Nord Stream AG, the operator of Nord Stream (JV), filed a lawsuit for 400 million euros against insurers Lloyd’s Insurance Company S.A. and Arch Insurance (EU) DAC, who refused to cover damage from explosions that violated the integrity of the export gas pipeline.

Estimates of the costs that must be incurred to restore Nord Stream and the damaged Nord Stream 2 (SP2) line vary from several hundred million euros to more than 1.2 billion euros. But the main doubts that the gas main will work in the foreseeable future are not related to financial issues.

For three

The idea of the North European Gas Pipeline (NEGP), which later turned into the Nord Stream, was discussed back in the 1990s. Then she was sharply criticized by representatives of the Ukrainian gas industry, who proved at all available sites that such a gas pipeline would never be implemented because of its meaninglessness — after all, why it is needed if the gas transportation system (GTS) of Ukraine is working.

Through it not less than 95% of export supply of natural gas from Russia to Europe was at that time carried out. NEGP prospects on such background seemed very foggy.

It is interesting that Nord Stream really could not appear. The watershed fell on 2002. Then Moscow, Kiev and representatives of the European buyers of gas discussed creation of tripartite consortium which would operate Ukrainian «pipe» and provided investments in its development.

Leonid Kuchma holding at that time a post of the president of Ukraine approved the project. But it was given a hostile reception by representatives of opposition who made scandal with elements of well-rehearsed hysterics under shouts «national property is sold!» The project did not provide transfer of the property right to GTS of Ukraine, but only management. But the opposition successfully ignored such subtleties in the heat of political fights.

The trilateral consortium was never implemented. Much later, in 2014, the new (at that time) post-Maydan government of Ukraine tried to sell the right to manage its gas transportation system. But it was an uninteresting asset with no download guarantees. And those could be provided by a large supplier on the one hand and a large buyer on the other. The only major supplier was and remains Russia, with which relations soured at that time. There were no people willing to buy the right to manage the Ukrainian GTS.

And in 2002, the failure of the trilateral management project led to a series of major gas crises between Moscow and Kiev. And most importantly, both the Russian side and European buyers are convinced of the need to build a gas pipeline in the Baltic Sea. The project was renamed Nord Stream.

Russian-European stream

Usually Nord Stream is called the Russian project, but even from the formal point of view it is not so. The large energy companies from the European Union participated in the project as owners (Wintershall, E.On, Gasunie and Engie).
The reasons of their interest the new gas main were extremely simple. The Ukrainian GTS was outdated (even only a part of the required amounts was invested in planned repairs, there was no talk of development at all), its reliability was declining. And the gas disputes between Moscow and Kiev only aggravated the situation.

Besides, at the time of making decision on construction of Nord Stream the forecast about approach of «the Golden Age of gas» was conventional. It was supposed that from 2005 to 2030 consumption of natural gas in the European Union (with Great Britain in structure) will increase from 500 billion to 800 billion cubic meters. It made a question of reliability of deliveries especially important.

A new pipe was needed. And the profit from its operation would go to the supplier and large buyers, and not to an outsider transit.

The first string of Nord Stream was started in 2011. To Kiev this transparent hint was enough to reject the imaginations occurring up to this point about impossibility of implementation of such project and lack of alternative of the Ukrainian route of supply of gas. The then president of the country Victor Yanukovych even initiated special audit which showed the necessary level of costs of modernization of Ukrainian «pipe» that it kept competitiveness. The result was an amount that would be enough to build another Nord Stream.

And they started talking about another Nord Stream immediately after the second line of the export gas main was launched in 2012. But there were no clear plans at that time. Even the option of building Nord Stream 2 was discussed to the UK.

Then the relations between Europe and Russia became complicated. And a paradoxical image it pushed to construction Nord Stream — 2. That overcame a set of obstacles in a way from the project to the pipes laid on the bottom of the Baltic Sea from our country to the coast of Germany. But being completely ready, SP2 did not get permission to operation from the European Union and by the time of notorious act of terrorism did not provide gas supply.

Rolls-Royce for the Russian gas

Nord Streams are twin brothers in terms of technical parameters. Both gas mains were built in a two-line design (i.e., each consisted of two parallel laid gas pipelines of 27.5 billion cubic meters. m), the length of each is more than 1200 km.

In 2021 the record of deliveries through the first Nord Stream was set. At the rated power of 55 billion cubic meters a year 59.2 billion cubic meters were pumped through it. That is if necessary both «Streams» could provide delivery of nearly 120 billion cubic meters, having made Germany the largest gas hub in Europe.

But by the time of the explosion, not only the Nord Stream — 2, but also the first Nord Stream was not in operation. The problem arose after an aggravation of sanctions opposition in 2022. It was connected with impossibility to serve fully gas-distributing units (GDU) of compressor station Portovaya in the conditions of sanctions.

The matter is that decisions on purchase of GDU for Nord Stream were made in 2008 when our country was just about to switch to the production of high-power units (32 MW). That is we at that time had no products. It was necessary to use company services of Rolls-Royce, the made necessary gas turbines (GDU heart) at the Canadian plant.

In 2014 gas-turbine business of Rolls-Royce was bought out by Siemens. Russia by that moment could make GDU-32 independently, but it did not cancel need to serve earlier bought import units.

In 2022 Siemens had a problem with planned and unplanned repairs of turbines at the compressor station Portovaya providing pumping of gas on Nord Stream. To simplify the situation, they had to be periodically (or as needed) exported to Canada for maintenance. But it became impossible to return because of the restrictions on access to equipment and technologies introduced by Canada against Russia.

The leadership of Germany pretended that tries to solve a problem. And the Siemens Company behaved so as if the events do not concern it.

As a result, as the time of scheduled repairs and identified malfunctions was reached, the gas pumping units began to be turned off, since according to existing standards it was impossible to operate them in such a state.

At the end of August, 2022 Nord Stream was stopped on prevention during which revealed malfunction of the last GDU operated at that time. Pumping of natural gas on the gas pipeline was not resumed.

And at the end of September somebody conducted a terrorist attack. There were explosions on Nord Streams near the island of Bornholm. Both strings of Nord Stream and one of strings of Nord Stream-2 were put out of action.

Nord Stream is superfluous

There was an act of terrorism largest in the history on power infrastructure of the international value. But the followed investigation went so actively as if its main task was not to reveal performers and through them to contact the customer and to think up the reason to curtail investigation.

A number of the countries by the present moment perfectly coped with this task — all trials safely curtailed.

Brussels thus does not show any concern. Nord Stream at the moment is objectively not necessary to the European market.

During the world energy crisis consumption of gas in the countries of Europe fell off approximately on 100 billion cubic meters. Earlier used Russian gas transmission capacities which for various reasons cannot be operated at the moment, include Nord Stream, the Yamal — Europe gas pipeline and one of the GTS directions of Ukraine.

In other words, the point is not only that Russian supplies have been replaced by liquefied natural gas from other countries, but also that consumption has collapsed, so even if all capacities are fully operational, there is no one to supply gas in the same volumes.

Even the corridors of supply of the Russian pipeline gas operating at the moment are used not for 100%. They could provide pumping about 20 more billion cubic meters a year.

It seems that capacities of Nord Stream in these circumstances are superfluous. But we see the increased volumes of purchases of the Russian gas for the first 10 weeks 2024 in comparison with the similar period of 2023. Deliveries to the countries of EC through «The Turkish stream» and Ukraine for this period increased by 2 billion cubic meters — approximately to 6 billion cubic meters.

Perhaps we are facing the beginning of a partial recovery in demand after a period of abnormally high prices. But without Russian gas transportation capacities full-fledged restoration is currently impossible.

Any capitulation in front of Russia

In the list given above there is no Nord Stream — 2. Formally it can be used partially for gas supply. Moreover, one preserved thread of this gas pipeline would allow pumping as much gas to the EU countries as was supplied to the EU from Russia via the Turkish Stream and Ukraine in 2023. But there is no operating permit. And they are in no hurry to give it out.

Behind it there is no rational reason — only personal political reasons. That is these motives it is impossible to call political in full sense, after all the politician as the classic spoke, is the concentrated economy. In the current conditions limitation of the gas transmission infrastructure operating till 2022 and lack of permission for Nord Stream — 2 is a limiting factor for the European economy.

In the world still there is no surplus of the offer of gas (the speech, certainly, about LNG). If you restore demand too quickly, you can provoke a new round of quotations by entering into a price confrontation with other buyers in both the European and Asian markets. It would be another matter if the Nord Streams and other gas mains in the Russian-European direction were working. As much gas as customers would need would be supplied from our country.

Do they understand this in Brussels, Berlin, Paris? Sure. But the European leadership now depends on maintaining bellicose rhetoric. It spoke too often and too loudly about the confrontation with Russia, about the war being waged against their «blooming garden» and about the inadmissibility of surrender, which means any compromises and attempts to negotiate taking into account Russian interests. The confrontation with Russia could be attributed to the consequences of the numerous mistakes made during the reform of the European energy sector over the past 15 years. Also, all the problems of the USU economy could be attributed to the treachery of our country.

Can the European leaders discuss with Moscow a possibility of cancellation of mutual sanctions, which do not allow operating the Polish site of the Yamal — Europe gas pipeline? May they demand at Kiev to provide pumping of the Russian gas in the direction uninvolved today which goes through gas-measuring station Sokhranovka? May they give out permission (at least temporary) on operation of one of Nord Stream — 2 threads? Answer to all these questions is yes.

Will they do it? No.

Hope for overproduction crisis

Even attempt from Berlin will cause to apply to Brussels for permission for Nord Stream — 2 unacceptable political consequences for the operating leadership of Germany. As well members of the European Commission cannot temper justice with mercy concerning Nord Stream -2. Today it was already somehow forgotten, but Nord Stream — 2 from the date of the announcement caused sharp criticism from the central European authorities. In 2022 the European Commission had a fine opportunity to declare in the hands that it was right all the time, without trusting Russia and criticizing its gas transmission projects.

To issue a permit for Nord Stream — 2 today is not just to sign your own wrongdoing, but to capitulate to Russia. Although Russia itself will by no means take this step in this way.
It would be possible to suggest to repair Northern streams at first and then to pass to negotiations with the European authorities. But under the current conditions it is necessary to have warranties of operation of these gas mains to start repair. Are there any attempts from Berlin or Brussels to give such guarantees? No.

German Chancellor Olaf Scholz is actively promoting construction of LNG terminals. Judging by messages in the German mass media, his activity is connected with a personal material interest. If these messages are true, the Streams are direct competitors to terminals. And while the first Nord Stream was operating, interest in liquefied natural gas from German consumers was minimal.

In addition, Berlin is currently trying to implement the promised program for the construction of new gas-fired power plants at the end of 2021 but not ordinary ones — ready to switch to hydrogen. Return of the Northern Streams a priori causes resistance to hydrogen initiatives on the part of consumers. Why do we need hydrogen if we have natural gas? Let’s wait a bit.

That is limitation of gas transmission capacities from Russia is considered also as insurance from attempts of the European companies to sabotage «ecological» initiatives of the European Union.

And the last thing: the management of EC demands to refuse the Russian gas by 2027. In 2027 there can be a LNG overproduction crisis on a global scale. If it occurs, the moment chosen by Brussels for refusal of deliveries from our country can be considered successful. But so far we can only see how limited access to gas transportation facilities from Russia is holding back the recovery of the European economy after the global energy crisis.

In the current conditions the deconservation of these gas transmission capacities is possible if not only our country, but also the European authorities are ready to negotiate.

If an overproduction crisis does occur in 2027, it will quickly end, as previous crises of this kind have ended. And it is possible that at this moment the EU will have neither LNG in the required volumes, nor green hydrogen and power plants adapted to it. And it will be too late to agree on the restoration of the Northern Streams.