The centrality of “pipeline diplomacy”/”energy blackmail” to Russian FP is a common trope amongst journalists and “geopolitics analysts”, alongside more recent buzzwords (“hybrid war”, “Gerasimov doctrine”, dezinformatsiya…).
But it’s always useful to pin down some hard facts/stats.
(1) Share of natural gas as percentage of Russian exports: 6%. Historically hovers between 5%-10%. This isn’t altogether insignificant, but not all that central in the grand scheme of things and overshadowed by yearly fluctuations in commodity prices. Oil, a much more fungible commodity, is an order of magnitude more important (50%+).
(2) European “dependence” on Russian gas: Around 30%, around 30%-40% in Germany. Slowly going down with the switch to green energies, although partially canceled out by countervailing moves to phase out nuclear (esp. in Germany).
But even a (hypothetical) hardcore embargo will not close down the industrial economies of Western Europe. Can be somewhat made up with supplies from Norway, to an extent by (more expensive) American LNG. And there’s plenty of fat to cut at the margins. Hard to see how to translate that into “energy blackmail” even if Russia really wanted to. Meanwhile, the countries most “dependent” on Russian gas – the Balts and Finland (close to 100%) and Poland (60%) – are hardly the most pro-Russian, sooner the converse. So to the extent that this “blackmail” does exist, it must be uniquely ineffective.
(3) The effectiveness of any such strategy has been going down for years anyway with the progressive integration of the European gas market.
Related observation: Laying pipe over your own territories is much more reliable, less risky, and less expensive than paying foreigners who are vulnerable to sanctions to do it for you over the seabed.
Nord Stream costs ~$10 billion, that number represents more than a third of Russia’s annual earnings from gas experts. It can also, in principle, be scuppered anytime if the Americans are determined enough.
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The billions that Russia gets for it will hopefully be used to improve the economy
The centrality of pipeline diplomacy & gas blackmail, is to finish your essay.
Nobody cares about gas or money. Nordstream 2 is a key technological cooperation program between Germany and Russia, which is why US wants to shut it down. While Gasprom is important, the key players are actually Rosatom and Siemens.
https://www.cleanenergywire.org/news/russia-ponders-adding-hydrogen-nord-stream-2-gas-deliveries-germany
https://app.handelsblatt.com/politik/international/gazprom-und-rosatom-russlands-neue-energiestrategie-nord-stream-2-soll-wasserstoff-liefern/26039724.html?ticket=ST-205245-BcYUwdsCpGgZqLgzenwM-ap3
Key points.
Unlike old pipelines that can handle only 20% hydrogen synthesis gas blends, Nord Stream 2 can handle up to 70% hydrogen gas flows.
Incidentally, while hydrogen is very difficult to work with, it is also the best chemical fuel for space rockets. If only someone was thinking about developing technology to make handling easier….
Oh wait, there is somebody!
Rosatom produces hydrogen via nuclear powered electrolysis and develops material technology for better storage that minimize losses in transport, and builds trains for that.
Cheaply produced and easily handled, hydrogen can boost German industry and help CO2 emissions concerns. Russia can fuel lots of space rockets with the stuff. US is of course upset about this.
I keep wondering when pipelines #1 and #2 will spring a large leak due to explosives placed along side.
That is a lot of underwater property to protect.
Drone tech being what it is, it wouldn’t take much to disrupt gas flow during the middle of winter.
Nobody really cares about clean energy after the SHTF. Everyone will want BTU’s regardless of their origin. The entire world is entering a depression and projects will be reevaluated for their immediate benefits. Hydrogen will be a casualty.
The CO2 scam is winding down as more and more people wake up to the con. The hydrogen economy is as real as fusion reactors; not at all. With gov’ts ignoring the obvious and proven Thorium fuel cycle for basic energy needs, why would they squander money on unproven technologies WHEN THE EASY MONEY GETS TIGHT?
Right now, denial of the state of the worlds economic system still keeps mars missions and other nonsense projects spending money acquired by debt financing. When the SHTF, much of that will stop.
Things that cannot go on forever have a tendency to stop. – Herbert Stein
Europe is trying to phase out nuclear power. I think it’s a mistake, but its their business. So no thorium reactors in Europe in the foreseeable future.
And oh really? Europe is scaling back their CO2 goals? That’s news to me. As far as i know, they are as committed as ever to reduce their CO2 emissions.
Oh and easy money won’t ever get tight. I mean, why? Its fiat. There’s infinite amount of money out there. Its just a number on a computer.
… what stops them developing these technologies independently from the pipeline? Also hydrogen economy is a boondoggle, you’re better off running everything from batteries if you want to go “clean” across the board.
Show me where I said that Europe was scaling back their CO2 goals. Don’t put words into my mouth.
The average person is realizing that the entire CO2 scam is unwinding. The political class is hell bent on wasting money on it till even they have to let it go as a predictable cooling starts world wide in the next decade.
As fiat reverts to its intrinsic value, projects are going to get cancelled. The US dollar, in particular, is circling the bowl. It’s just a matter of time till US fiat and then world fiat becomes worthless. Why do you think gov’t are accumulating gold? They know their fantasy is coming to an end. That’s why the COVID nonsense was planned. It’s to occupy the shallow thinkers while the sociopaths loot the rest of the country on free fiat. Once the smoke clears, the oligarchy will own most of the real productive property and the average person will work for peanuts.
Feudalism 2.0 is the goal.
Hydrogen has serious containment issues. H2 molecules are too small and sip through any sealing. If you have a tank of methane, the gas remains inside the tank. A tank of hydrogen gas will end up empty in 15-30 days.
Besides that, hydrogen is very explosive, serious safety issues are associated with it.
Running industrial furnace off batteries doesn’t strike me as very efficient. Its for industry applications, not Starbucks coffee and housewives driving around.
General idea is to convert natural gas into ash and hydrogen. Ash will capture carbon, hydrogen and reduced amount of natural gas will be used as heat source. Russia is great for natural gas feed stocks. They can develop the tech without the pipeline, but the pipeline is ideal since it can handle high hydrogen gas loads already. It will take a lot of Rosatom trains to replace it.
Taking ZeroHedge too literally is not healthy.
All i said was CO2 reduction is EU goal and will remain so. Hence the move to hydrogen for industrial applications.
@In Catilinam
That’s what Rosatom trains are for.
“I mean, why? Its fiat. There’s infinite amount of money out there. Its just a number on a computer.”
When the dollar stops being the reserve currency, then the chickens will come home to roost. But there’s a deal of ruin in a nation, and we’re nowhere near that stage yet.
https://www.russia-briefing.com/news/russia-swaps-us-dollar-chinese-rmb-holds-25-global-reserves.html/
But it’s inevitable with the US on its current demographic course.
Bäume wachsen nicht in den Himmel.
“The trees do not grow up to the sky”
And oh really? Europe is scaling back their CO2 goals? That’s news to me.
You are a liar.
Industry is doing just fine on natural gas and if you haven’t noticed, the world is heading towards more electrical use for transportation and industrial applications (robots).
Burning hydrogen in an internal combustion engine isn’t the goal; using it in a fuel cell is. A fuel cell can use natural gas and other fuels, but prefers hydrogen which isn’t a primary fuel. No one wants to increase fuel costs by having to manufacture hydrogen from a nuclear reaction if a cheaper alternative is available after the SHTF. Till then, all sorts of nonsense projects will survive.
Methane is better for reusability. Russia should be developing reusable rockets.
Hydrogen is a store of energy not a source i.e. it takes much more enegy to produce it than it produces when run through a fuel cell or burnt in an engine.This is likely to remain so.
It has some limited applications where high energy density is desirable like space launch vehicles and Fuel cell based AIP for conventional subs like the German U212/214 but even here it is loosing ground to alternatives like methane which though less energy dense is much easier to handle(Which is why SpaceX chose it) and advanced lithium polymer batteries in the case of submarines like the ones in the Japanese Soryu class SSK.
Once solid state batteries become mainstream it is game over for Hydrogen as far as transportation is concerned.
While i agree with the sentiment in terms of ease of overhaul and inspection (Space Shuttle tech was expensive to reuse, true), hydrogen has like 120 seconds worth of ISP over methane. This is just too good to pass up. Those RS-25 and RL-10’s were amazing when they worked.
It is a matter of material science to make hydrogen infrastructure and rocket propulsion robust and reliable, and i think it is doable.
Reusability is indeed the future, but it mostly matters for large rockets, Russia is not quite there yet. Musk is beating Russia with his Starship. :). (For small and medium rockets, payload reduction is too much for reusability to make sense).
@RoatanBill
Seriously? The whole point is to phase out natural gas to reduce CO2, so no, industry is not fine using natural gas. I’m not talking about automotive applications here.
@YetAnotherAnon
While gold is nice, all currency is fiat, not just the dollar. It all works on the same principle. There’s infinite amount of any fiat currency.
Nordstream has more than just economic potential. Any improvement of Russian relations with Germany would be valuable. Russia’s ideal geopolitical partners have long been Germany and/or Japan. Unfortunately for Russia, ideological and cultural differences along with great power competition have prevented these mutually beneficial partnerships. So far. As far as hydrogen power goes, I can’t see it ever being more than a niche product.
SpaceX is impressive but they are not the final word on state of the art material science. They chose methane because that’s what they could do. Doesn’t mean somebody else can’t develop better containment technology.
Im not talking about transportation, im talking about synthesis gas for industry with reduced carbon content to meet reduced CO2 requirements.
Today Putin signed an order for Russsian battleships to accompany Russian pipelaying currently in Vladivostok to the Baltic.
Hydrogen has a role in countries with high tidal ranges such as the UK, Ireland and France. It only has to be stored forthe interval between tidal peaks. Similar logic for nuclear. Wind’solar types are proposing it for interseasonal storage which seems to be lunatic.
That would certainly signal who the “friends” are even more than current mafiosi tactics of “sanctioning” or telling the czech to buy american NPPs if they know what’s good for them (did the US even finish any NPP in the last ten years?)
Accidents concerning large industrial sites are a symmetrical sword, it would be bad to go down that route.
The US Fed Gov is a rabid animal.
You can expect, should expect, any and all wanton acts of destruction if it doesn’t get its way.
Am I the only one here who has the impression that Nord Stream 2 will not be completed?
That USA and their Atlanticist friends in the EU will do everything necessary to prevent the completion of the works?
I am probably being overly pessimistic, but I think that the 10 Bn $ that this project cost have been lost for everyone except the companies directly connected to the construction of the pipeline. Could anyone remind me who are the major shareholders of these companies?
As mentioned elsewhere, the Russian pipelaying ships are now ready and Putin has ordered the Russian navy to escort them from Vladivostok to the Baltic. Now the UK is out, there is no serious opposition to Nordstream 2 in the EU. It will be finished.
Perhaps there might be asymmetric ways of preventing finalizing the pipeline.
1) Belarus drifts towards the confrontation between Lukashenko and the opposition.
2) A Maidan sniper type provocation.
3) Violence spiralling towards civil war (Syrian scenario)
4) Russia steps in as per the accords signed between Belarus and Russia.
5) Russia again described as the Empire of Evil hell-bent on saving flailing dictatorships the world over.
6) Stopping of all EU/Russia cooperation in all fields.
7) Blockade of Russia/EU hydrocarbon trade.
What about this scenario?
imo it will be completed, but the US is certainly going to extraordinary lengths to sabotage it:
https://www.dw.com/en/nord-stream-2-us-senators-threaten-german-port-with-crushing-sanctions/a-54473119
https://www.cruz.senate.gov/files/documents/Letters/2020.08.05%20Final%20Mukran%20Port%20Letter.pdf
North Stream II is a symbol of the new US-Russia warlike relations. It will be completed because Germany would lose face (at home) if it would cease supporting it. Washington is making the hysterical noise not because of NS2 – they know that’s a done deal – but so no other new energy projects are contemplated by Europeans with Russia. And more US arms are bought by EU. In that they are succeeding.
Not sure that list is right. Czech Republic doesn’t oppose NS2, they actually invested 3/4 billion euros to build a pipeline connecting to NS2 in Germany, they will switch from getting gas from the east to getting it mostly from Germany.
The real losers of NS2 are Poland, Ukraine, Balts, and to some extent Hungary and Slovakia. They will be in much harder negotiating position. Washington is also making all this noise to show them support. Right. If you can’t do a damn thing, the next best thing is to yell and scream so it muddies up the issue and also feels good emotionally.
Giovanni Pompeo is a big baby with a penchant for military sales – that’s all he is, a loud salesman for a long time already in the belly-over-the-belt unserious stage of life. But NS2 by itself is really not that important, it is what can be gained by escalating the NS2 issue that matters.
China/India combined are almost twenty times the population of Russia, and therefore a far larger market for Western consumer goods and the West’s Culture Industry.
I cannot imagine what major corporation in the US would go under if Russia was hit with Iran-level sanctions. Maybe something in oil/gas or mining. If there was a critical mining import we needed from Russia, I imagine it would be exempted, like we’ve previously done with Iranian pistachios.
Russian troops in Belarus is going to make Poland scream. And there’s just enough diaspora voters in the critical Midwestern states to tip the balance.
https://upload.wikimedia.org/wikipedia/commons/3/36/Percentage_of_Americans_claiming_Polish_Ancestry_by_state_in_2018.png
It will improve the bottom line of Blohm&Voss
My personal opinion is that Belarus is a trap for Russia: damned if they intervene, damned if they don’t. The trap worked just fine in Ukraine. Russia intervened, got a conflict on its hands and needed to find a way to bypass the Ukrainian territory for its gas exports. Hence North Stream 2 was built. But perhaps Nord Stream 2 has also become a trap: let the Russians build a pipeline and sink 10 bn $ in the Baltic sea and then prevent them from ever operating this pipeline. We’ll see in 2021 if I was too blackpilled.
The long game is the best option. At some point the West will tire of propping up Ukraine, and the internal political winds will shift towards conciliation.
This worked in Venezuela, Maduro outlasted his opponents who weren’t able to convince the army to flip, nor for the US/Brazil to invade.
The other lesson is that anything short of Chinese-style authoritarianism will allow Western cultural subversion to seep in. The new font of Poz isn’t OpenSociety, it’s literally every major Western corporation.
It’s also debatable whether the “state capitalist” model is actually effective in delivering rising living standards, while preserving sovereignty. The liberal system has been more effective in growth in the century’s first two decades, and a potential FIRE implosion is still hypothetical.
Whether Nord Stream 2 is completed or not is entirely up to Germany. If it is not, however, Siemens will completely lose a shot at Russian power plant modernization contract. That contact is worth $20-30 billion. Nord Stream 2 is peanuts in comparison.
Like I said before, this has nothing to do with gas or even money. Those things are not strategic, and if it were only about that, US wouldn’t care.
The matter at stake is German-Russian technical cooperation. If Germans are willing to sacrifice that, there is no hope for them. They will fade away because US will continue to push them around, bleed them dry with tariffs, and steal their technology. It will be their loss, unfortunately.
Are there regional/linguistic divisions in Belarus? That was the font of conflict in Ukraine, where part of the military walked off the job in the early stages of the conflict. The economic elites were also split.
This isn’t a good thing for the nationalist right in the US. We need an additional military presence on the Southern Border, not in East Europe. Frankly, we may need to remove all troops from Europe to prevent Bluestan insurrection should the government win re-election.
I don’t know the salience of Polish geopolitics on the voting behavior of Polish diaspora voters in the US. But the margins in Michigan and Wisconsin are tight, and if some people think that only Biden will protect their cousins from the Bear…
This is just another meme.
I believe regardless of what happens to NS2, Russia will invest in indigenous gas turbine Power Plant technology. This would be the right time as many next generation military and civilian jet engine projects are underway in Russia and the material science tech involved is more or less the same.
Siemens is not going to transfer core i.e hot section material science technology to Russia so German help in such modernization is setting up power plants on a turn key basis with Russian companies doing non essential work much like how Russian Railways is modernizing with German help with trains like Siemens Desiro Rus being imported from Germany or built in Russia with all critical components (traction motors etc.) being imported from Germany.
Russian gas turbines may be slightly less efficient than those from Siemens, Mitsubishi and GE but well worth investing in given the need for sanction proof technology for gas based power plant.
Besides given the low price of gas in the Russian market it may make sense to invest in slightly less efficient Russian power plants as the Capex is likely to be substantially lower.
Fiat money is debt; debt that is expected to be repaid with forthcoming IQ and productivity gains.
So yeah, it’s gonna crash, and soon.
You’re not the only one, I’m set to win a longstanding bet on NS2 completion at the end of this year.
And if I had a dime for every time someone claimed that the Germans would finally stand up to the Americans…
The area around Brest, not coincidentally where Tikhonovskaya was brought up, is more Belarussian in speech than other parts of the country. It was Polish before 1939 and the Russian invasion.
Dependency of Poland on Russian gas and the possibility of “gas blackmail” might be mitigated by the fact that without Jamal gas pipeline Russian gas deliveries to the Western Europe would be also limited.
https://en.wikipedia.org/wiki/Yamal%E2%80%93Europe_pipeline
Gas dependency is nevertheless a reappearing question in Polish politics, and without obsession over it Poland probably wouldn’t support all those GUAM initiatives, not to mention unconditional support for Georgia.
You can always repay a $1 million loan with proceeds from $2 million loan, $1 billion loan with $2 billion loan, $1 trillion loan with $2 trillion loan etc.
In a fiat system, debt is never repaid really, just rolled over at reduced interest rates to make debt service easy. Inflation is usually expected to take care of money excess, but our demographics don’t allow for significant inflation. So either we solve excess money problem with zero rates (negative real rates) – slow solution. Or with negative rates – fast solution. Negative rates can burn money quickly by returning it to the banks.
I don’t see why this system would crash. People who run it are pretty happy with it. Stock markets are up. If you pass Universal Basic Income, all of it will be spent at Amazon, stock market will go up even higher, Jeff Bezos will become a $trillionaire.
Who would want to ruin a good thing?
False.
This was true up to 2014, but since then situation has changed when Lithuania has bought floating gas import terminal – in 2019 roughly about 60% of all Lithuanian used gas was imported through it, this year so far up to roughly 70% so far and even some amount of gas from that terminal is being pumped to Latvia, Estonia and Finland as gas prices collapsed, so Gazprom certainly does not have 100% of the gas market anymore.
In the US, the only time in recorded history the debt went down was in 2008.
https://fred.stlouisfed.org/series/TCMDO
We all know how that turned out.
Aside from that, debt is really never repaid. It is literally a river of free money.
If this was the case, why did Denmark grant the pro-NS2 side a permit to lay the pipeline in Danish waters?
They could have continued to block the construction and forced them to develop an alternative route.
Saying new debt is generated all the time is not actually the same as saying debt is never repaid. Furthermore, in times of economic growth, which covers the vast majority of the period you posted, one expects new debt to be generated. Your graph also shows periods other than 2008 where debt goes down. From Q4 1945 to Q4 1946, and from Q4 1953 to Q1 1954, the debt level went down.
There is no theoretical reason a country with a “fiat” currency could not reduce debt levels if it wanted to. Whether that would be a desirable thing to do is another matter.
I don’t think “free money” is a useful or meaningful concept. It is certainly not the case that generators of credit(banks) cannot go into default for example.
I do not consider taking out $2 million dollar loan to pay back $1 million dollar loan to be an actual repayment. Its more like a rollover.
Right, debt growth is what generates economic growth. (Money supply) x (velocity of money) = (price level) x (real GDP).
.
You can get away with not printing money for a short while, but it inevitably will lead to recession that will force you to compensate and print more excess or “catch up” money. This is why the curve is so nice and regular.
The price of debt reduction is deflationary depression. Destruction of GDP, 40% unemployment, people living in tents etc. It is very damaging and unpleasant, which is why inflation is always a better choice for dealing with debt overhang.
Well, it is free money. Once you take out $2 million dollar loan and pay off $1 million dollar loan from the past, you are free to do with the rest whatever you wish. Small banks can go into default, true. But large, systemically important financial institutions have Federal Reserve to prevent this from happening. Their money problems are solved with a few mouse clicks on a computer.
Generally, political economy is all about what do you want to spend this free money on.