Putin’s latest Ukraine stunt may blow up in his face

Germany postures itself as the conscience of Europe. It takes in floods of refugees and scolds those who do not. It claims to guard European unity against the nation-state and ridicules the United States for electing a real estate developer as president.

But Germany, the self-declared paragon of European values, is also Germany Inc., the land of the “Putin Versteher” (Understander). Germany Inc. is poised to give the Kremlin its greatest “pipeline politics” victory.

The $10 billion Nord Stream 2 (NS2) pipeline has the necessary German approvals. Once in operation, NS2 will make Germany Europe’s hub of cheap Russian gas.

{mosads}Germany’s Putin Versteher echoed Putin’s claim that NS2 is “undoubtedly absolutely free from politics … a purely commercial project.” This claim is not true. NS2 is designed to split Europe in two, while imposing considerable economic losses on Ukraine, whose failure is a top Putin priority.

Germany has been a lonely supporter of NS2, a pipeline being built by Russia’s gas monopoly, Gazprom, and German/Austrian utility giants under the Baltic Sea to deliver Russian natural gas directly to Germany. It will redirect gas from Eastern and Central Europe and eventually eliminate gas deliveries through Ukraine.

The NS2 agreement, signed without EU consultation, is inconsistent with EU energy policy, such as diversification, ensuring independent sources of supply for smaller countries and promoting a common EU policy toward Russia and Ukraine.

Scheduled to go into operation in 2019 and supported by Angela Merkel’s ruling coalition, NS2 seemed a done deal before Putin’s rogue actions in the Kerch Straits on Nov. 25. Since then, German voices have been raised, demanding that the NS2 project be re-examined. 

The Friday election of Annegret Kramp-Karrenbauer (AKK) to succeed Merkel as head of the Christian Democrats (CDU) has provided an impetus to reconsider the NS2 project, which the influential German newspaper, Die Zeit, calls a “foreign policy disaster for Germany.” 

In pre-election interviews, AKK declared that she wishes “to reconsider the political importance of NS2.” Per AKK: “As long as the Russian leadership has the impression that it can do anything without being confronted with a clear stop sign, it will keep on trying.”

As one countermeasure, AKK floated the idea of closing European ports to Russian ships. She noted that even if NS2 becomes operational, Europe will still have leverage by deciding how much gas to take from Russia versus alternate sources, such as American liquified natural gas. 

To understand whether NS2 is indeed in trouble, one must consider German coalition politics. Throughout its postwar history, Germany has been ruled by coalition governments, with the CDU or the Social Democratic Party of Germany (SPD) as the senior member and the smaller Green Party or Free Democrats as the junior partner.

Due to the rise of the anti-immigration Alternative for Germany Party (AfD), neither the CDU nor SPD have enough votes to form a governing coalition with a smaller party. Instead, the CDU and SPD have combined in a wobbly “grand coalition,” which could collapse at any time, requiring early elections.

As long as the grand coalition exists, NS2 is relatively safe. SPD politicians are strong supporters of NS2; their last chancellor (Gerhard Schroeder) chairs the NS2 investor committee and serves on the board of Gazprom. The German government’s current position, therefore, is that NS2 should be completed as planned.

Besides, Germany boasts that it protected Ukraine by wresting an agreement from Russia that some of its gas will continue to flow through Ukraine. 

The two most recent regional elections have been disastrous for both the SPD and CDU, especially the latter’s losses in Bavaria. The surprise ascendant party is the Greens, and national polls place the Greens as the second strongest party, just a few points behind the CDU.

In the face if its own electoral losses, forces within the SPD want to leave the grand coalition so as not to be blamed for its failures. 

The CDU under AKK must therefore plan to gain a stable coalition when and if the current government fails. A CDU proposal to sink NS2 would cause the coalition to collapse with new elections and AKK likely as the chancellor candidate.

Throughout the debate, the Greens have consistently opposed NS2. They would not enter a coalition government with a CDU that favors NS2.

If the Greens continue to do well in regional elections and in national polling, the CDU would likely base its election strategy on forming a coalition with the anti-NS2 Greens. The scrapping of NS2 would be a key part of any CDU-Green coalition agreement. 

Vladimir Putin has the reputation of a skilled strategist, a politician who plays chess while his opponents play checkers. If Putin blows what should have been a sure thing — the completion of NS2 — he will have made a huge blunder visible to all.

As AKK notes, Putin himself, not Germany, reopened the NS2 debate with his blocking the Sea of Azov, seizing Ukrainian naval vessels and charging Ukrainian navy men with criminal acts.

{mossecondads}With such rogue behavior, it is increasingly difficult for Germany’s Putin Versteher to argue that NS2 is simply a normal commercial deal. It should be increasingly clear that Gazprom is not a commercial business but an arm of Russian geopolitical policy.

Another twist: Russia purportedly supported the anti-immigrant AfD party, whose electoral successes crashed Germany’s stable political equilibrium and caused electoral disasters for the SPD, its most reliable ally in the NS2 saga. Was this another mistake by master strategist Putin? 

Yet another twist for Washington to consider: With increasing doubts about NS2, U.S. sanctions of the five European energy giants that are partnering with Russia on NS2 could frighten them into abandoning ship.

Good relations with the U.S. and its mighty financial markets are more important to these companies than gains from the NS2 deal. Moreover, U.S. sanctions would be popular throughout Europe, especially in Eastern and Central Europe, the Baltic States and Scandinavia.

Nord Stream 2 could be the victim of Putin’s too clever by half. Has chessmaster Putin lost his touch?

Paul Gregory is a research fellow at Stanford University’s Hoover Institution. He holds an endowed professorship in the Department of Economics at the University of Houston and is a research professor at the German Institute for Economic Research in Berlin. He has written extensively on Russia and the former Soviet Union, including: “The Political Economy of Stalinism,” (Cambridge, 2004), which won the Hewett Prize.