Explaining Germany’s contradiction

Severin Fischer is Senior Researcher at the Center for Security Studies (CSS), Zürich

The construction of the Nord Stream 2 pipeline between Russia and Germany has become one of the most controversial topics in European energy policy. For a majority of European policymakers and analysts, it seems hard to understand how Angela Merkel’s government can back the creation of a more secure Energy Union and a seemingly contradictory German-Russian pipeline project at the same time.

In the interpretations of many, the latter shows a lack of solidarity with Central and Eastern European countries; some even draw a causal link to the resistance of those countries to show solidarity during the refugee crisis. The reality is of course much more complex, and requires a deeper look into Berlin’s dominant mindset. Two strategic motives in German politics and the clarification of a misunderstanding around the Energy Union could help explain Berlin’s point of view.

The first strategic motive is in foreign policy. The German government is following a tradition in the country’s foreign policy towards Russia that has often been vaguely described as ‘Ostpolitik’. From the early years of the Cold War until most recently, German governments saw a dual approach towards the regime in Moscow as most promising. This included a variation in political strategy between confrontation and rapprochement on the one side, while on the other side keeping channels for dialogue and economic cooperation open.

Since the annexation of Crimea and the war in eastern Ukraine, the German government adapted its strategy and supported the sanctions regime against Russia, but with clear limitations on a predefined set of economic sectors. Trade in natural gas was clearly exempt from the sanctions, following many decades of German foreign policy tradition. The cooperation between German and Russian companies on Nord Stream 2 is therefore seen as a means of keeping a window for political dialogue open and supporting future cooperation with Russia’s government. Behind closed doors, German politicians ask why this opportunity should be blocked if cooperation on natural gas survived the worst of Cold War confrontations.

The second aspect, although discussed even less openly, is strongly connected to Germany’s national energy sector transformation and its consequences. In the early days of Germany’s ‘Energiewende’ around 2007-2008, natural gas was perceived by many as the obvious partner of renewable energies in the future. The conviction that renewables and natural gas would dominate Germany’s electricity sector for some decades bought support for an energy sector transformation from the national gas industry. Reality, of course, has proven this assumption wrong. Quite to the contrary, natural gas has lost market shares in the electricity sector and suffers from decreasing demand. This is one among a whole set of factors that turned German energy companies from big incumbents to weak competitors in the market.
Besides its outspoken support for the further deployment of renewables and more ambitious climate policies, the second part of German energy policy concentrates on protecting its suffering energy industry. In the case of natural gas, this means supporting the German gas industry in its cooperation with Russian suppliers, strengthening the German natural gas market and improving framework conditions for exporting gas to other European markets. Germany’s natural gas export of 30 billion cubic metres in 2015 underlines the economic importance of this strategic move.

Finally, and probably most importantly, a clarification of the big misunderstanding around the Energy Union is needed. This has a great deal to do with the strategic ambiguity of the project itself. The concept of the Energy Union was mainly perceived by the German public as a project for further greening Europe’s energy system and better coordinating energy supply structures. The energy security dimension did not receive much attention among policymakers and in the media, unlike in many Central and Eastern European governments, where the European Commission’s proposal was interpreted as a step towards reducing the EU’s dependence on Russian supplies. In Germany, however, growing flexibility in open markets remained key for guaranteeing energy security. In the German understanding, additional import infrastructures such as Nord Stream 2 would contribute to a diversification of transit options. This difference of views has not been addressed so far, and remains widely open for controversies.

The combination of Germany’s foreign policy tradition vis-à-vis Russia, its support for the German gas industry and its different interpretation of the Energy Union project can serve to explain Berlin’s support for Nord Stream 2. As long as the regulatory framework of the Third Internal Energy Market Package will not prohibit the construction, policymakers in Germany will see no means or reasons to change their position on this controversial pipeline project.