Did you know that Russia fulfills nearly 40 per cent of the European Union’s natural gas requirement? And this gas reaches European shores through a 1222-km long pipeline passing through Baltic Sea. Called Nord Stream 1, this pipeline stretches from St Petersburg to north-eastern Germany. And another pipeline, called Nord Stream 2, was under-construction.
Who controls Nord Stream 1?
Nord Stream AG owns and runs Nord Stream 1. And Russian state company Gazprom holds a majority stake in it. So, in a way, the Russian government controls the gas and the pipeline.
Why is it in the news?
In an obvious retaliation to the sanctions slapped by the West for its attack on Ukraine, Russia had slashed the supply via Nord Stream to 40 per cent in June. Next month, it was further reduced to 20 per cent. And on August 31, Moscow halted gas supplies for three days to Europe via Nord Stream 1, citing maintenance issues. But on Saturday, the shutdown was extended indefinitely.
Why is this pipeline crucial to Europe and the implications?
Energy prices in Germany, Europe’s largest economy, are among the lowest in the continent. Thanks to the cheap Russian gas. This also makes German manufactured goods more competitive in the international market. Russian threats to choke this gas supply to Europe present an economic threat to Germany.
Gas prices in Europe are about 450% higher now than they were about a year ago. Clearly, the Russian move to restrict supplies has put the group of nations in a tight spot. Experts believe it may accelerate the recession in the region. The gas is also crucial to provide the required heating to Europe in the upcoming winter.
Politics around Nord Stream 1
Russia is using the supplies via the crucial pipeline as a bargain to navigate its economy through sanctions from the western countries. Ukrainian president Volodymyr Zelenskyy had, in July, said that Putin is trying to wage an “overt war” against Europe using the pipeline.
What could have been Nord Stream 2
To expand its options and double the supply from Russia, Germany had decided to build Nord Stream 2. But it was halted in February post Russia’s invasion of Ukraine.
In response, Russia’s former president and now deputy chairman of the Security Council, Dmitry Medvedev, tweeted, “Welcome to the brave new world where Europeans are very soon going to pay 2,000 euros per thousand cubic metres!”
Subscribe to Business Standard Premium
Exclusive Stories, Curated Newsletters, 26 years of Archives, E-paper, and more!