Blocking The World's Most Controversial Pipeline

Russia is now on its final leg of construction for the Nord Stream 2 pipeline project, and Washington is hoping--at the very least--to delay construction further via additional sanctions because this pipeline will essentially double Russia’s direct export capacity to Germany (the first EU entry point) to 110 billion cubic meters per year. In other words, the new pipeline will have a 55 billion cubic meter capacity for piping gas from Russia to Germany across the Baltic Sea. 

With the pipeline now 93% complete, Washington is trying to impose new sanctions on companies involved in the completion of this pipeline. While most media pundits have shrugged off these new sanctions, which are presently in the form of a US Senate bill, Denmark could pose some complications for Russia.

So, do sanctions work, and could new sanctions actually delay Nord Stream? Yes, they can. They may not stop it, but they can delay it. Here’s how: 

While the pipeline’s point of entry into the European Union is Germany, which is extremely unhappy about the new sanctions bill, Russia wants to change the process for laying pipe in Danish waters. The last leg of Nord Stream requires 160 kilometers of pipe to be laid in Danish waters, for which Russia already has a permit. However, Gazprom now wishes to change the technique for pipelaying, which requires an amendment to the existing permit. Denmark has said it will take some four weeks for them to decide on that amendment, thus ensuring additional delays as Denmark uses this time to assess the potential blowback from sanctions for involvement in this final leg.  

This pipeline is a significant geopolitical and geoeconomic undertaking. First of all, it will empower Russia and further entrench its gas dominance over the continent. Second, it will leave Ukraine out in the cold, and the country relies on transit revenues. Aside from Ukraine, the only real power in the EU that is staunchly opposed to Nord Stream as a direct threat to EU security and supply diversity is Poland. Of course, Poland also appreciates the US military support it receives and also enjoys transit revenue that it will lose once gas starts going directly to Germany. Thus, Ukraine and Poland lose their negotiating leverage with Gazprom. 

For Germany, despite its major cheerleading of renewables and despite the fact that Nord Stream completely contradicts that, it means more gas flow and more supply options in case of disruptions. 

The project has already been delayed. Last December, US sanctions forced pipelayers to halt work, and while Russia could finish it on its own, it would push the completion date likely to early 2021 at best. Nord Stream should have been completed in Q4 2019. So, yes, sanctions work in this case--even if they are belated. 

ESG is Exploding, and Oil Should Take Note

We’ve been talking a lot lately about ESG investing--also known as “sustainable investing” or “impact investing”. That’s because we’re following the money, not the politics, and the money is taking over. As we have noted several times, ESG powerhouse BlackRock has largely taken over Wall Street, and now, Goldman Sachs is hoping to get a bigger piece of this pie. 

To wit: Goldman is eyeing what it sees as a $16-trillion investment opportunity between now and 2030 in clean energy, partly because borrowing costs are only around 3% for clean energy, while they have skyrocketed to some 20% for fossil fuels.