Bloomberg | Bloomberg | Getty Images One of the early victims of Russia’s invasion of Ukraine – and its ongoing geopolitical and economic implications – was the Nord Stream 2 gas pipeline, a massive energy project that took several years to build and cost $ 11 billion. Even before Russia’s unprovoked attack, the signs were not good for the 1,234-kilometer offshore pipeline – designed to double gas flows between Russia and Germany. Now, the big infrastructure project looks, as one analyst put it, “killed.” The installation of the pipeline started in 2018, but it faced many obstacles, and it became something like a geopolitical pinball machine in Europe and the USA before it was finally completed in September 2021. Until November last year, however, there were further indications of problems when the German energy regulator temporarily suspended the certification process that would allow it to start operating the pipeline. The suspension came as Russia rallied tens of thousands of troops along Ukraine’s border (although regulators cited legitimacy as the reason for the suspension). The final nail in the coffin of Nord Stream 2 came in February following Russia’s fatal decision to formally recognize two pro-Russian, breakaway regions in eastern Ukraine. This prompted the German government under Chancellor Olaf Solz to suspend the certification process altogether. As we all know now, Russia’s recognition of the breakaway republics of Donbas was the precursor to its largest invasion of Ukraine, which began on February 24. The ensuing war plunged Europe into an unprecedented geopolitical crisis that has brought joint projects and business collaborations between (and within) Russia and Europe – such as Nord Stream 2 – to the brink. “Russia’s invasion of Ukraine has killed Nord Stream 2. In short, it would be inconceivable for Germany or any other European country to make a U-turn and authorize the pipeline following Russia’s behavior,” said Kristine Berzina, a senior fellow and The head of the geopolitical team at the German Marshall Fund in the United States told CNBC on Wednesday. “Even the pipelines have a shaky future in Europe,” Berzina said, while for Nord Stream 2, “the pipeline is frozen in its inactive state. Apart from ensuring the safety and stability of the structure, I do not foresee other uses of it. “ Russia’s invasion has accelerated the EU’s withdrawal from Russian energy with the bloc saying it would cut Russian gas imports by two-thirds by the end of 2022 and plans to end its dependence on Russian fossil fuel imports by in 2030. Russia has responded by threatening to cut off gas exports to so-called “unfriendly” countries if gas payments are not made in rubles, as opposed to euros or dollars. The Group of Seven industrialized countries rejected this request. Against this backdrop of bitter geopolitical tensions, the future of the Nord Stream 2 pipeline is now very doubtful, say energy analysts. “We do not believe Nord Stream 2 will ever be up and running,” Kateryna Filippenko, chief analyst for European gas research at Wood Mackenzie, told CNBC on Wednesday. “Europe’s attitude towards Russian gas has changed irrevocably and is now determined to differentiate itself from Russian gas. In the meantime, Russia is threatening to cut off gas flows to Europe if payments are not made in rubles. It is difficult to “We see an approach between Europe and gas. Russia could give the green light to Nord Stream 2, even years from now.”

“Dead in the water”

The pipeline was developed and was to be operated by Nord Stream 2 AG, a Swiss subsidiary of state-controlled Russian gas giant Gazprom. However, it was co-financed by many other European companies, including Germany’s Uniper, its subsidiary BASF, Wintershall Dea, as well as Engie, OMV and Shell. In the midst of the massive withdrawal of Western companies from Russia, the energy companies participating in Nord Stream 2 were forced to suffer heavy losses in the project. Wintershall Dea announced in early March that it would write off its € 1 billion ($ 1.1 billion) funding, as did OMV and Uniper. Shell has also retired from the project. Richard Gorry, CEO of JBC Energy Asia, described the project as “dead in the water” when he spoke to CNBC in February, saying “it was never really alive because it was always in a vacuum whether it was political or bureaucratic.” CNBC approached Gazprom and Nord Stream 2 (which is now under US sanctions after the invasion and whose website is down) to comment on their plans for the pipeline, but has not yet received a response from any of them. the two. Meanwhile, Germany’s energy regulator, the Bundesnetzagentur, told CNBC that the pipeline was far from being certified. “A prerequisite for Nord Stream 2 certification is a positive assessment by the Federal Ministry of Economic Affairs and Climate Action that security of supply is not compromised,” he told CNBC in a statement on Tuesday. “This condition is no longer met,” the regulator said, adding that “it cannot certify the company at this time” and that operating the pipeline without certification would be illegal. A container is decorated with a map showing the Nord Stream 2 gas pipeline, which was expected to deliver Russian gas to European households at the Lubmin industrial park in northeastern Germany on March 1, 2022. John Macdougall | Afp | Getty Images With Germany turning its back on Russian gas, it is clear that Nord Stream 2 is now clearly at odds with EU energy policy, Warren Patterson, ING’s chief commodity strategist, told CNBC on Tuesday. “The EU’s plan to be independent of Russian energy before 2030 suggests it is unlikely that we will ever see gas flowing through the pipeline,” he said. Patterson expected Nord Stream 2 pilot to wait and see if there was a possible future for the pipeline once the war was over: “If it does not, they will have to decide whether to abandon the pipeline or recover. “It would obviously be a costly operation,” Patterson said.

The war will be decisive

Russia has been heavily sanctioned for the invasion and has become an outcast for the West, which has sought to strike at Russia, a major oil and gas exporter, where it is hurting to impose sanctions on its energy sector. The United States has banned imports of Russian oil, liquefied natural gas and coal, while the EU has banned new investment in Russian energy and the United Kingdom has imposed sanctions on leaders of Russian energy companies. The fate of Nord Stream 2 will largely be judged by how Russia’s invasion of Ukraine ends, and this depends on a number of factors, essentially whether President Vladimir Putin admits that his forces do not have, and will not, achieve its territorial objectives in landing and seeking a ceasefire, or if it intensifies the conflict. How well Ukraine’s forces and defenses can repel and counterattack Russia is also a big factor in the equation. There are concerns that the conflict is becoming more and more like a war of attrition where no one wins. Meanwhile, talks between the two sides to reach a ceasefire and a peace agreement remain fraught with difficulties. Firefighting work is underway at a large fuel depot near Ukraine’s western Klevan settlement in the Rivne region, supplying fuel to Kyiv for the Ukrainian army, which was hit by high-precision cruise missiles from Russia on March 28. 2022. Ukrainian state service Anadolu Agency | Getty Images There is a small chance, one analyst noted, that the assets of Nord Stream 2 could be overturned. “Nord Stream 2” will not be re-launched or approved unless the war in Ukraine leads to a conclusion that guarantees Ukrainian territory and peace in a way that future Russian aggression is deemed to have been eliminated, “said Henning Gloystein, director energy, climate and resources of the Eurasia Group, he told CNBC on Wednesday. “Even in the event of a ceasefire or some sort of settlement, it seems unlikely that peace will be considered so stable that there is no longer a Russian threat, especially as long as President Vladimir Putin is in power,” he said. As Putin seems quite secure in his position, Henning noted, the German government does not expect a revival of Nord Stream 2. “The only possible scenario for a revival – and probably because NS2 is officially suspended, not canceled – seems to be under a completely reformed Russian government. Even then, I suspect that Germany would simply be reluctant to simply revive NS2 in its former form. “I suspect Germany would probably try to turn it into a hydrogen pipeline. But it all seems a bit far-fetched at this stage,” Gloystein said. Kristine Berzina, of the German Marshall Fund in the United States, said there had been speculation for many years about whether Nord Stream and others could be used to transport hydrogen in the future and that Russia was a potential future supplier. of hydrogen. “For those who wish not to fall into old patterns of dependence on Russia, it would be important to note whether there are old people in Germany who would like to finally revive their energy relationship with Russia with next-generation fuel under a carbon-free flag. But would Europe really submit to Russia again? “This would enrich Russia again,” he warned.

Warning signs

The Nord Stream 2 gas pipeline has always been controversial since Gazprom and several European energy companies agreed in 2015 to build it. Russia and Germany, under …