News Digest Item
25 May 2018

Nord Stream 2 - “economically and politically unnecessary” or prevailing benefits?

Deutsche Bank Research / DIW

The benefits of the planned Russian-German gas pipeline Nord Stream 2 outweigh the drawbacks, writes Josef Auer in a commentary for Deutsche Bank Research. It would increase supply security, as fewer countries are involved in transporting gas than before, and it could fill the gap from lower domestic gas production. He argues dependence on Russian gas will not increase since growing global supply, for example LNG from the US, will broaden Germany’s and Europe’s range of options. The combined capacities of the existing and the new Nord Stream would not be sufficient to compensate a “total loss of transit through the Ukraine”, and Russin President Vladimir Putin had said that Ukraine transit would continue if commercially viable.  
Claudia Kemfert, head of energy at the German Institute for Economic Research (DIW) writes in a commentary in DIW’s weekly publication that Germany’s choice to bet on construction of the contentious Nord Stream 2 pipeline and not building its own LNG terminal is an “expensive strategy and will push up consumer prices”. The pipeline – “economically and politically unnecessary” – reduces Europe’s market flexibility and increases the dependency on Russian supply, she writes. Europe’s natural gas demand will decrease in the quest to reach climate goals, although there is a role for the fossil fuel during a transition period, writes Kemfert.

Read the DIW commentary in German here and the Deutsche Bank commentary in German here.

For background, read the CLEW news digest piece Merkel says Ukraine must not be excluded from Nord Stream 2 pipeline and the factsheet Germany’s dependence on imported fossil fuels.

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