Mamdouh Salameh - despite threat of sanctions Nord Stream 2 is unstoppable
Sputnik has discussed the US threats with Dr Mamdouh Salameh, International oil economist and visiting professor of energy economics at the ESCP Europe Business School in London.
How should Germany act in the face of the ultimatum made by Washington?
Germany supported by the European Union should ignore the ultimatum because it will come to nothing. Ultimatums by President Trump against Germany aren't new. President Trump broke all norms of diplomacy and protocol during the NATO meeting in Brussels on 11 July 2018 when he accused Germany of being a captive of the Russians because of its dependence on Russian energy supplies.
He went on to say that Germany is totally controlled by Russia because they will be getting 60 to 70 percent of their energy from Russia and a new pipeline. However, German Chancellor Angela Merkel hit back at President Trump saying that Germany makes its own independent decisions and denying his claim that her country was totally controlled by Russia.
The ultimatum, of course, refers to the jointly European and Russian financed Nord Stream 2 gas pipeline that would deliver, along with the already existing line, some 110 cubic metres per year of Russian gas supplies under the Baltic Sea to Germany and the European Union, thus bypassing Ukraine. It will be completed by the end of this year.
How much will is there in Berlin to go on with the Nord Stream project and act independently in this matter?
There is plenty of will in Berlin to go ahead with the Nord Stream 2 project. Despite the threat of sanctions by the United States and the opposition by Poland, Ukraine and the Baltic States, Nord Stream is unstoppable. Nord Stream has become a battle of wills between President Trump and German Chancellor Angela Merkel.
Trump's antagonism towards Merkel is partly personal — [it's] a reaction to her standing up to him and her very evident dislike of him, which she makes little attempt to hide. Germany has already started building its portion of the Nord Stream 2. Germany's approval of the Nord Stream 2 gas pipeline makes great economic sense, in my opinion, and provides energy security not only for Germany, but for the European Union as well.
The United States keeps insisting that the project will undermine the security on the continent while Moscow maintains that the venture is purely economic in its nature. What objective is Washington pursuing by politicizing the issue?
The US opposition to Nord Stream as you know is mainly motivated by self-interest and partly by geopolitics. The US has always been opposed to Nord Stream 2, which it views as Russia's attempt to tighten its grip on Europe's energy supplies. Part of the US opposition to Nord Stream 2 is that it hopes to sell more of its LNG to the European Union; and while the European Union is willing to buy US LNG as part of its energy diversification, it's not prepared to buy it at any price.
Until US LNG matches the price of Russian piped gas, it stands no chance whatsoever against Russian gas supplies in most European countries. There is an exception to that, for instance, Poland. If the Polish are foolish enough to buy the more expensive US LNG in preference of cheaper Russian gas supplies in order to swipe the Russians, it's their own affair. I'm sure President Putin will not lose a single minute of sleep over their not wanting to renew their gas supply deal with Russia.
The EU is determined to diversify its energy sources but not at any price. So, until American LNG matches Russian piped gas, there is no chance for it, or little chance let's say, in Europe. Germany, for instance, receives 57 percent of its natural gas and 35 percent of its crude oil from Russia, while the European Union receives almost 40 percent of its gas needs. Consequently, I would say that furthermore Russian gas is and will remain cheaper for Germany and the EU for the foreseeable future until US producers can match Russian gas prices.
What impact could the rhetoric of the threat repeatedly used by the United States have on the relations between Washington and Berlin that have already been strained?
The relations between Germany and the United States, and also between the EU and the US, are certainly strained. President Trump knows that if he imposes sanctions on Germany, the EU has the economic muscle to retaliate against the United States. The threat of sanctions might also be aimed at scaring Western shareholders in Nord Stream, like EON, Wintershall, Shell, OMV and ENGIE, to force them to withdraw from the project.
However, even if he succeeds, which I very much doubt, Gazprom and Germany are capable of financing the entire project on their own. For an American president to describe his closest ally, the EU, as a fool speaks volumes about his state of mind. He flourishes when he antagonizes everybody because by doing so he attracts attention to himself.
We have seen this time and time again by his greatest foreign follies, for instance, walking away from Iranian nuclear deal and starting a trade war with China. His sanctions against Iran have so far failed to cost Iran a single barrel of oil; and his trade war against China made him realize that he cannot win that war, hence his attempts now to reach a settlement with China.