Click play to hear this article from Amazon PollyBERLIN - Just weeks before a critical German election, the country's chancellor ignores protests from Eastern Europe and reaches an historic agreement for a gas pipeline to the Baltic. This will increase Russia's influence over Europes energy security.This sounds a lot like mid-July 2021. That's because history repeats itself in the worlds of German energy politics.This scene was played out in September 2005. German Chancellor Gerhard Schrder was just about to lose power to Angela Merkel, an East German-born physicist. He hosted a ceremony in Berlin with Vladimir Putin to sign a Nord Stream pipeline agreement.Putin was not in Berlin last week for the celebration of the agreement between Merkel, U.S. President Joe Biden that will allow the second phase to Nord Stream 2 to proceed. The Russian is the biggest beneficiary of the agreement, so he might as well have been.Merkel called Putin however.In a statement, the Kremlin stated that the Russian president had praised Germany's loyalty in the execution of the purely commercial project to increase Germany's energy security.Despite the fact that the pipeline is almost complete and still faces opposition from the U.S. Congress, and much of the EU itself, the political agreement reached between Merkel and Biden will likely give the project enough momentum for it to be completed.Nord Stream 2, which is similar to the original Nord Stream pipeline that was completed in 2011, will deliver gas over 1,200 km under the Baltic. It will start just outside St. Petersburg, and end on Germany's northern coast.The twin pipelines have a combined annual capacity for about 110 billion cubic metres of gas. Russia can use them to bypass overland routes through Ukraine. This will lower the threshold for Moscow's intervention in the region. The fact that both Germany and Europe will be more dependent on Russian gas is not in dispute, at least not outside of Germany.Berlin has long rejected these concerns, arguing that it doesn't matter if a Russian gas molecule arrives into Germany through Ukraine or the Baltic. It doesn't take a Ph.D. to understand that the shortest distance between two points can be a straight line.The Nord Stream pipelines are different from the Ukraine's existing infrastructure. It has a theoretical capacity for 160 billion cubic meters. This is a little like the difference between copper wire and fiber-optic cables. The Ukrainian pipeline has been in use for five decades and is now so leaking that it would cost 6 billion to fix.The Nord Stream pipelines are, by comparison, state-of-the-art. They have a combined cost of at least 17.5 million. Gazprom, Russia's state-owned gas company, can send gas to Germany at lower costs and with less hassle by flipping a switch. Gazprom has agreed that it will pay Ukraine transit fees. These fees have been around $2 billion per year in recent years and will continue through 2024.German industry, which is in dire need of reliable, cheap energy sources, loves it.Germany will shut down its last nuclear reactor next year and plans to eliminate coal-fired electricity production in 2038. Although renewable energy is now a greater percentage of Germany's electricity mix, it still accounts for less than half of its total. This means that Germany has a large electricity gap to fill. To do this, it needs natural gas which is less polluting than coal. Gas is also used for heating 45 percent of German homes.The Netherlands accounts for around 30% of Germany's gas supply. Russia and Norway each account about one-third. The Netherlands plans to stop extracting by 2030, making Nord Stream more important.Critics of this project argue that Germany has many other options to obtain natural gas. These include the existing eastern route through Ukraine, Belarus, and Poland, or via Turkey. Or, from the west, liquid natural gas sent on U.S. ships.However, in Germany's eyes, none of these options can offer the reliability and simplicity of Nord Stream.Germany is willing to sell Ukraine and cause tensions with key allies, from Warsaw to Washington, in order to get cheap gas. Yes, in a word.It is the more intriguing question, however, why?Many have written extensively about Russia's mystical influence on many German elites, the so called Russiaversteher or Russia sympathizers. But Schrder, Merkel and other prosaic factors may also be at play.After leaving the chancellory in 2005 Schrder was appointed chairman of Nord Stream. This appointment has over the years made Schrder a wealthy man. Schrder, in the eyes of his critics sacrificed his reputation to accept Putin's service. His engagement, however, has allowed him to retire in a very comfortable manner.Although Ukraine and Poland protested the deal in 2005, their resistance was not nearly as strong today. Many in the West still considered Putin a possible partner in 2005. He was yet to accuse America of trying to intimidate Russia through NATO, and it would be many years before he would wage war on Georgia and annexe Crimea.Nord Stream was not controversial in Germany. The sight of Schrders moving into Putin's service only a few weeks after his departure as chancellor raised eyebrows. But Russia was not considered a threat. During the Cold War, Germany purchased Russian gas for decades (often to U.S. objections). The Cold War was over.Merkel's motivation to support Nord Stream is complex and requires a look back at 2011.In the wake of Japan's Fukushima nuclear catastrophe, Merkel made a decision to reverse her earlier decision to prolong the lives of Germany's nuclear reactors. Germany was in its so-called Energiewende, a transition to renewable energy. Many experts believed that Germany needed nuclear power for a longer time while increasing wind and solar production.Germans were so shocked at Fukushima that Merkel agreed to quickly revert to a plan first passed under Schrder, the Greens, in 2000, to turn off the country's last reactor by 2022. Germany's electricity generation was about one-fifth nuclear power at the time.The extension was cancelled, which has created the exact scenario Merkel and German industry predicted a decade ago: an inability to find affordable energy options. Germany's electricity prices for industry are at their highest level in a decade, with the nuclear phase-out nearing completion and coal becoming less attractive due to an increase in carbon pricing.In order to be able to compete internationally, electricity must become less expensive in Germany, Olaf Scholz (the Social Democrats candidate for the chancellor) stated in a speech last month.This is where Nord Stream comes into play.Merkel and Putin are not in love. They have clashed over the years over Russian leaders' aggressions on neighboring territories and other issues. Merkel is certain that Russian gas is essential to Germany's energy needs.The only plausible explanation for Berlin's willingness to give up its relationship with Washington over this project is that Berlin is important to her strategic vision.Putin's benefits are yours.A journalist asked Merkel last week if she regretted her decision not to continue with nuclear power. Merkel said she didn't regret the decision, but stated that Germany would have to continue to depend on gas in the future.She said that we cannot, as some demand, get rid of nuclear power and coal then pull out as quickly as possible from natural gas. It's not possible.Putin could not have said it better.This article is part POLITICO's premium policy service, Pro Energy and Climate. Our specialized journalists will keep you up to date on the latest topics in Energy and Climate policy. For a free trial, email [email protected]
