Russia's Gas Monopoly Comes Apart
Nord Stream 2 Goes American | Power of Siberia Stalls | Western Sanctions Bite
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“Barbershop Whispers….Russia (BWR)” begins with “My Takeaways” on the main topic, followed by a discussion on the main topic. The last two BWR sections are “Follow-ups” on previous publications and “Quick Bites” on emerging events.
In last week’s BWR, I discussed the Kremlin’s political and economic benefits of North Korean troops in Putin’s war on Ukraine.
In this week’s BWR, I discuss Russia’s eroding control over its natural gas export markets. Nord Stream 2 is on the auction block, Power of Siberia -2 is stalled, and Rusisan LNG struggles with offtake agreements and distribution channels.
Takeaways
RUSSIAN GAS EXPORT MARKETS—Once firmly a monopoly under Kremlin control, Russia’s natural gas export markets increasingly fall under direct and/or indirect control by US, European, and Chinese actors.
REALPOLITIK—Monopolies and war always end; the question is timing and who benefits. The Kremlin is paying dearly in blood and treasure for Putin’s war, and Ukraine is fighting for its very existence. Will Nord Stream 2 ownership become a bargaining chip in future Ukraine/Russia/Western powers ceasefire negotiations? What Western sanctions, if any, could also be on the negotiating table?
Russia’s Gas Monopoly Comes Apart
Nord Stream 2 Goes American | Power of Siberia 2 Stalls | Western Sanctions Bite
Nord Stream 2 Auction
Nord Stream 2 AG (NS2), the 1,200KM natural gas pipeline that extends under the Baltic Sea from Russia to Germany, was completed in 2021 at a cost of $11B. It has an annual capacity of 55 billion cubic metres (BCM), equivalent to 700 LNG tankers, and was intended to deliver energy to 26M European households annually.
The pipeline never became operational, first because the German government delayed certification due to Putin’s second invasion of Ukraine. Then, in September 2022, the pipelines Nord Stream 1 (NS1) and NS2 were damaged by explosive sabotage, rendering NS1 completely disabled but surprisingly sparing one of two NS2 pipes.
Nord Stream 2 AG, owner and operator of NS2, is a wholly owned Swiss subsidiary of Gazprom RU. In January 2025, a Swiss bankruptcy court will auction it off. How many buyers will participate in the auction remains to be seen. Given Putin’s ongoing war on Ukraine and the government approvals—US, Swiss, and Russian—needed to acquire the pipeline, only the brave and those with a high-risk tolerance will participate. One declared participant is Stephen P. Lynch, an American entrepreneur with decades of successful deal-making experience in Eurasia.
