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US looks to Germany to stop Baltic undersea Russian gas pipeline

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Reuters are reporting that, according to US State Department officials, a Russian pipeline project that would boost Moscow’s ability to manipulate European energy markets can be slowed by Denmark but ultimately Germany would be needed to stop it.

Russian natural gas company Gazprom and its European partners are seeking to build Nord Stream 2, a project to move gas to Germany under the Baltic Sea, bypassing existing land routes through Ukraine and Poland.

US diplomats are talking to their German counterparts about the project, but it is unclear whether Germany’s government, still forming after elections in September, can be convinced to stop it. Germany and neighbouring Austria have companies financing the pipeline, which would carry 55 billion m3 of gas per year.

Denmark, which has been caught in a geopolitical conflict over the pipeline, passed a law in late November allowing it to ban Nord Stream 2 from going through its waters on foreign policy grounds.

The Trump administration, like the Obama administration before it, is concerned that Nord Stream 2, which would concentrate 75% of Russian gas shipments to Europe, could help Moscow use energy as a weapon. Russia cut gas shipments in winter months in 2006, 2009 and 2014 during pricing disputes with neighbouring countries including Ukraine.

Nord Stream 2 could slash pipeline transit payments Russia makes to Ukraine by about US$2 billion a year.

Secretary of State Rex Tillerson encouraged Denmark to consider domestic laws to stop the pipeline. But the Nord Stream consortium is looking at another route through international waters just north of Denmark that would mean the project could proceed despite any ban.

Washington hopes to diversify Europe’s gas supply with shipments of US LNG. Currently 90% of US LNG goes to markets in Asia. But the exports are expected to soar in coming years as US facilities open, which could mean more will be available for Europe.

When European countries install infrastructure to import US LNG, it can be transformative. After Lithuania opened an LNG terminal, it negotiated a 20% cut in the price it pays for Russian gas.

Washington also supports other gas pipeline projects including the Southern Gas Corridor to bring gas to southern and central Europe from Azerbaijan and the Caspian Sea.

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