German Chancellor Angela Merkel, due to visit Moscow on May 2, is going to pursue pragmatic aims before anything else and to take care of Germany’s economic interests first and foremost, sources in the foreign policy segment of the Russian political establishment said. “Too many economic issues of critical importance to Berlin have piled up and their solution brooks no delay,” diplomats say.
Formally the agenda of Merkel’s visit is pegged to the forthcoming G20 summit due in Hamburg in July. Within the two months left Merkel, the G20 president, is to meet with the leaders of all countries in the group. The German Foreign Ministry said in a news release Merkel plans to discuss with Moscow the most topical issues on the summit’s agenda, as well as bilateral relations. This is only the tip of the iceberg, though.
The context of the visit is quite telling. Last time Merkel was in Moscow two years ago for the 70th anniversary of the end of World War II in Europe, which Russia celebrates on May 9 as the day of victory over Nazi Germany in the Great Patriotic War. Her trip to Moscow followed the next day after the main festivities and the customary parade in Red Square – on May 10. Relations between the two countries were no easy then and they remain so today. Russian President Vladimir Putin and Merkel have since met several times at several international venues. Each time Merkel confined herself to highfalutin rhetoric over Ukraine and the Minsk Accords. In fact, she preferred to neglect Germany’s internal interests, economic above all, for the sake of the EU’s economic feasibility and meeting demands from the overseas ally.
The spring of 2017 gave Merkel an unpleasant surprise. Germany’s main ally, the United States, has a new leader, who looks determined to find new foreign policy bearings. With respect to Germany as well. When she paid a visit to Trump, Merkel could see well for herself the White House would care little about her interests. Still worse, it might go as far as demanding Germany pay its debts. Trump has already tabled a $380-billion cheque for maintaining NATO but refrained from demanding it should be cashed at once, provided Berlin agreed to toe the line. It is more than obvious that in economic affairs as well the United States will not be too ceremonious either with the EU or its main engine Germany.
“Beacon of stability”
For Merkel, who is sometimes referred to as a “beacon of stability,” such geopolitical turmoil with the 2017 autumn elections looming on the horizon may turn critical. Brexit and Marine Le Pen’s indisputable popularity in France add to the dramatism of the situation. Her arch foes – the Eurosceptics – have planted traps all around. On the domestic front the state of affairs looks hardly brighter. True, the opposition is not too strong as Germany’s economy remains on the rise. But stable supplies of fuel and energy, in the first place, gas, will be crucial to further growth. Merkel just cannot afford to brush aside German businesses’ expectations.
Against this backdrop a breakthrough agreement has been concluded on laying a second line of the Nord Stream gas carrier. Gazprom’s CEO Aleksei Miller early this week told the media that a pattern of funding the Nord Stream had been finalized. Gazprom will finance half of the of the 9.5-billion-euro project and a group of European investors – France’s Engie, Austria’s OMV, Dutch-British Royal Dutch Shell and Germany’s Uniper and Wintershall – the other half. Each foreign investor will contribute about 950 million euros. Gazprom as the largest investor will remain the sole shareholder of the Nord Stream-2 project company.
The impressive presence of Western energy industry heavyweights in the project makes one hopeful the geopolitical hurdles in the way of laying the pipeline, should any emerge, will be easily overcome. The strongest opponents have been Ukraine, Poland and, since just recently, Denmark. Kiev and Warsaw are gas transiters and monopolists. Both are keenly interested in retaining the fees Russia pays them for delivering gas to customers in Europe. At a certain point Denmark made plans for laying its own pipeline only to realize that Nord Stream-2 gas for it will be less costly, so its harsh rhetoric eased somewhat lately.
Besides, there are Germany, Finland and Sweden, whose offshore areas of the Baltic Sea the pipeline will stretch across, and also Lithuania, Poland and Estonia, involved in Nord Stream-2 consultations. The coordination process is hopefully to be over toward the end of the summer. To a large extent it is sheer formality, though, and the chances for a positive outcome look good enough. After five European participants in the deal refused to become Nord Stream-2 stakeholders, the EU’s third energy package requiring the pipeline project’s coordination with the national regulators may be ignored.
In a situation like this Merkel will have to walk a tight rope to keep the economic and political interests in balance. She will fly in to Moscow fully aware German businesses and voters will not forgive her for ignoring their economic interests once again. In other words, if in her present capacity of chief of the European bureaucracy she goes ahead with blocking the Nord Stream-2 project. In the meantime, such a risk does exist. Both Warsaw and Kiev are demanding Berlin should drop plans for the gas pipeline deal with Moscow. Both are aware another gas carrier under the Baltic Sea and the Turkish Stream will make the services of Russian gas transiters redundant starting from 2019. Naturally enough they pester the European Commission with protests.
Getting ready for a compromise
According to sources in Russian diplomatic circles the German delegation is getting ready for a compromise and may try to negotiate which of the transiter countries may expect the pressure in their pipelines will remain unchanged. As before, Berlin’s most valuable ally is Poland, the sources believe. After all, it is an EU and NATO member-state and a neighbor who heard many pledges back in the 1990s. In relations with Ukraine Germany made no such promises that will have to be kept. Moreover, unofficially Germany does agree that Kiev is a headache for a number of reasons – its energy blackmail, its reluctance to comply with the Minsk Accords, and its thriving corruption and incapable authorities. Miller said on April 25 that Gazprom might still be prepared to pump 15 billion cubic meters of gas through Ukraine after Nord Stream-2 is commissioned. This amount would be just enough to maintain pressure in the pipeline, but the transit money Kiev would get in exchange will fall short of what is required to keep the gas carrier operational. In the meantime, Ukraine in 2019 will surely need it to import gas from Europe.
Whatever the case, central to Merkel’s talks in Moscow will be the question if the whole insignificant overland gas traffic will go to the EU through Belarus or Poland, or if Ukraine can expect to have a share. Berlin is pragmatic enough, and it usually tends to opt for the lesser of two evils. Particularly so, if its own economic interests require this and if political risks are bound to linger, with the electorate feeling pretty bored with attempts to cater to near neighbors’ demands and whims again and again.