A prominent German-American political commentator recently described to me those German and Austrian politicians who so enthusiastically support the Nord Stream 2 project as “blind to Russia’s motives.” The most charitable way he could characterize them was “hyper-mercantilist,” while less nice epithets he used were “gutless” and “spineless.”
Some of the old German-speaking politicians, who grew up in the earlier post-World War II decades, have been imbued with a sense of guilt toward Russia for the 1941 Nazi invasion and the atrocities which Germans committed in the Soviet Union. Vladimir Putin’s obsession with the Soviet victory is mainly directed inward — it stokes not just patriotism but nationalism and additionally helps rehabilitate Stalin and, indirectly, Stalin-era atrocities committed by the organs of state security against their own people. But a useful corollary to that is the continued reminder to the Germans of their war crimes.
Ukraine, along with several other Central European nations, have always been opposed to Nord Stream. Delivering Russian natural gas to Western Europe around its traditional route would allow the Kremlin to use natural gas supplies as a political weapon, blackmailing its neighbors without jeopardizing deliveries to the West. Ukraine is especially vulnerable, given that it is at war with Russia and that Russia not only has designs on its territory but would like to strip it of national independence as well. Ukrainians feel that by supporting the project, European Union nations are effectively betraying them. They, therefore, welcome U.S. sanctions on companies involved in the pipeline, which the Biden Administration has recently reaffirmed, albeit after a period of hesitation.
However, the geopolitical and economic picture around Nord Stream is much more complex. The project, which is nearing completion this year, may yet go ahead, since President Joe Biden is more interested at this point in patching up America’s frayed relations with its traditional European allies, most notably Germany, than in picking up fights abroad while he has his hands full with domestic issues. This suggests that a compromise over Nord Stream may eventually be reached. But for Ukraine — and the world at large — it may turn out to be rather a good thing.
For Ukraine, severing its connections with Russia and reorienting its economy toward the EU is a priority. The economy experienced a major shock after 2014, the year the Kremlin invaded Ukraine, when commerce with Russia was first greatly reduced and then pretty much curbed entirely — both because of actions on the Ukrainian side and of Russian “sanctions” against Ukraine. A comprehensive trade deal with the EU has already helped the country to replace Russia as the largest trading partner and, prior to the onset of the pandemic, the Ukrainian economic recovery was gaining steam.
Losing access to Russian gas will force Ukraine to become more energy efficient while finding other, more reliable suppliers and developing its own resources, especially renewable energy. Moreover, it will do wonders for the urgent task of fighting corruption, for which shady deals associated with natural gas and with Russian deals have been a major driving force.
Western support for Nord Stream also underscores the fact that Ukraine can rely on no one but itself in its conflict with Russia. At this point, it is pretty clear that Russia has decided that expanding its invasion of Ukraine beyond Crimea and the Donbas will be too costly. But Putin is cautious and cowardly, whereas his successors may be more imperialistic, aggressive or insecure of their hold on power at home. They may try a brief victorious war to shore up their popularity. Ukraine needs to be prepared both militarily and economically to withstand such conflict on its own. Building a conventional military that is more than a match for Russia is possible, as Azerbaijan has demonstrated, and Brussel’s reluctance to support Ukraine should focus the minds of the country’s leaders on these tasks.
While Nord Stream 2 may be good for Ukraine, it is also a bad idea for Russia — which in turn will be good for Ukraine as well. In the first decade of the 21st century, Putin set out to build up Russia as an “energy superpower”. The idea was that Russia would ride record-high oil and natural gas prices and achieve its political goals by keeping Western Europe hooked on its energy supplies.
Another benefit of being mainly an oil and gas exporter was that it is an economic model that encourages kleptocracy, autocracy and corruption. To develop high-tech industries and a dynamic service sector you need investment and considerable personal and economic freedom. Getting resources out of the ground is relatively easy to do and for a kleptocratic government to control and divert. Not surprisingly, all other “energy superpowers” are among the most oppressive and corrupt nations, despite their natural wealth. Nigeria, Saudi Arabia, Kazakhstan, and Venezuela are prime examples. Norway, which is determined to avoid this fate, is at pains to keep its offshore oil-producing sector at an arm’s length.
However, Putin’s clever plan has run into several problems. His attempts to blackmail Russia’s Western European clients have encouraged them to diversify their sources of energy. Both Trump and Biden have attacked Nord Stream 2 precisely because American natural gas producers want to replace Russia in the lucrative Western European market.
Technology meanwhile has brought new oil and gas to the market, and with every passing day, it is making energy cheaper to produce. Oil prices tumbled in 2014 and are unlikely to stage a major rally even after the end of the pandemic.
Meanwhile, Putin’s petty hooliganism on the international arena has landed him with Western sanctions, curbing Russia’s access to the same technology that allows its energy producers to exploit its resources cheaply and efficiently.
Finally, and crucially, Russia has become a wrong kind of energy superpower. It is renewable and clean energy that is the power of the future and there Russia has very little to offer. Russia’s post-Soviet heyday is now well behind it: since 2008 it has grown poorer and this trend will continue in the future.
A number of energy analysts say that Nord Stream is a white elephant and that Russia is building a pipeline into the past. And, attached to its networks of pipelines Russia too is sliding into the past, being overtaken along the way by countries it used to look down upon. It is happening not just in economics but in a variety of other fields, from medicine and science to military technology about which Putin loves to brag and which — it is worth mentioning yet again — proved no match to modern weaponry in the recent Nagorno-Karabakh conflict.
Ukraine, after clinging to those same pipelines over the first three decades of its independence, should now shed no tears if Russia is determined to help by cutting its umbilical cord to the past
