Increased Russian Gas Exports Effects on United States
The United States introduced a new round of sanctions specifically targeting foreign companies investing in the development of Russia’s energy sector. These punitive measures have thrown a wrench into Russian gas giant Gazprom’s financing mechanism for the construction of a natural gas pipeline, Nord Stream 2. If constructed, Nord Stream 2 would span from the Russian Coast to Germany, bypassing existing natural gas pipelines routed through Ukraine.
Gazprom has forged on inspite of these sanctions, with officials publicly committing to negotiations of new financing mechanisms to continue development. Despite being marketed as a supply-driven response to the decline of domestic natural gas production in Western Europe, Nord Stream 2 signifies greater geopolitical significance to the Russian grand strategy. The rationale that demand in European markets for foreign gas exports exceeds supply is disproven by the Gazprom energy transit pipelines that are currently running under-capacity.
It is unlikely that Nord Stream 2 would increase the amount of Russian gas exports to Europe. Once the guise of commercial interest falls away, the issue becomes distinctly geopolitical.
Most of Russian natural gas runs through pipelines routed through Ukraine. Russia is investing billions into redundant infrastructure to divert gas transit out of Ukraine. This shift in infrastructure has severe consequences, depriving Ukraine of billions of dollars in transit fees during a period of heightened domestic economic restructuring.
Shifting energy infrastructure out of Ukraine would allow Russia to up the ante, increasing aggression towards Ukraine without incurring the cost of disruption in gas exports to Europe. Russian-Ukrainian energy relations have always been tense.
Ukraine has strived to reconcile an energy-intensive economy with a lack of a domestic energy source. This structural mismatch has kept Ukraine dependent on Russian natural gas for the past two decades. Russia used Ukraine’s gas dependency to force Ukraine’s political interests to line with a broader Russian agenda.
The usage of artificially low priced Russian natural gas was a bargaining chip that forced Ukraine to make strategic concessions such as the signing of the Kharkiv. Breakdowns in negotiations over gas pricing in 2004 and 2009 led to Russia punitively ending natural gas transit through Ukraine. Ukraine did not begin seriously diversifying its natural gas portfolio until after the Maidan revolution and subsequent change in leadership in 2014.
European leaders should put aside their own ambitions and acknowledge Russia’s agenda. The construction of Nord Stream 2 is a measure devised by the Kremlin to ensure that conflict with Ukraine doesn’t harm Russia’s energy exports indicating greater Russian aggressionism is in the cards.
Given Russia’s tendency to exploit the natural gas dependency of its neighbors, Europe’s reaction has been inexplicable. Germany has thrown its support behind the pipeline’s construction, due to its interest in transforming Germany into an energy hub. Strengthened economic relations between Germany and Russia spells trouble for Ukraine, a country that is currently amid a civil war with separatists armed by the Russian Federation.