Jens B’ttner/picture-alliance/dpa/AP Images
Passers-by wave to the Russian pipe-laying ship Fortuna as it is towed out of the harbor, January 14, 2021, in Wismar, Germany. The ship is being used for construction work on the Nord Stream 2 pipeline in the Baltic Sea.
For six decades, the National Defense Authorization Act (NDAA) has glided through Congress, a rare constant in the increasingly paralyzed legislative body. But this year, the bill was stalled for weeks as the parties debated a pipeline carrying natural gas from Russia to Germany.
Congress reached an agreement this week that sidestepped the fight over the Nord Stream pipeline. But the NDAA is only the latest element of Biden foreign policy to snag on this contentious piece of infrastructure. Foreign-policy hawks have held hostage President Biden’s State Department and Treasury nominees over the administration’s handling of Nord Stream.
The pipeline was built to send gas directly from Russia to Germany, bypassing Ukraine and removing a source of income—as well as a strategic choke point—for the former Soviet state. In May, President Biden lifted sanctions that Congress and former President Donald Trump placed two years ago on the firms building the pipeline, which was 95 percent complete when he took office. It was finished in September and now awaits certification from German regulators.
Indignant that Democrats cast Trump as soft on Russia throughout his presidency, Republican hawks are now returning the charge. Democrats, including Sen. Jeanne Shaheen of New Hampshire and Rep. Marcy Kaptur of Ohio, have also hit out at Biden for resisting calls to impose new sanctions as Russia amasses troops at the border with Ukraine.
Echoing those criticisms, Sen. Ted Cruz (R-TX) has warned that Russian President Vladimir Putin has built the pipeline “so then the Russian tanks can ride into Ukraine.”
But the senator from the Permian Basin, who has emerged as the pipeline’s toughest critic, has another reason to oppose the infrastructure for Russian gas: preserving the European export market for U.S. liquefied natural gas (LNG).
“I’m not even sure he really cares about Ukraine. It’s just politics,” Daniel Fried, former President Obama’s State Department coordinator for sanctions policy and former U.S. ambassador to Poland, said of Cruz to the Prospect.
A Cruz spokesperson did not comment on the senator’s interest in guarding the European market for American LNG.
Sen. Ted Cruz has warned that Russian President Vladimir Putin has built the pipeline “so then the Russian tanks can ride into Ukraine.”
Beyond Texas, senators from other oil-producing states such as North Dakota have slammed the pipeline, also citing national security. That strategic priority makes sense, given that the U.S. outflanks Russia as a top exporter of natural gas. Despite the pandemic, U.S. producers in 2020 saw the highest natural gas exports on record.
“Freedom gas,” as former Energy Secretary Rick Perry dubbed the fuel, has been explicitly pitched to European producers in recent years as an alternative to Russian energy. Perry, who is also the former governor of Texas, told reporters in 2019 that after freeing Europe from the Nazis, “the United States is again delivering a form of freedom to the European continent.” This time, he said, “rather than in the form of young American soldiers, it’s in the form of liquefied natural gas.”
Now, even as it looks to decarbonize its power sector long-term, Germany plans to ramp up its reliance on gas over the next decade. The country’s new governing coalition, which includes the Green Party and the pro-business FDP, has agreed to build gas-fired power plants as it aims to retire coal by 2030.
Brussels is not unanimously in favor of Nord Stream 2. The European Parliament has repeatedly called to block the pipeline. But it also bristles at U.S. sanctions as an affront to European autonomy. Kevin Book, an analyst at ClearView Energy Partners LLC, told the Prospect that Europe is “against Nord Stream 2, but more against U.S. sanctions.”
Ironically, the ratcheting up of sanctions under Trump may have prompted backlash from Europeans who see it as a challenge to energy sovereignty, discouraging tie-ups with American LNG rather than preserving market share. For example, Engie, a French power company, last year pulled out of talks to import American LNG, in a decision that was reportedly based on methane emissions from American fracking.
“It’s worth noting that that [Engie] decision came after we had ramped up sanctions on Nord Stream 2,” Book said.
Since 2017, firms partnering on the pipeline have poured some $14.2 million into lobbying against sanctions and issues related to Nord Stream, according to OpenSecrets.
Ironically, the ratcheting up of sanctions under Trump may have prompted backlash from Europeans who see it as a challenge to energy sovereignty.
Looking ahead, U.S. LNG producers are closely tracking the German approval process for Nord Stream. In the short term, the speed at which German regulators allow gas to start running through the Nord Stream pipeline could impact prices somewhat.
After the pandemic stalled energy use and caused some frackers to let drilling spots close, resurgent demand and an energy crunch prompted producers to ramp up gas output. That means there’s not much short-term elasticity of production, since producers are running as hard as they can, and it can take years to build new liquefaction capacity.
The bigger question is how much of the European energy market will now be supplied by Russian rather than American gas over the medium term.
“If there were sustained bid on gas across the ocean,” Book said, “you would expect there to be a lot more development of LNG liquefaction capacity.”
Given record-high demand for LNG, increased Russian gas supply to Europe won’t have much impact on facilities expected to come online in the next year, such as Sabine 6 and Calcasieu Pass, two LNG projects in Louisiana, said Connor McLean, an energy analyst at BTU Analytics.
“What’s really going to feel the impact are facilities that are either being constructed right now, or are trying to get approval to be constructed,” McLean told the Prospect. He said Driftwood LNG and Plaquemines LNG in Louisiana, and Golden Pass in Houston, which are three to four years out from completion, could be impacted by competition from Nord Stream.
Expectations of Nord Stream’s impact on global demand for LNG could influence the Federal Energy Regulatory Commission (FERC), the regulator that approves gas drilling facilities, McLean said.
Those expectations were jolted on Tuesday after a call between Biden and Putin. The United States would be willing to use the pipeline as “leverage” against Putin’s military buildup on the border of Ukraine, national-security adviser Jake Sullivan told reporters at a press conference. Sullivan added, “If Vladimir Putin wants to see gas flow through the pipeline, he may not want to take the risk of invading Ukraine.”
In Europe, the debate over U.S. sanctions is viewed as a play not only for energy security but for lucrative energy markets—violating territorial sovereignty even as they claim to preserve it. Sanctions are an “aggressive instrument in a fossil energy war,” Claudia Kemfert, an energy economist at DIW Berlin, told the German newspaper Handelsblatt. She said both Russia and the United States are using natural gas as a “political weapon.”
