Russian pipeline love

Germany blocks out allies’ wails over Russian pipeline love

Why Washington’s and the EU’s opposition to the Nord Stream 2 pipeline elicits shrugged shoulders in Berlin.

By Janosch Delcker

Imagine you’re a senior member of the European Parliament, you have an important issue and you write a provocative letter to a minister in Berlin. It gets leaked. And then?

Nothing.

That’s just what happened when Manfred Weber, head of the European People’s Party, the largest grouping in the European Parliament, wrote to Germany’s Economy Minister Sigmar Gabriel, criticizing the Nord Stream 2 pipeline project. The letter was noted in Brussels and in parts of Europe worried about the political ramifications of a second pipeline from Russia to Germany that bypasses Poland and Ukraine. In Germany, it fizzled. A week later, a spokeswoman for Gabriel’s ministry told POLITICO she hadn’t even heard of the letter.

The reasons for Weber’s damp squib are rooted in the huge shadow Russia casts on Germany business and politics — especially through lucrative Russian contracts for German companies — and the singular role that relations with Moscow play in the Social Democratic party (SPD), the junior partner in Germany’s ruling coalition.

The Berlin-Moscow axis

“There is a strong belief in Germany that relations between the EU and Russia can only get back to normal if economic relations are being strengthened,” said Severin Fischer, a researcher at the Center for Security Studies at ETH Zurich, adding that this has its historical roots in what’s known as Germany’s Ostpolitik during the Cold War, when West Germany based its strategy of “change through rapprochement” towards the communist East largely on strengthening economic ties.

“We have to make sure that we get the Russians back on board when it comes to international cooperation,” agreed Bernd Westphal, a German MP for the SPD, who is his party’s spokesman in the Bundestag committee on economic affairs and energy. “This is also in the interest of Europe and the EU: Europe has no future without talking to Russia.”

There’s a strong economic rationale for Germany’s support for the pipeline, running under the Baltic Sea from Russia to Germany.

Two of the six energy companies involved in Nord Stream 2 are based in Germany — E.ON and BASF/Wintershall — and much of the material used to build the pipeline would be provided by German companies, said Andreas Metz of Berlin-based lobbying group Committee on Eastern European Economic Relations, which supports the pipeline. He added the project receives no state funding, and was “unfortunately being politicized by those countries who would lose revenue through Nord Stream 2.”

Allied worries

The pipeline is enraging some of Germany’s closest friends, who fear Russia will be able to circumvent existing pipelines running across Central Europe and ship gas directly to Germany. Some countries like Ukraine and Slovakia could lose billions in transit fees while Poland worries the Kremlin will use gas contracts as a diplomatic bludgeon to exert control over its former empire. Witold Waszczykowski, the Polish foreign minister, has called Nord Stream an irritant in an already strained relationship between Warsaw and Berlin.

The European Commission is cool to the idea, fearing it undermines the bloc’s energy union project, whose goals include diversifying EU energy supplies.

Washington is also annoyed. Amos Hochstein, U.S. special envoy and coordinator for international affairs, told reporters earlier this month that the U.S. is “deeply concerned” about Nord Stream 2. The U.S. administration is skeptical of the argument that the pipeline is a commercial project, pointing out that the existing Nord Stream pipeline isn’t running at full capacity.

“Nobody spends money building pipelines in a low-oil environment when you already have a pipeline that works just fine,” Hochstein told POLITICO earlier this year.

Criticism from the outside creates a headache for Chancellor Angela Merkel and her conservative Christian Democrats (CDU) and its Bavarian sister party, the CSU. She is suspicious of Russian President Vladimir Putin and has been the main driver in enforcing a sanctions regime against Russia to punish it for its actions in Ukraine. But Russia is much more important to the SPD, which has historically pushed for close political ties with Moscow and whose unionized voting base stands to gain by deepening economics links with Russia.

That’s why Merkel and other leading German politicians are trying to segregate Nord Stream 2 from the broader issue of sanctions, defending the pipeline as a “commercial project” of private investors and expressing their hope that it will turn Germany into an energy hub distributing gas across Europe, boost domestic business, and generate jobs.

The pipeline, if built, would concentrate about 80 percent of Russian supplies to Europe along one route and increase Gazprom’s share in the German market to 60 percent from 40 percent.

“We have also to see the opportunities that might come with Nord Stream 2,” said Martina Werner, a German MEP from the SPD and a member of the European Parliament’s committee on industry, research, and energy. “It’s not that the gas is just for Germany — we would be able to distribute the gas all across Europe.”

Pro-Russian Social Democrats

If there is one politician in Berlin to fly the flag for Nord Stream 2, it’s economy minister and SPD chief Gabriel.

Nothing illustrates the proximity of Gabriel’s SPD to Russian energy better than the fact that his party fellow, former chancellor Gerhard Schröder, joined the supervisory board of Nord Stream only weeks after he left office in 2005.

Last fall, Gabriel traveled to Moscow to reassure Putin of Germany’s support for the pipeline. He stressed that Berlin would try to keep Nord Stream under German regulatory authority to limit the possibilities of “external meddling” in the project.

His efforts weren’t just about maintaining ties with his party’s old Russian friends: The SPD finds itself in its worst crisis in post-war history, and Gabriel is under increasing pressure to win back voters. The energy sector, backed by powerful domestic labor unions, has traditionally been SPD territory, and Gabriel hopes that his efforts for Nord Stream 2 will earn him support.

Because Merkel’s CDU-CSU has given the SPD free rein over Nord Stream, that doesn’t leave much effective political opposition to the project.

Traditionally, two parties in Germany are critical of energy deals with Russia, the Liberals (FDP) and the Greens. The FDP didn’t even make it into the parliament in the last elections, and the Greens, as the smallest opposition party in the Bundestag, are essentially powerless.

“At this point, it is difficult for us in the opposition to have our good arguments against Nord Stream 2 being heard, with such a large group of key players in the [Bundestag’s economic affairs and energy] committee supporting the project,” said Annalena Baerbock, a Green MP.

That leaves non-Berlin politicians like Weber to carry the weight of opposing Nord Stream. In his letter, he talked of the project’s “incompatibility” with EU energy goals, adding: “It would lead to a significant increase in the EU’s dependence on Russia for its gas supply. The project furthermore contradicts the EU’s foreign, security and Eastern Partnership goals.”

The pipeline’s backers question why Weber, a German, got involved at all. “I believe that some of his Polish colleagues within his European People’s Party put pressure on Weber,” said Werner of the SPD. “At the end of the day, he is the chairman of the political group, and has also to represent their interests.”

That’s the same pressure being felt within her own grouping. Gianni Pittella, president of the Socialist and Democrats group, sent his own letter to the Commission’s two energy chiefs, stressing the pipeline’s “dubious economic rationale” and echoing many of Weber’s other concerns.

Unlike Weber, he didn’t bother sending the letter to Berlin.