Gas games: a closer look at Nord Stream 2
Covid in the house, a tsar alone, banned books on Holocaust Remembrance Day, a visit to the House of Austrian History, voices from Kyiv.
This popped up on my phone this morning one of those reminders “on this day X years ago” and it just felt like a decade ago but it’s pretty so it will do for a depressing Friday. I’m not a skier and I don’t enjoy the mountains but the rest of my family does, so in the past I would indulge in long walks and try not to kill myself on cross-country skis. That proved harder said than done. In recent years, I would travel alone while they went skiing; now my Russian visa has expired and I find myself missing things that no longer exist.
Covid in the house
I woke up at 6:30am this morning ready to drive two of three kids into school (the third still on school-ordered Distance Learning), and opened my email to find a positive PCR test as of 4:00am from my youngest. She has zero symptoms so I was really quite surprised. That set off half an hour of calls and emails to notify anyone who could be remotely affected by the news. As for the rest of us, I tested the kids, dropped the tests at Billa. By 7:15am the school director was on the phone, making sure my other kids don’t show up at school today. I have a weird feeling about the whole thing because if not for Vienna’s test 3x a week system, we would never have known. The kid was literally bouncing off the walls last night.
She could have gotten it in school, or out shopping, or on the bus, or frankly, anywhere at this point. My prediction that covid would be in our house by the end of January has proven to be extremely accurate. Not that I’m happy about it, but at least I know I’m not crazy. Hoping it will be mild for my youngest and whichever the rest of us catch it now too. Actually feeling remarkably calm, all things considered.
Gas games: a closer look at Nord Stream 2
I am having a hard time reading my Twitter feed these days, with so much war talk from so-called experts and a plethora of journalists landing in Kyiv who probably last visited the country in 2014. There has also been a lot of talk about Nord Stream 2, particularly out of Washington. So I decided to take a closer look at the project, who is financing it, who is involved, who has something to lose should it be cancelled.
Let me start with my conclusion: I do not think Nord Stream 2 will be used as a lever against Putin. I believe gas will start to flow this year. The subsidiary company was registered in Zug on January 26. The regulators can still stall things in the short-term, but in the long-term, Europe needs the gas and too many billions of Euros have been invested by European companies and financed by European banks for this project to be shelved at this late date.
I first started looking into Nord Stream 2 when there was yet another Austrian political scandal involving an ÖVP politician and text messages. This time it was a former finance minister, Hans Jörg Schelling. I didn’t know much about him, so I did a quick google, and learned in 2018 he became an official advisor (lobbyist for) to Gazprom on Nord Stream 2.
Then I took a closer look at Nord Stream 2 itself. Its CEO is none other than Putin’s former Stasi buddy, Matthias Warnig. Warnig’s name has been synonymous with German-Russian murky business deals since the early 1990s. For more about him in detail, do read Catherine Belton’s Putin’s People. If you read German, check out this interview Matthias Warnig gave Die Presse in 2018 “Mr Putin doesn’t have a mobile”.
CFO is Paul Corcoran, a native English speaker from BASF/Wintershall, COO is an Italian, Marco Casirati, who has been involved since the very beginning of the first Nord Stream, and CTO is Russian, Pavel Persidskii. Immediately you realise there will be a strong lobby at least within Germany (but not limited to) to keep this project going.
So who is financing Nord Stream 2? The primary shareholder is of course Gazprom. The project is being financed half by Gazprom, and half by the European partner companies: Engie (France/Belgium), OMV (Austria), Shell (Netherlands), Uniper (Germany) and Wintershall Dea (Germany). The five European partner companies provided Nord Stream 2 with a €9.5 billion loan to fund 50% (10% each) of the project. The rest was funded by Gazprom. Enormous money, by any measure. Money both those companies and their governments will fight to protect.
A deep dive on the connections between OMV and Gazprom and Nord Stream 2 here in German, from 2018. OMV also has major upstream projects in Russia it has invested in recent years.
Wintershall Dea has a German CEO/Chairman, Mario Mehran, who also happens to be the spokesperson of the Russia working group at the German Eastern Business Association (Ostausschuss – Osteuropaverein der Deutschen Wirtschaft, OAOEV). On January 17, the association released a statement on the Russia-Ukraine tensions urging dialogue and stressing that Europe needs both gas transport via Ukraine and Nord Stream 2.
Wintershall Dea also has an interesting supervisory board, including two board members from Letter One, a holding and investment company founded by ex-Alfa Group shareholders. In other words, influential billionaires from Russia. Check out the L1 all-male board of 11, quite interesting biographies! They have global assets, but of course, assets in Russia, too.
It’s hard to underestimate how intwined German and Russian business interests are after nearly three decades of cooperation. Which is, of course, under normal circumstances, a good thing. But now there is a situation in which Germany and much of central Europe is highly dependent (c. 50%) on natural gas from Russia, and gas cannot realistically be used as a lever against Putin, no matter how much Biden’s administration would like to do so. For excellent detail on the actual flows of Russian gas into Europe, and volumes, see this detailed piece by Bruegel.
Ultimately, this isn’t Biden or Nuland’s call. They can tell the press what they like, and even Germany’s foreign minister can say, as she did yesterday, that Nord Stream 2 is on the table. I don’t believe it is. Biden himself waived sanctions against Nord Stream 2 back in May, despite the fact that Putin had been building up troops near Ukraine’s border since April. Pipeline construction was completed in June 2021. On November 16, the regulator suspended Nord Stream 2, and gas prices in Europe jumped 17%.
In short, Nord Stream 2 has had a rocky road since its inception, but the stakes are too high to switch it off.
I firmly believe Europe’s bankers and business leaders would sacrifice the sovereignty of a few Eastern European nations to keep gas flowing in Europe. I believe they have priced in these risks and would make a deal with Russia. I am thinking of it in the context of a reverse Molotov-Ribbentrop pact, with the same implied historical risks.
Last night the FT reported Europe is reportedly talking about also stopping signing new upstream gas projects with Russia. This would be a huge step, and again, I remain highly skeptical. There are just too many billions at stake.
A tsar alone
In order to understand Russia in all of this, read this one paragraph below from Gideon Rachman’s interview with Dmitri Trenin. At the moment, Putin really is operating like a tsar.
Yesterday marked the 78th anniversary of the lifting of the 872-day Siege of Leningrad. This incredible photo of Putin was taken by TASS photographer Alexander Demianchuk. Survivors of the siege and their relatives were left to wait in the cold for hours as Putin walked alone to the memorial cemetery, guarded by snipers. I think this will be one for the history books.
Yesterday was Holocaust Remembrance Day. News out of America that parents are now banning books at school board meetings. The latest victim? Maus. Do read this and this on what this means and what kind of people want to ban stories of the Holocaust.
Yesterday, I had a few hours free in downtown Vienna. I went for the first time to the House of Austrian History. Highly recommended! There is a permanent exhibit on the history of Austria since 1918 (excellent!) and also a special exhibit now called “Disposing of Hitler” on how to treat Nazi-era artefacts. It is placed, I’m sure with intention, exactly opposite the infamous Hitler balcony. I posted a thread with photos here:
I was also very moved by these photos yesterday of Austria’s chancellor embracing Israel’s foreign minister during a remembrance ceremony at Mauthausen.
Finally, if you still have time for more reading this weekend, I would recommend this Letter from Kyiv, which includes this gem of a quote: As the Russian opposition figure Alexei Navalny put it recently, Putin wants “to sit down [with Biden] in a smoke-filled room and decide the fate of Europe like we’re back in 1944”.
I would also read this thread from Kyiv and Kharkov, ordinary people talking about what they will do should Russia invade:
I wish you all a smooth Friday, thanks so much for your feedback and for reading.
Please check out Dr. Prasad’s Substack. https://vinayprasadmdmph.substack.com/p/overdiagnosis-and-overtesting
Your covid story reminds us of the ridiculousness of it all. Testing asymptomatic people serves no purpose at all. A comedy of errors.