brunsbüttel facility’s capacity to re-gasify a portion of the LNG could help replace a part of the gas Germany now receives from the Netherlands, whose Groningen field is mandated to close soon. But the small scale of the new facility’s means it cannot significantly diminish Germany’s great dependence on Russian and Norwegian pipeline imports.

Indeed, despite a spate of articles claiming the contrary in major media outlets, including Der Spiegel and Bloomberg, the goal of the federal government’s new LNG policy is not to cut dependence on Russian gas. The entire regulatory and ministerial review process clearly focused on fueling maritime and heavy-road transport. Clearly, this small-scale facility provides no serious counterweight to Germany’s Gazprom imports, which are projected to rise from current levels of 55 bcm via Nord Stream 1, to 110 bcm of gas per year when Nord Stream 2 is complete, or about 60 percent of total German gas imports. At present, Germany receives 31 percent of its gas from Russia and 24 percent from Norway. Reversing this reliance on Russia would require multiple large-scale LNG regasification terminals capable of fueling a major portion of the country’s conventional gas demand for electricity generation, heating, etc.

Stalled Transport Cleanup

So what is the motivation for the new LNG policy? 46.1 percent of German GDP is dependent on exports (2016 data), compared to 26.9 percent for OECD states overall. Therefore, it is especially important that Germany be competitive in its maritime and heavy road transport to move all those goods. Yet despite having pinned the nation’s commercial future on the success of the Energiewende, actors from government, industry, political parties, and climate/environmental institutions have, embarrassingly, accomplished virtually nothing when it comes to cleaning up air-pollution and carbon emissions from transport. The so-called Verkehrwende (transport transition) is going nowhere. The ongoing diesel scandal is but one aspect of this, involving passenger vehicles. However, in maritime and heavy trucking, Germany has fallen disconcertingly behind many other European states and the United States.

For example, in California, after some 15 years of efforts, in 2015 fully 60 percent of all buses were running on compressed natural gas (CNG), as were 17 percent of all U.S. buses. This means their engines were emitting about 99% less particulates and sulfur dioxide, 70% less nitrogen oxides, reducing noise pollution about 50% and emitting from 12 to 20 percent less CO₂ than diesel fueled engines, which remain ubiquitous in most German cities. Using LNG in buses would bring similar environmental benefits to Germany.

Moreover, over the past few years, the use of LNG for maritime and heavy-transport fuel has begun to take off in the US, China, and parts of Europe. The US Energy Information Agency expects American railways to undergo a transformation from diesel-to-LNG similar to that of steam-to-diesel for locomotives in the 1950’s; this shift would be both environmentally beneficial and reduce cost, as LNG has a similar energy density to diesel, but it is broadly cheaper and much cleaner.

Alternative Fuel

While Germany has made little progress on cleaning up heavy transport, international organizations have recently mandated new emissions standards. In maritime shipping, clean-fuel regulations requiring that carbon emissions be cut by half by 2050 were adopted for the first time this April by the UN’s International Maritime Organization. Most analysts expect that meeting these targets will “require the shipping industry to completely redesign their fleets around new fuels.” Accordingly, the German maritime sector has pressed the federal government to facilitate LNG infrastructure, lest it fall behind in global competitiveness.

So too, for the trucking industry, as Brussels moved in May to adopt its first carbon emissions targets. German business has pushed Berlin to foster the infrastructure and policies needed to facilitate the shift to new fuels such as LNG. Given the country’s very-high export-dependent economy, it is of utmost importance that it does not become an LNG ‘desert’ among other EU neighbors, who have already begun to meet Brussels’ mandates for LNG fueling stations. If Germany had no LNG capacity, the uninterrupted movement of road or waterway freight via the country would be threatened. Accordingly, the federal government and Brussels have both recently begun providing subsidies for LNG adaptation in Germany.

To be clear, LNG brings serious benefits. But LNG is not carbon free, and is likely to be only a ‘bridging fuel’ to other technology. However, power-to-gas technology, which would use renewable energy to produce natural gas or hydrogen for such purposes, is today far from feasible at scale. This is also true of electrification of heavy road and sea transport.

So, given that LNG is useful in the present, why has there been so much opposition to the import and use of LNG in Germany? This opposition has come, broadly speaking, from two camps.

Two Streams of Opposition

The first camp asserts that, regardless of other countries’ experiences, Russia has been a historically reliable gas provider, and so building large-scale LNG import terminals would be an expensive and unnecessary energy security policy. This dovetails with a widespread conviction among German business and political elites that only via mutual German-Russian interdependence, especially in the energy business, can Germany ameliorate geostrategic tensions. Repeated bad behavior by Moscow does not shake this conviction; on the contrary its makes interdependence even more necessary.

A second camp argues that LNG use—large- or small-scale—is antithetical to the renewable-energy goals of the Energiewende. Here, natural gas and LNG are often dismissed out-of-hand as simply another fossil fuel, “largely produced in the USA” by “environmentally dangerous” fracking that is banned in Germany. Therefore, according to this reasoning, it would be “hypocritical” to import it.

However, scientific assessments by the International Energy Agency present serious challenges to many of the popular, environmentally motivated concerns about LNG use. When the agency reviewed studies of “methane leakage” conducted in recent years, it concluded that natural gas is indeed superior to coal, and can and is being improved by better regulation of leakages in its production and supply chain. And while many challenge official assessments of leak-rates from U.S. production sites, most agree such leaks can be minimized with improved maintenance and regulations. Moreover, aside from this concern there is no challenge to LNG’s very significant pollution-and-noise reduction advantages over diesel. Nevertheless, in a number of discussions earlier this year in Germany, I found strong opposition, on principle, to the idea of distributing LNG in liquid form as a transport fuel (i.e., “small-scale” LNG).

Basically, the line of argument here is that, in light of the goals of the Energiewende, Germany can and will be “zero carbon in transport” in a couple decades–and so expenditures on LNG infrastructure will be “wasted investments.” Given Germany’s presently dismal record in greening transport, including the stubborn diesel scandal, the hubris of this technological optimism appears rather large. It also neglects the fact heavy roadway and sea transportation are technically much more difficult to electrify than passenger vehicles.

In response to my inquiries, representatives of major international energy companies in the past year described frustration in finding any interest in Germany for LNG. Unlike in other EU countries, they said they could see no prospects in the German market. They expressed amazement at the German insistence that LNG is not needed to help displace coal or diesel.

 The real Meaning of Brunsbüttel 

Much of the popular and elite opposition to using LNG in Germany is based on a sort of technological optimism that sees the good as the enemy of the perfect.

Nevertheless, what is clear is that political decisions were taken to address long-standing environmental and competitiveness issues in heavy transport. But there was no appetite for a larger, forthright confrontation with the pervasive hubris about what are in reality very difficult and still-unsolved technical and economic problems preventing fully green heavy transport. It is also clear that these decisions had nothing to do with hedging Germany’s heavy and increasing reliance on Russia gas via the Nord Stream 2 project.

The government’s embrace of small-scale LNG is indeed a positive environmental and competitiveness policy change for heavy transport. But Germany still faces far larger energy security problems.

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© REUTERS/Sputnik/Mikhail Klimentyev/Kremlin

Politics, they say, makes for strange bedfellows. After 13 tense years knowing each other, it’s hard to imagine Angela Merkel and Vladimir Putin engaging in political pillow talk. The two speak each other’s languages but their leadership styles—and goals—couldn’t be further apart. But in the Black Sea resort of Sochi this week, Russia’s president welcomed the re-elected German chancellor to his summer residence and both made an effort to accentuate the positive.

At a joint press conference after talks on Friday, Merkel and Putin made clear that pragmatism was the order of the day. Their countries’ bilateral interests outweigh the differences and, increasingly, they find themselves united against the Trump White House.

Four years ago bilateral relations dipped below freezing point after Russia’s annexation of Crimea and the wider Ukraine conflict. In all-night talks, Merkel took the lead in Western diplomatic efforts, facing down Putin in Minsk to produce a peace process named after the Belarussian capital.

That roadmap remains fragile but not even regular violations of its terms are enough to hold back a thaw as summer approaches. The Russian president welcomed Merkel with  pink and white roses. Merkel came empty-handed, but bearing with a diplomatic bouquet.

“We have a strategic interest in having good relations to Russia,” said Merkel. Serious, ongoing policy differences that were obvious from their “open exchanges” did not mean the two countries did not have “areas in which we are completely of one opinion.” On her wavelength, Putin said “differing analyses of this situation or that” did not alter how Germany remains a “key partner” for Russia. “Solving problems is not possible when one does not engage in dialogue with one another,” he added.

Though ongoing disagreement over Ukraine featured in their talks, their joint press conference made clear that it has been displaced by more pressing problems. The American decision to disown the Iran nuclear deal, Merkel said, was no reason for the rest of the world to walk away from a agreement that, though not perfect, offered more control, security, and transparency than no deal. “It would be becoming for Iran to say now, ‘we want to continue to observe this obligation,’” she said.

With a typically wily flourish, Putin invited Syrian leader Bashar al-Assad to his Sochi residence a day before Merkel. At the press conference with his German visitor Putin called on Western countries to make a greater effort on the humanitarian front in the war-torn country. European leaders counter such calls by saying Russia, as his main backer, should bankroll any reconstruction effort. As long as Assad is president, they have refused to provide anything more than humanitarian assistance to Syria.

Show of Unity

Perhaps the greatest show of unity between the two leaders was in facing down US criticism of the Nord Stream 2 pipeline. This is the second pipeline, currently under construction, to carry Russian natural gas to Germany under the Baltic Sea. It follows the first Nord Stream pipeline that opened in 2011. Ukraine fears an alternative route for Russian gas will see a drop of deliveries through its territory, opening the door to further energy standoffs with Moscow and a subsequent fall in transit charges which comprise around 4 percent of Ukraine’s annual budget.

Merkel insisted gas delivered must continue through Ukraine while Putin declared the project, controlled by the state-owned Gazprom concern, as an economic not political project. Russia would continue these deliveries, he said, “as long as they make economic sense and sense for all involved”.

Trump administration energy experts in Berlin on Thursday called Nord Stream 2 “a bad idea … from a geopolitical perspective” that was “potentially … an elevated sanctions risk.” Sandra Oudkirk, deputy assistant secretary of state for energy diplomacy, said Russian guarantees to keep supplying Ukraine with Russian gas were “unenforceable.” Washington would continue diplomatic efforts on this front, she said, but recalled how last August the US congress voted for sanctions against companies involved in the pipeline project.

Making light of such tough talk, in a show of the thaw with Germany, Putin joked on Friday in Sochi that US opposition to the Nord Stream project was perhaps the only point of continuity between the Obama and Trump administrations.

The Russian and German leaders share too much history to become bedfellows in this life. But the Sochi thaw suggests the two are pragmatic enough to move on, sharing the belief that, in politics, there are no friends—only shared interests.

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Cover artwork: © Mitch Blunt

Congratulations, Madame Chancellor,

Voters have given you another term as the leader of Germany, and since no one expects you to run again in 2021, you are free now. You can do daring things without giving too much heed to the latest poll numbers. Here are my three suggestions for an agenda that will make you my hero. If that’s not motivation enough, it has the additional advantage of making a real difference for Germany, Europe, and the world.

Domestic politics first: go on a spending spree for education. A really big one. The goal is very simple: cut class sizes by half in elementary and secondary schools by 2025. Make 15 pupils the norm, not thirty. No other education reform will be nearly as effective in promoting individual learning, inclusion, and academic performance. This means, among other things, hiring a veritable army of new teachers, upgrading school buildings, and expanding teachers’ training in universities. It’s a massive undertaking, but its effect will be overwhelming 10 to 15 years down the road. Buy out the federal states and hold the Social Democrats to their education-related campaign slogans. I can’t think of any single policy item that would have a longer-lasting positive effect on Germany than this one.

Second, bury Nord Stream 2, the Russian-German pipeline project, and bury it quickly. That you have let this poisonous project sit and fester has been one of the great puzzlements of your last four years. It undermines everything the re-unified country needed to do in order to ease the lingering suspicions of its neighbors about its size, power, and geopolitical reliability. No other German foreign policy stance (including our notorious unwillingness to get serious about military affairs) is as corrosive as this economically unnecessary project that undermines European unity, smacks of strategic recklessness vis-a-vis our Central European neighbors, and rightfully worries Washington.

Finally, explain the real nature of Germany’s and Europe’s strategic situation to the strategically hapless people of Germany. Use all the credibility, respect, and stateswoman-ly weight that you have accumulated over the last twelve years to make them realize what is at stake, and why Germany will have to do very painful things in the near future.

Explain to them that without the United States, Europe will be unable to remain free and at peace. Explain to them that without military power, diplomacy cannot work in the Balkans, in the Middle East, in North Africa, or facing Russia and China. Explain to them that without allowing some sort of transfer union (in return for strict budgetary oversight), the euro will crash, causing economic mayhem. Explain to them that a technological mega-revolution is unfolding as we speak, and that it will change every aspect of human life, from work to learning, to politics, to health care, to the way we protect, pay, feed, entertain, and love each other. Few countries are better prepared to succeed in that coming world than Germany, but the journey will not be for the faint-hearted.

Preach all of this, restlessly, fearlessly, again and again. For twelve years as chancellor you relied on your aides to be honest with you and speak truth to power. Now spend the last few years of your chancellorship to do what has previously been neglected: explaining strategic realities to a country that prefers to have nothing to do with them. Among the many examples of fine leadership that you have given us, this is the one that’s missing. Sie schaffen das! Good luck and godspeed.

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