A worker checks monitoring equipment at the Slavyanskaya compressor station, the starting point of Russia's Nord Stream 2 pipeline. Photo: TASS

Remote, quiet but energy-rich: the coastal area of Lubmin in north Germany hosts the world’s most controversial gas pipeline.

Nord Stream 2 stretches for 1,230 kilometres from Vyborg in Russia through the Baltic Sea to Lubmin in Germany, bypassing Ukraine and Poland.

The twin gas pipeline is finished, but it is waiting regulatory approval before it can start providing the 55 billion cubic meters of natural gas to Europe every year.

Amid heightened geopolitical tensions, that task might not be that easy, CNBC reported.

US State Department officials have warned Europe against bowing to Russian pressure and waiving the lengthy process needed to approve Nord Stream 2.

Amos Hochstein, a senior advisor for global energy security at the US State Department, said that if Russia has more gas to ship to Europe to ease the continent’s supply crunch, it should do so through existing export pipeline infrastructure, including the ones that transit Ukraine.

“I don’t think that we should, as a society of laws, the United States and Europe … be pushed into waiving restrictions, waiving the regulatory process and the legal process in order to satisfy a crisis that, to some degree, can be alleviated through other means and mechanisms,” Hochstein told reporters.

But the Biden administration jettisoned the idea of further sanctioning the pipeline, saying Russia would complete it regardless of the economic penalties imposed.

Some European lawmakers are fiercely opposed to the deal and do not want regulators to approve it.

“We want to break out from this [Russian energy] dependence,” Morten Petersen, a Danish lawmaker at the European Parliament, told CNBC’s “Street Signs Europe.”

Russian officials say the speedy approval of Nord Stream 2 could help bring down natural gas prices, as Europe scrambles to address an escalating energy crisis.

Russian President Vladimir Putin insisted the project was “purely commercial” and an efficient way to provide natural gas to Europe.

Nord Stream 2 represents a shorter route to Europe than Ukrainian pipelines and given its more modern, it is also cheaper to maintain.

The majority of natural gas going into Europe already comes from Russia. In 2020, this represented about 43% of the total gas imports to the bloc, according to Eurostat.

Poland and Ukraine are opposed to the pipeline, citing energy security concerns.

For Kyiv, it is feared the pipeline could lead to fewer natural gas flows via Ukrainian pipes and hence fewer revenues to its ailing economy.

Critics also argue the pipeline is not compatible with European climate goals and will most likely strengthen President Putin’s economic and political influence over the region.

The Russians sweep aside those claims, pointing out the undersea pipeline could play a role in calming gas prices.

Russian Deputy Prime Minister Alexander Novak said that “early completion of the certification” for Nord Stream 2 would help “cool off the current situation.” 

In fact, natural gas prices recently dropped after President Putin hinted that Russia could increase its output, saying that state-owned gas giant Gazprom has never “refused to increase supplies to its consumers if they submit appropriate bids.”

Putin said Gazprom could increase flows by an extra 17.5bn cubic metres via the new pipeline “the day after tomorrow” if regulators approved it “tomorrow.”

According to Gustav Gressel, senior policy fellow at the European Council on Foreign Relations, a think tank, it’s only a matter of time before the German energy regulators give their seal of approval.

Natural gas prices in Europe have increased more than 130% since the beginning of September and are more than eight times higher than at the same point last year, according to data from Independent Commodity Intelligence Services.

As a result, German and European leaders are under pressure to take measures to mitigate the impact on households, amid fears it could ultimately derail the economic recovery that has taken shape in recent months.

That has pushed some in Europe to recommend fast tracking the Nord Stream 2 approval process to meet greater demand during the winter.

As for the EU, the political and economic union made up of 27 member states is unsure about what to do.

Increasing gas imports from Russia could provide some short-term relief but there are tough questions about what to do in the medium and long term.

There are efforts across the EU to reach carbon neutrality in the coming years and this raises the question about what sort of energy mix European countries are after.

While some see natural gas, a fossil fuel, as a means to reduce CO2 emissions in the path to carbon neutrality, others argue that energy independency is the most important aspect – hence nuclear and renewables are purported to be the option.

The US and several eastern European countries say Russia wants to use the US$10 billion pipeline, which bypasses Ukraine, as a geopolitical weapon to increase the EU’s dependence on Moscow while costing Kyiv transit revenues from traditional supply routes.

But Putin said EU energy policy was being made by “non-specialists” who were “deceiving voters” and said the world could avoid future crises if it focused on “fundamental projects” such as Nord Stream 2 instead of spot market trading.

Russia exported almost 90 billion cubic meters (bcm) of gas through Ukraine in 2019 compared with an expected 40 bcm this year.

Ukraine earns billions of dollars a year from Russian natural gas transit.

Putin blamed the gas crisis on what he said were short-sighted attempts by the EU to switch from long-term contracts to the spot market and increase the share of renewables in the energy mix.

As a result, Putin argued, US and Middle Eastern liquefied natural gas producers had reduced supplies to Europe, which he claimed had created a shortage of 70bn cubic metres that the Nord Stream 2 pipeline’s planned capacity of 55bn cubic metres could help resolve.

“When the Europeans set up their market principles, they were basing them on it being a high-end market. And it’s not — the gas went to Latin America and Asia,” he said.

“What’s that got to do with Russia? This is the result handmade by the European Commission’s economic policy.”

Sources: CNBC, RadioFreeEurope, CNN Business, Financial Times