Western reluctance on Nord Stream II gas pipeline, SWIFT emboldens Russia

Like the possibility of a Russian invasion of Ukraine becomes more and more likelyBerlin’s reluctance to impose sanctions on Nord Stream 2 and other pressure points, such as SWIFT bank transfer system, erodes deterrence and may invite Russian aggression. Germany actually goes a bit further, block the transfer of lethal aid NATO allies to Ukraine.

Adding fuel to the fire, President Biden’s remarks on January 19^and differentiating between a full-scale invasion of Ukraine and a “minor incursion” was confusing and did nothing for American credibility. Unsurprisingly, these comments were met with anger by Ukrainian officials.

A number of sanctions have been discussed and threatened by the United States, Germany and their NATO allies in preparation for Russian military action against Ukraine. Some of the measures outlined by the Biden administration include punishments on aerospace and weapons technology and a ban on exports of all US consumer goods to Russia.

Washington has also pledged to sanction senior Russian government officials, including President Vladimir Putin. However, in May, the Biden administration reversed earlier policy, rescinding an earlier pledge to sanction the recently built 55 billion cubic meter Nord Stream II gas pipeline between Russia and Germany.

Today, it is awaiting regulatory approval from Berlin to start operating. The controversial project would entirely bypass Ukraine, which currently benefits from billions of dollars in transit revenue. Washington has reached a OK with then-coalition Chancellor Angela Merkel in May promising that Berlin would impose sanctions on Nord Stream 2 over Russian misconduct on the continent.

However, the new coalition government led by Olaf Scholz of the centre-left SPD has shown reluctance to pursue this policy, despite the first openings that pipeline sanctions would be at stake. Scholz has frequently reiterated his preference for a peaceful and diplomatic solution to the tensions concerning Russia and Ukraine. Regarding the economic consequences, the new Chancellor was weak and vague.

The message from Washington increasingly seems to be one of hesitation and reluctance. January 13^andthe Senate rejected a Invoice proposed by Sen. Ted Cruz (R-TX) to impose sanctions on Nord Stream 2. The legislation would have applied sanctions no later than 15 days after their enactment, and any decision to lift them on Nord Stream 2 would have to be put to a vote by Congress.

Curiously, Biden administration officials were behind the lobbying campaign to defeat the bill, despite weeks of rhetoric advocating devastating economic consequences should a Russian invasion occur. The administration argues that imposing sanctions on Nord Stream II would not deter Russia from invading Ukraine. It would foster discord between Washington and Berlin at a time when unity is needed more than ever between the two allies. For the moment, we see neither allied harmony, as evidenced by the cowardly words of President Biden, nor deterrence from Russian truculence. The lack of clarity undermines German energy security by reinforcing its dependence on the Kremlin and weakens US, NATO and EU options to deter a Russian invasion of Ukraine.

Putin, always an opportunist, is probably delighted to see so much indecision coming from the United States and Germany. The fundamentals of deterrence are credibility and severity of action – making it clear to an adversary that the cost of aggression would outweigh the benefits. American and European inaction, especially vis-à-vis NS2 and SWIFT, only invites more aggressive Russian policies.

History teaches us a good lesson: weak sanctions in the past have failed to deter Russian aggression in Ukraine. President Barack Obama’s punitive actions against Russia included punishments on certain banks, energy companies and arms manufacturers. These proved insufficient to prevent Putin’s illegal annexation of Crimea and the de facto partial occupation of Donbass.

Leaders in Washington and Berlin are rethinking the economic and military consequences for Moscow. While the United States has recently become the first leading exporter of natural gas, Germany could import liquefied natural gas from US exporters such as Tellurian and Chenier, as I have already pointed out. In fact, the United States is projected overtake Australia and Qatar by 2022 as the world’s leading exporter of liquefied natural gas (LNG).

Germany is Gazprom’s largest foreign customer. Last year, about 50 to 75 percent of its gas imports came from Russia. German officials see the controversial pipeline as an important energy corridor because the country is closing nuclear power plants and halting the use of coal as part of its ambitious Energiewende program of the transition to renewable energies. Proponents argue that Nord Stream 2 would improve energy sustainability by increasing affordable natural gas capacity for Europe’s energy-intensive industry.

Of course, affordability is only one side of the energy security coin. The other is reliability. Efforts to reduce dependence on Russian gas can only strengthen European energy security. Russia has already proven to be an unreliable partner. January 13^andEuropean Commissioner for Competition Margrethe Vestager strongly suggested that Russia manipulated gas prices this winter. This is not a new phenomenon. In 2009, Moscow has stopped supplying gas to EU countries due to ongoing negotiations with Ukraine. As I have said before, relying on Russia to fill Europe’s energy supply gap was a worrying proposition then, and hindsight has confirmed that those concerns were even more valid now.

The crisis with Russia is certainly dynamic, with Putin playing with his cards close to his chest, keeping his next moves and intentions a secret, but the report evacuation Russian diplomats from Kyiv and L’viv, and reports of giant rail convoys with military equipment, including field hospitals heading for the Ukrainian border, point to an invasion coming soon.

Suppose the West fails to adequately prepare and deter. In this case, the long-term consequences will go beyond energy and concern the major shift in the European balance of power and the deterioration of America’s overall position vis-à-vis Russia and China.

With the help of Marco Rodriguez