Why the US and NATO beat Germany for Nord Stream 2
All the intertwining of energy, economy and geopolitics on the Nord Stream 2 gas pipeline. An in-depth analysis by Tino Oldani for Italia Oggi
Following the Navalny case, the opponent of Vladimir Putin poisoned with the Novichock and hospitalized in Berlin, a debate has opened in Germany on the hypothesis of hitting Russia with a sensational sanction: the renunciation of Nord Stream 2, the second gas pipeline which should connect the Russian fields to Germany, passing through the North Sea, a work already built for 90%. A sanction requested several times by Donald Trump, who has already pushed several large European companies to withdraw from the project, but has never scratched the line of Chancellor Angela Merkel, who defends the pipeline as a "commercial operation" without political implications. In recent days, however, the first failures have emerged. Not only the leaders of the Greens, but also some prominent members of the CDU, Merkel's party, said they were in favor of the renunciation of Nord Stream 2 as a response to Putin's methods. The only ones to defend the pipeline are the Social Democrats of the SPD, headed by the former Chancellor Gerard Schroeder, appointed years ago as president of the Nord Stream consortium on the proposal of the Russian company Gazprom. And since the Social Democrats are government allies, Merkel has never interfered in their dealings with the Russian gas masters. Which has attracted not a few accusations, starting with Trump: he makes a big voice with Putin on values and human rights, but then he continues to do business with them and not pay what he owes to NATO.
In this context, a comment that the Faz dedicated to the latest statements by Steffen Seibert, Merkel's spokesperson, was surprised, in which it was stated that "Merkel does not rule out sanctions". Which is not exactly what Seibert said, but the fruit of a subtle interpretation. Let's see the facts. Urged by the media, Seibert declared that "Merkel agrees with what was declared on Sunday by Foreign Minister Heiko Maas". And Maas, a Social Democrat, had been very cautious: «I hope that the Navalny case will not lead Germany to reconsider the Nord Stream 2 project. However, it is necessary to further verify what happened. It is too early to issue statements on sanctions against Russia ».
What does "too soon" mean? The classic half-empty glass. Yet the Faz, usually well informed, saw the glass half full: "Merkel who does not rule out sanctions". For the definitive answer, it will still take some time. But not an infinite time, as insisting on Nord Stream 2 could have a very high political price for Germany. The reason was explained in an interview with Deutsche Wirtschaftsnachrichten (German economic news) by the American geopolitics expert George Friedman, president of Geopolitical Futures, with brutal frankness judgments: "On Nord Stream 2, Germany can prevail if it can pay the necessary price. This project is not in line with NATO, and Germany is a member of NATO. However, the federal government assumes that the price will not be that high. We'll see if the price isn't that high ». On the latter point, Friedman adds: “To withstand a recession, the Germans must generate 50 percent of their gross domestic product independently of exports. This means that your products must be bought by German consumers. This is not possible. If German customers can't buy German products, your economy will quickly shrink. The most important customers of Germany are the Americans ». Words that, in the light of the most recent developments in US monetary policy, hint at the "price" that Germany is likely to pay.
Fed Governor Jerome Powell has announced that he will maintain an accommodative discount rate policy for a long time, no longer aimed at fighting inflation, but at supporting growth and employment. As a result, the world will be flooded with a dollar that is increasingly weaker than other reserve currencies, the euro in the lead. This means that European products will be more expensive in the United States, starting with German ones.
Since the German economy has its strong point in exports, with repeated and huge surpluses in the trade balance, for years above the 6% of GDP ceiling indicated as a limit by the EU treaties, it is evident that a reduction in exports towards the USA it would involve a high price. Especially since the low-wage policy implemented with the Hartz IV reform has weakened domestic demand, so Friedman goes so far as to say, exaggerating in tone but less in content, that "German consumers cannot buy German products".
This explains the first failures of the Germans on Nord Stream 2, which in the US is hated not only by Trump, but also by his rivals, including Joe Biden and Barack Obama. Not only. The same newspaper that interviewed Friedman reports that German energy experts now consider Nord Stream 2 a "luxury", since its abandonment would not jeopardize energy security, as current supplies "are sufficient in the long term" . Russia, even without Nord Stream 2, would remain Europe's most important gas supplier.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/perche-usa-e-nato-picchiano-la-germania-per-il-nord-stream-2/ on Sat, 12 Sep 2020 07:38:10 +0000.