Olaf Scholz’s increasingly farcical contortions over Nord Stream 2 are a warning to other western leaders about energy dependency on President Putin. As tensions over the military standoff on Ukraine’s border grow and Russia faces the threat of sanctions, the German chancellor seems unable to utter the name of the new east-west gas pipeline in public.
Germany already imports more than half its gas from Russia. Nord Stream 2 — completed but awaiting regulatory approval — will double the capacity of the first Nord Stream pipeline to 110 billion cubic metres a year. Doubling your imports of Russian gas through a Russian pipeline when Mr Putin is seen to be exploiting his energy position for geopolitical ends exposes Mr Scholz to the charge that he is putting his country’s interests ahead of Europe’s. Germany’s chancellor has refused to send arms to Ukraine; British deliveries have even made detours round German airspace.
On a practical level this is a story of myopic energy strategy. Germany’s headlong dash to ditch nuclear power has left it precariously reliant on gas imports. In 2002 nuclear accounted for almost 30 per cent of its electricity. By the end of this year, after its last three plants close, it will be zero. The anti-nuclear lobby has been vociferous, and Germany has been pushing into renewables, but the sun doesn’t always shine and the wind doesn’t always blow. The loss of nuclear’s consistency has forced Germany to lean more heavily on coal — and Russia.
Britain is in a milder version of the same predicament. Over the past decade our use of renewables has increased fourfold while the burning of fossil fuels has reduced by more than half. A string of investors have abandoned plans to build nuclear plants because of government dithering. The remaining seven plants, owned by France’s EDF, with British Gas’s parent, Centrica, retaining a small stake, provide about a fifth of our energy. All but one are due to shut over the next decade. Gas is the backup generator in our energy system. Centrica’s closure of the Rough gas storage facility, off the Yorkshire coast, five years ago increased our exposure to volatile wholesale prices, which are now forcing up fuel bills.
Much of the price increase is driven by demand from Asia. But Britain also feels the knock-on effects of Europe’s relationship with the Russian state-owned giant Gazprom, which has been accused of refusing to pump in extra supplies to exert pressure on Europe over Ukraine.
Advertisement
On a broader level this is a story of fractured western leadership. By massing more than 100,000 troops on Ukraine’s border, Mr Putin is doing what he does best: using force to test where the fissures lie in Europe and Nato. While Mr Scholz bites his tongue, the European Commission president, Ursula von der Leyen, has said that Nord Stream 2 “cannot be excluded from the sanctions list” if punitive measures are slapped on the Kremlin. The pipeline needs approval from both Berlin and Brussels, and Ms von der Leyen told newspapers this month that its future would depend on “Russia’s behaviour”. Germany is said to be prepared to sign up to a common sanctions package, and President Biden has said the country is “completely, totally, thoroughly reliable”. We must hope that proves accurate if the moment comes.
The first problem in this puzzle — energy security — is a long-term one. The UK business secretary, Kwasi Kwarteng, deserves praise for cutting the Gordian knot on nuclear funding in October by backing a “regulated asset base” model that allows developers to pass some of the upfront cost on to consumers. Britain now needs to embrace a proper building programme: up to eight big plants and 40 smaller ones are needed if we are to have any chance of hitting net zero by 2050. Germany, which has definitively ended its relationship with nuclear power, has no such escape route. That is why Nord Stream 2 is so important to Mr Scholtz.
The second problem of fragmented western leadership is a shorter-term issue in the case of Ukraine but no easier to solve. We are, in effect, in a new Cold War with Russia. If Mr Putin puts boots on the ground in Ukraine, the country will already have been lost. Western leaders need to prevent that and persuade Moscow it would be too painful economically.
In 1980 the USSR backed down from invading Poland when it judged that the costs would be too great. The US had threatened to impose a total trade boycott and to sell arms to China, which was at the time in the anti-Soviet camp. The USSR was in a weak position, bleeding heavily from a war in Afghanistan against the US-backed mujahideen. Now, however, Mr Putin is confident, and a joint statement this month with China’s President Xi against “further enlargement of Nato” cemented the axis of autocracy.
European and US leaders need to show unity and develop a package of sanctions so harmful that it makes Mr Putin think twice. Germany must play its role. Going soft on Russia and negotiating on the basis of Mr Putin’s draft security agreements issued in December, which include barring Ukraine from Nato, is not an option.
