If the German government does not return to nuclear power, at some point it may return to the disputed Nord Stream 2 pipeline despite Russia’s invasion of Ukraine. The first option would be a victory of reason, and the latter of the interests of companies associated with Russians – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.
Gazprom doesn’t stop
Russia’s Gazprom reported force majeure as the reason for restrictions on gas supplies to at least one European customer, according to a letter seen by Reuters. The missive was about deliveries via Nord Stream 1, which have been limited under the pretext of the dispute over Siemens’s turbine. In the letter dated July 14, seen by Reuters, Gazprom claims that due to force majure, i.e. extraordinary circumstances, it was forced to limit deliveries. According to the agency’s source in the sector, the company refers to the Nord Stream 1 pipeline, which runs from Russia to Germany. The Russians assert they have no control over this and so are forced to put the brakes on the deliveries via this route, which had been subject to a few disputes already, including the conflict over payments in rubles, to which some German clients have allegedly agreed despite the fact that the gas contracts did not include such a possibility. The other controversy was about Russia recovering its Siemens turbine, which was going through maintenance in Canada, and which Ottawa returned under Berlin’s pressure.
Gazprom did not comment on Reuters’s reporting, but the Russian Foreign Ministry suggested that due to western sanctions, the deliveries may remain limited after the 11-21 July NS1 technical break is over. Gazprom itself said that it is yet to receive documents confirming that the Siemens turbine will return.
One suspects that the restrictions revealed by Reuters apply to the former financial partner of the disputed Nord Stream 2 project – Germany’s Uniper – which in itself is very ironic. Gas from Russia, presented as the cheapest option and stabilizer of the energy transition, has become a source of destabilization and costs Germany more and more. Gas supplies from Russia fell in June by 60 percent, so Uniper buys it from alternative suppliers at higher prices. It estimates that it will need a total EUR 9 billion in support to overcome the energy crisis. Uniper had to tap into gas reserves to make up for the missing gas, but this usually happens at the end, when there is no gas on the market or during the heating season, which starts at the end of October. At the same time, Germans have declared they would abandon gas from Russia by 2024. It remains to be seen whether they will honor this pledge. “The threat of gas shortages will hang over Germany for the next two winters,” said the head of Bundesnetzagentur, the national energy regulator.
Germany’s dependence on Russian gas gives Moscow the upper hand
Dependence on Russian gas causes losses and can affect Berlin’s policies. In the first quarter of 2022 Germany’s BASF recorded a 29 percent decline in revenues – to EUR 1.22 billion, due to losses in its Wintershall DEA company where a Russian fund called Letter One holds shares (33 percent), and the need to write off EUR 1.1 billion from the Nord Stream 2 project frozen after Russia’s attack on Ukraine. BASF’s performance on the stock exchange has been impacted as well, the company peaked in January 2018 when its shares reached EUR 99 only to drop to EUR 42 per share in July 2022. They took a nearly 40 percent nose dive in the last six months. BASF is to wind down its business in Belarus and Russia by the end of the year, but it will keep its food companies as it claims it wants to avoid a food crisis.
A human rights group Global Witness found that BASF’s subsidiary Wintershall, which was engaged in the Nord Stream 2 project in the past, provided in 2022 EUR 14 billion (28 bcm) worth of Russian gas via NS1, in which the company holds 15 percent of shares. Moreover, the firm cashed in EUR 400 million in the first quarter of this year thanks to hydrocarbon assets in Siberia, where in 2021 it extracted 15 bcm of gas. BASF lobbied in March to maintain the supplies of this fuel from Russia (it receives them mainly from these deposits, which give it a competitive advantage under normal conditions), warning that stopping them could mean “the biggest crisis since the end of the 2nd World War,” as President Martin Brudermueller put it. First, however, the crisis seems inevitable in the face of Gazprom’s actions, which are restricting supplies to Germany, regardless of the interdependence created by BASF and other German companies tied to Russia. Secondly, a crisis at BASF does not necessarily immediately mean a crisis in Germany, and the current situation is a good moment to break the dependence of German policy on the hidden interests of such companies. In contrast, any speculations about a German-Russian agreement on the resumption of gas supplies via Nord Stream 1 or the launch of Nord Stream 2 due to the problems with the former are yet to be confirmed by data. It actually looks as if Germany was bracing itself for no supplies from Russia. Unfortunately, lobbying by companies like BASF or public fatigue may still change that.
Time to abandon Russian gas
Under current conditions, any power plant reducing dependence on Russian gas will be worth its weight in gold. Limiting gas consumption, which has been already introduced as part of the second emergency level on the German market and developing other power sources are both good alternatives to another deal with Russia. Germany will use more coal from its reserves, but so far it has resisted the next step, which is to return to nuclear power. This reluctance has provoked criticism on the international arena, including in Poland and Ukraine. Finally, the German Ministry of Economy and Climate declared on July 18 that it would look again into the plan to disconnect the last three nuclear power plants by the end of 2022. The reason is the possible interruption of gas supplies from Russia. The first revision of the plan in March ended with a negative recommendation for legal, technical and safety reasons. However, the threat that Russian gas would stop flowing for good changed Berlin’s approach at the request of transmission network operators afraid the grid would collapse without the fuel from Russia. 9 GW of nuclear power that is to be extinguished by the end of 2022 would strengthen the security of energy supply in Germany and the whole region, and it can also be sold to neighbors, including Poland. Germany should also consider restarting the NPPs that were turned off in 2021. The future of German NPPs will impact the entire EU, whose member states may start to build new reactors to buy less Russian gas. This needs to be done in order to abandon the Russian commodity by 2027, a goal stated by the community it its REPowerEU program. A task like this will only be achieved if lobbying efforts of companies like BASF fail, and going back to “business as usual” despite Russia waging war against Ukraine proves impossible.