Europe Can Buy Russian Gas on Its Own Terms

The hour of reckoning is at hand for the Nord Stream 2 project to double the exports of Russian natural gas to Europe across the bottom of the Baltic Sea. This key element of Vladimir Putin's energy strategy now faces twin pressures: from the difficult German coalition talks and from the European Commission. The challenges are more likely to reshape the project than previous attempts by the U.S. and eastern European nations to derail it.

Nord Stream 2, a 9.5 billion euro ($11 billion) project, is meant to follow the path of Nord Stream 1, a pipeline from Vyborg near St. Petersburg to Greifswald in Northeastern Germany that was finished in 2011. It would be able to carry 55 billion cubic meters of gas a year, enabling Gazprom, now the sole shareholder in the project, to supply more fuel to Europe without paying transit fees to Ukraine. Last year, a little under half of the 178.3 billion cubic meters of gas that Russia supplied to Europe went through Ukraine, yielding some $3.1 billion in transit payments. For Ukraine, this is critical revenue. State-owned oil and gas company Naftogaz said earlier this month that in the first nine months of the year, the taxes the company paid on the gas transit revenue exceeded Ukraine's public spending on health care.