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Closing Arguments: Pipeline Problems, Afghan Aftermath

Copyright © 2021 Energy Intelligence Group
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Nord Stream 2: Geopolitical Liability or Economic Necessity? On the heels of a fresh round of US sanctions targeting the Nord Stream 2 pipeline, Europe is facing a crisis of supply when it comes to natural gas, setting up the potential for a very difficult winter. While the US and many of its European allies view the Russian-supplied Nord Stream 2 pipeline as undermining European energy security and harmful to Ukraine, the reality is that Europe could see an energy crisis this winter unless gas supplies start to flow through the still-to-be completed pipeline. This puts US sanctions in the position of harming the very nations whose interests they purport to be serving. The new US sanctions, announced on Aug. 20, represent little more than a nuisance to the massive Nord Stream 2 pipeline project, aimed at flowing up to 55 billion cubic meters of Russian gas per year to Europe. President Vladimir Putin, speaking to the press after meeting with outgoing Germany Chancellor Angela Merkel on the same day the new sanctions were announced, noted that only 15 kilometers of pipeline remain to be installed. This week's ruling from a German court that Gazprom's Nord Stream 2 pipeline is not exempt from EU gas market regulations, however, could be more problematic. Gazprom subsidiary Nord Stream 2 AG must now comply with conditions for unbundling, third-party access and tariffs that are still to be set by the German energy regulator, which could take months. Unclear is whether gas could flow before that process is completed. Prior to the court ruling, Gazprom said it could supply some 5.6 Bcm by the end of 2021. Any deliveries via Nord Stream 2 would be greatly welcomed by much of Europe. While Russian gas continues to flow at capacity through the existing Nord Stream 1 pipeline, volumes have dropped sharply in pipelines transiting Ukraine, as well as the Yamal-Europe pipeline that crosses Belarus and Poland. Some of this reduction can be attributed to a recent fire at the Urengoi condensate plant in West Siberia, although volumes are now recovering, as well as to scheduled pipeline maintenance. But the main culprit is the high price of gas, which has Russia diverting discretionary supplies to Asian markets, to the detriment of the European market. Whether through coincidence or as part of a deliberate strategy on the part of Russia, circumstances are aligning that could have Russian gas arriving via the Nord Stream 2 pipeline at a time of maximum demand, simultaneously underscoring the importance of the pipeline as a supply source and Europe’s overreliance on Russia for its energy needs. But without any viable alternative to Russian gas, geopolitics could take a back seat to economic reality. Afghanistan: US Prestige and Reliability Take a Hit

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