At the same time a year ago, the fate of the Ukrainian-Russian gas transit contract seemed to be hanging by a thread. A range of unsuccessful bilateral and tripartite (involving representatives of the European Commission) negotiations between Kyiv and Moscow gave the impression of another unavoidable Ukrainian-Russian gas war. The fate of Ukrainian transit was saved by American sanctions against companies involved in the Nord Stream 2 construction. Given Joseph Biden’s victory in the U.S. presidential election on Nov. 3, Ukraine cannot but reflect upon how he will pursue American foreign policy toward Russia and implement his vision of “energy diplomacy.”
At first glance, it may seem that American “gas diplomacy” will occupy a peripheral place in the strategy of the Democratic president: unlike his predecessor, who was supported by the oil and gas lobbies, the former U.S. vice president under Obama Administration supports the environmental agenda. Biden advocates Washington’s return to the Paris Climate Agreement and endorses the energy sector’s decarbonization (the transition to renewable energy generation) by 2035. However, this does not mean that the administration of the 46th president of the United States will change the “gas strategy” of energy policy, which began after the “shale revolution” in the United States.
Although in the long-run American foreign policy will move from gas in favor of environmentally friendly energy sources, Washington will continue the current gas policy during Biden’s term. The European energy policy of the former “global policeman” is based on his understanding of the concept of security: for Washington, increasing its liquified natural gas exports to Europe is a means of fighting on the gas front against Russia, a means to combat Russia’s position on the European gas market.
In the context of European energy security, Nord Stream 2 is one of the critical elements of the Americo-Russian competition. That is why sanctions against Nord Stream 2 are perceived in Washington as much needed protection of European energy security. Back in 2016, then-Vice President Biden said that Nord Stream 2 would only harm Europe, making it more dependent on Russia.
Undoubtedly, one can’t deny American companies’ economic interest in increasing U.S. influence in the European energy market. However, if Nord Stream 2 was a purely economic project, American companies’ desire to increase their profits could not lead to a real geopolitical confrontation between Washington and Berlin. Nord Stream 2 is more political than an economic project.
In U.S. political circles exists a strong consensus to keep the sanctions working. The sanctions will likely be extended to companies providing insurance and underwriting services. A new package of sanctions will make it impossible for Russia to use the Akademik Cherskiy vessel to complete Nord Stream 2 independently.
A political and security perception of the North Stream 2 formed in the United States a two-party consensus that this gas pipeline threatens American national interests. Therefore, one should not expect that Biden will immediately “sacrifice” sanctions to improve relations with Germany. The German Institute for International Affairs and Security, Germany’s leading research think tank, acknowledges in its policy paper on the future of US-Germany relations that the Biden administration will not simply lift sanctions. The report recommends that Germany pay more attention to the development of energy infrastructure in Eastern Europe and intensify efforts towards “energy solidarity”. According to the authors of the paper, only such steps may help to lift sanctions in the long run.
Undoubtedly, American sanctions will not last forever: I am sure that by 2025 — on Dec. 31, 2024 — the Ukrainian-Russian contract for gas transit expires, the sanctions will be lifted. In almost five years, the United States will be able to increase LNG exports to Europe several times, invest in the construction of new LNG terminals, and sign more multilateral contracts on the export of “freedom molecules.” In a few years, for Washington, which has every chance of becoming a significant player in the European gas market, the issue of cooperation with Germany will weigh more than NS-2. In a few years, the United States’ global influence will be even more fragmented, which would fuel a rivalry with China and new powerhouses. That is why the United States will try to maintain allied relations with Germany in the realpolitik 2.0 system.
Ukraine should not take sanctions for granted. It is necessary to prepare for the “end of Russian gas” era by diversifying sources of natural gas imports. One should not ignore the import of American “blue fuel” through Poland and the Baltic countries, Ukraine’s accession to the Southern Gas Corridor, or the possibility to build our LNG terminal. Given the domestic gas transportation system’s capabilities and Europe’s largest network of underground gas storage facilities, Ukraine should make every effort to maintain transit status after 2024.
U.S. sanctions against Nord Stream 2 have given Ukraine the needed time: it must be used properly.
Viktor Karvatskyy is the CEO of ADASTRA think tank. The Ukrainian version of this column was published in NV Business.
