By Rick Noack

American ire over German reliance on Russian natural gas imports shows no signs of letting up, and over the weekend, Richard Grenell, the U.S. ambassador in Berlin, issued a warning to German companies involved in a controversial new pipeline to Russia. Writing to several corporations over the weekend, he said, “We emphasize that companies involved in Russian energy exports are taking part in something that could prompt a significant risk of sanctions,” according to the German weekly Bild am Sonntag and other German news outlets.

In a statement, embassy spokesman Joseph Giordono-Schultz said on Monday, “The U.S. Government has been clear that we agree with the European Parliament, the U.S. House and nearly 20 European countries in opposition to the Russian Nord Stream 2 project.” He added that “companies are free to work on [Nord Stream 2], and we are free to make clear that working on it could disqualify them from also working on U.S. projects.” the spokesman said.

He said the ambassador’s letter was not supposed to be a threat, but German lawmakers disagreed. The foreign policy spokesman of Chancellor Angela Merkel’s conservative Christian Democratic Union party and the Christian Social Union in the Bundestag called it “unacceptable.”

President Trump said in a speech at the U.N. General Assembly in September that Germany would become “totally dependent on Russian energy if it does not immediately change course” on its energy policy.

Within Europe, however, the Trump administration is not as isolated as its German critics would like it to be, as WorldViews explained earlier:

What is Nord Stream 2 and why is it so controversial?

Russia is building its own pipeline, called Nord Stream 2, that could double the amount of natural gas it exports to Germany. For the European Union, natural gas is critical: It generates more than one-fourth of the European Union’s electricity needs, which are only growing.

(The Washington Post)

A third of the European Union’s gas comes from Russia, and Moscow is hoping to boost its market share further. To ensure it does, the Russian natural gas company Gazprom is building two new pipelines into Europe. One of them, called Turkish Stream, will serve southern European markets via Turkey and Greece. But the far more controversial project is Nord Stream 2, which ends in northern Germany and is slated to supply major Western European nations, among others.

(The Washington Post)

Western European countries hope more gas trade with Russia will reduce tensions and give them common economic interests with Moscow. But critics of Nord Stream 2 fear that the project will make Europe even more dependent on Russia and vulnerable to its political whims.

Without mentioning the U.S. ambassador’s name, Ukraine’s national oil and gas company, Naftogaz, jumped to Grenell’s support on Monday, writing on Twitter: “Nord Stream 2 is a real threat to the Baltic states.”

Why is Europe so divided on this issue?

Many of those countries still remember a dispute between Ukraine and Russia that began in March 2005. At the time, Moscow accused Kiev of diverting gas meant for E.U. nations and redirecting it to its own storage sites, thus avoiding paying for its own energy consumption.

Russia and Germany concluded that new pipelines were needed to avoid the fraught route through Ukraine.

Things became even more complicated in June 2014, following a pro-European revolt in Ukraine that triggered Russia’s annexation of Crimea. As Russian-backed rebels fought Ukrainian soldiers, Moscow turned up the pressure by cutting off Ukraine’s gas supplies once again.

European pressure on Russia eventually ended the blockade, but Ukraine and other Eastern European countries fear that their Western European partners will be less inclined to help them once they receive gas through the new pipelines.

In Germany itself, Nord Stream 2 has faced mounting resistance in reaction to Russian military operations in Georgia, Ukraine and Syria.

Still, there is — at least as of now — little chance the pressure will work. Widespread anti-Trump sentiment in Germany would make any change in policy, in response to the latest letter, a hard sell for Merkel and her allies. And then, there simply isn’t a real alternative.

“Germany has long been among the E.U. countries with the most friendly attitudes toward Russia — but they also simply wouldn’t be able to go without Russian gas deliveries,” said Andreas Heinrich, an Eastern Europe researcher at the University of Bremen.

Britain, Norway and the Netherlands are Western and Northern Europe’s biggest gas producers, primarily relying on natural gas fields in the North Sea. But over the next few decades, Europe’s own resources — which accounted for more than a third of its supplies in 2016 — are expected to gradually disappear.

accounted for more than a third of its supplies in 2016 — are expected to gradually disappear.

(Rick Noack)

The supplies could be replaced either by Russian natural gas or by liquefied natural gas (LNG), which is natural gas that has been cooled to become liquid and loaded into shipping tanks. New fracking and drilling technology has already made the United States the world’s biggest natural-gas producer. It is now trying to become the top LNG exporter as well, with Europe its biggest potential market.

Only 4 percent of American LNG goes to Europe, compared with the 59 percent that is exported to Asian markets. That could change when the construction of six new European LNG port terminals is completed, most of them in former Soviet republics.

Dieter Kempf, president of Germany’s industrial association, told the Süddeutsche Zeitung newspaper in a recent interview that LNG would probably never constitute a real alternative to Russian gas. He argued that shipping LNG across the Atlantic Ocean is too expensive — a conclusion shared by a number of energy experts, including Theisen. Shipping LNG across the Atlantic can take weeks, and constructing the terminals where the gas would be unloaded is expensive.

“LNG and Russian gas will compete, but LNG won’t replace Russian exports,” Theisen predicted.

Still, Merkel agreed to speed up the construction of an LNG terminal in Germany in November, trying to calm U.S. concerns about the country’s energy dependence on Russia. That effort, last weekend’s letter by the U.S. ambassador showed, clearly has not worked the way it was probably intended to.

Parts of this post were first published on Oct. 17, 2018. The piece was updated Jan 14, 2019.