How German bureaucracy, not Scholz, could limp Nord Stream 2

(Bloomberg) – German Chancellor Olaf Scholz can tacitly delegate the task to the country’s bureaucracy under pressure from the US to halt the Nord Stream 2 pipeline project because of Russian aggression against Ukraine.

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Before gas can flow through the pipeline at the bottom of the Baltic Sea, Germany’s regulatory authority and the EU Commission, two institutions not known for their speed, have to give the green light. The certification by the German Federal Network Agency must be subjected to an EU test before the final approval by Germany – a back and forth that can take six to eight months.

However, the approval period remained in mid-November when the network agency froze the process to enable pipeline operator Nord Stream 2 AG, which is owned by Russian Gazprom PJSC, to set up a German company to comply with local and EU regulations. The decision skyrocketed European natural gas prices, an indication of how much Europe is betting on the potential for larger Russian shipments. Nord Stream 2 is set to double the capacity of the existing underwater route from Russian gas fields to Europe.

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The process that began in September cannot resume until Gazprom has brought its Nord Stream 2 operations into line. The German authority has not yet received any information as to when the required documents will arrive, said a spokesman.

Scholz, a lawyer and 40-year veteran of German politics, knows how slowly the country’s bureaucracy can turn. For Nord Stream 2 this could be to his advantage: the longer the certification takes, the less pressure he feels to intervene on the political side.

The US secret service anticipates that Russia could invade Ukraine with up to 175,000 soldiers at the beginning of 2022, possibly at the end of January – several months before the Federal Network Agency’s consultations are expected to be concluded.

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That gives Scholz some breathing space in his first week in office. And like Angela Merkel, whose tactics he studied for years, Scholz is known for not giving in to pressure.

A German government official denied US claims that Berlin had signaled to Washington to stop Nord Stream 2 in case Russian President Vladimir Putin invades Ukraine. Such an assurance is currently not needed, on condition of anonymity, because the talks are confidential: As long as the fate of the pipeline lies with the regulatory authorities, Scholz’s government has no mechanism to intervene.

It is not the first time the US has tried to put pressure on Germany over Nord Stream 2. But since the Washington-Berlin conflict was resolved in July, there has been a feeling that the Biden administration might look for another way – like the current Ukraine crisis – to end the project once and for all, the official said .

President Joe Biden faces bipartisan criticism for waiving sanctions against the pipeline’s parent company earlier this year. Legislators continue to urge Biden to sanction the pipeline, especially given the Russian troop build-up.

Biden and Scholz spoke on Friday. US Treasury Secretary Janet Yellen also spoke to the new German Treasury Minister Christian Lindner about how the US could “impose heavy costs on the Russian economy†should tensions between Ukraine and Russia intensify.

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While the transatlantic relationship has thawed compared to the Trump era, pressure points remain, which in Berlin are fueling the view that Germany must first and foremost protect its own interests.

Here, too, Scholz is following the line of his predecessor. As Vice Chancellor, he experienced Merkel’s protracted battle with the United States over Nord Stream 2.

So far there are no signs that Scholz will break with Merkel’s position. While some in Merkel’s Christian Democrats had concerns about the pipeline, Scholz’s Social Democrats almost unequivocally support them.

A wild card, however, are the Greens, the second largest partner in Scholz’s three-party coalition. Greens co-chair Annalena Baerbock has called for an end to Nord Stream 2 in the past – but since she became Germany’s first foreign minister, she has been silent on this issue.

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Surveys have shown that most Germans agree with the pipeline, but supporters of the Greens are the least enthusiastic.

The other Green chief, Robert Habeck, recently suggested that the situation in Ukraine should be part of the certification deliberations – something officials at the Ministry of Economic Affairs he now heads reject.

In addition, Scholz has a long history with the country’s biggest Nord Stream 2 supporter, Gerhard Schröder von Scholz’s own SPD – Germany’s chancellor before the Merkel era.

Today Schr̦der is chairman of the Russian state oil company Rosneft and Nord Stream AG and a personal friend of Putin Рbut is still interested in his former party friend.

From the VIP tribune in the Bundestag he watched as Scholz took his oath of office on December 8th. The 77-year-old later gave TV interviews in which he defended Nord Stream 2 and praised Scholz for his “patience and determinationâ€.

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