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Germany

Nord Stream 2: Merkel's Farewell Gift To Putin Is A Slap To Biden

Germany and the U.S. have agreed on a compromise to complete the gas pipeline — or rather, the Americans have submitted to Angela Merkel, who in turn had a farewell gift for Russia.

Pipes for the Nord Stream 2 pipeline in Mukran
Pipes for the Nord Stream 2 pipeline in Mukran
Robin Alexander

BERLIN — Angela Merkel's chancellorship comes to an end with a farewell present. Not for her, but from her: a gift for Vladimir Putin. The Russian President is the beneficiary of the compromise that Merkel has made with U.S President Joe Biden on Nord Stream 2 — the proposed Baltic Sea pipeline that will deliver Russian natural gas to Germany and the EU, bypassing countries like Poland and Ukraine.

American politicians across party lines have regularly criticized the pipeline as a devious Russian influence project that would entrench Europe's energy dependence, provide billions of dollars to the Kremlin, and make Ukraine more vulnerable to Russian aggression.

Chancellor Merkel and President Putin — Photo: Marquardt Christian/Action Press/ZUMA Press

Unlike other European politicians and her predecessor Gerhard Schröder, who has sat on the board of Russian energy companies after his term, Merkel is unlikely to benefit financially from her good contacts with the Kremlin — that doesn't suit her style or character. But this fact makes the Nord Stream 2 deal — which might well be Merkel's last notable mark on the international stage — all the more irritating.

Sure, Merkel has demonstrated her negotiating skills: taking advantage of the plight of the new U.S. President Joe Biden, who needs Germany for its "Alliance of Democracies' against China, the new authoritarian world power.

Ukraine got duped. Poland and the Baltic democracies got duped too.

Observers on both sides of the Atlantic have been wondering for months why Merkel had delayed dealing with Biden for so long. She probably wanted to build up bargaining power: China is more important than Russia to Biden, and Nord Stream 2 became a powerful bargaining chip as time went by.

Merkel did not even accept to include a so-called "kill switch" clause, which would have enabled Germany to shut off the pipeline if the Kremlin blackmailed Central and Eastern European countries. (Just a few months ago, Putin himself indicated that that's exactly what he's aiming for.) Ukraine got duped, caught up in negotiations about its future over which it had no say. Poland and the Baltic democracies got duped too, and they are sure to bring up the matter within European Union institutions for a long time.

The German-Russian Nord Stream 2 gas pipeline in the Baltic Sea — Photo: Jens Büttner/dpa/ZUMA

Remarkably, Washington agreed to end its opposition to the project without any recognizable benefit in exchange: Merkel has neither promised increased engagement for NATO nor more clarity about China. The compromise between Biden and Merkel is not a compromise at all, but an American capitulation.

This will get Biden into big trouble in Congress, where the issue has allowed Democrats and Republicans to find common ground. Angela Merkel began her last term in office with the plan to oppose Donald Trump in his attempt to undermine the rule of law around the world. She was right. then But now she ends her final term in office by putting a spoke in the wheel of her successor, essentially saying to Germany's next chancellor to figure things out on your own.

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FOCUS: Russia-Ukraine War

How Russia's Wartime Manipulation Of Energy Prices Could Doom Its Economy

A complex compensation mechanism for fuel companies, currency devaluation, increased demand due to the war, logistics disruptions, and stuttering production growth have combined to trigger price rises and deepening shortages in the Russian energy market.

Photograph of Novatek's gravity-based structure platform for production of liquefied natural gas, floating on a body of water.

Russia, Murmansk Region - July 21, 2023: A view of Novatek's gravity-based structure platform for production of liquefied natural gas.

TASS/ZUMA
Ekaterina Mereminskaya

In Russia, reports of gasoline and diesel shortages have been making headlines in the country for several months, raising concerns about energy supply. The situation escalated in September when a major diesel shortage hit annexed Crimea. Even before that, farmers in the southern regions of Russia had raised concerns regarding fuel shortages for their combines.

“We’ll have to stop the harvest! It will be a total catastrophe!” agriculture minister Dmitry Patrushev had warned at the time. “We should temporarily halt the export of petroleum products now until we have stabilized the situation on the domestic market.”

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As the crisis deepens, experts are highlighting the unintended consequences of government intervention in fuel pricing and distribution.

The Russian government has long sought to control the prices of essential commodities, including gasoline and diesel. These commodities are considered "signalling products", according to Sergei Vakulenko, an oil and gas expert and fellow at the Carnegie Endowment. Entrepreneurs often interpret rising gasoline prices as a signal to adjust their pricing strategies, reasoning that if even gasoline, a staple, is becoming more expensive, they too should raise their prices.

The specter of the 2018 fuel crisis, where gasoline prices in Russia surged at twice the rate of other commodities, haunts the authorities. As a result, they implemented a mechanism to control these prices and ensure a steady supply. Known as the "fuel damper," this mechanism seeks to balance the profitability of selling fuel in both domestic and foreign markets.

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