• Natural Gas News

    Hopes wane that Nord Stream mystery will be solved [Gas in Transition]


It looks increasingly likely that the Nord Stream mystery will never be conclusively solved, and even if the perpetrators were implicated with hard evidence, there is currently little political interest in pursuing a case.

by: NGW

Posted in:

NGW News Alert, Natural Gas & LNG News, Europe, Top Stories, Europe, Premium, NGW Magazine Articles, Gas In Transition Articles, February 2024, Infrastructure, Pipelines, Nord Stream Pipeline, Nord Stream 2, News By Country, EU, Denmark, Germany, Russia, Sweden

Hopes wane that Nord Stream mystery will be solved [Gas in Transition]

The explosions that ruptured the Nord Stream 1 and 2 pipelines in September 2022 elevated the conflict between Russia and the West to a new level. Widely concluded to be the work of saboteurs, the blasts set a precedent. No longer was the war confined to Russia and Ukraine – vital energy infrastructure in European waters was also shown to be at risk of attack. But nearly a year and a half after the attacks, there is still no conclusive evidence to indicate who was behind them.

Hopes that this evidence might emerge were further dashed when Denmark’s police announced on February 26 that they had ended their investigation into the explosions, citing a lack of grounds to pursue a criminal case in their country. This is just weeks after Swedish investigators also terminated their probe, stating that they lacked the jurisdiction to continue with the case.

“The investigation has led the authorities to conclude that there was deliberate sabotage of the gas pipelines,” said the Copenhagen police in a statement. “However, the assessment is that there are not sufficient grounds to pursue a criminal case in Denmark.”

Danish police have been cooperating with relevant foreign partners and their investigation has been “both comprehensive and complex,” they said.

This leaves only Germany actively investigating the explosions. A spokesperson for the German cabinet said on February 26 that the government remained “very interested” in the case, adding the country’s general prosecutor office overseeing the probe was deciding on future steps.

There is very little room for doubt that the rupturing of the pipelines was the result of sabotage. Investigators in Germany, Sweden and Denmark all reached this conclusion some time ago. But the question of who is to blame is another matter.


Trading accusations

In the immediate aftermath of the explosions, fingers were pointed towards Russia as the culprit. NGW made the case at the time that the destruction of its own pipelines was not in Moscow’s interest, as it deprived the Kremlin of the means of offering Europe, and particularly Germany, restored gas flow in return for concessions in the conflict in Ukraine. What is more, it increases the likelihood that Russia’s loss of market share in Europe is irrevocable.

Moscow remains adamant that the US and/or its allies were behind the attacks. Within days of the blasts, Russian President Vladimir Putin accused the “Anglo-Saxons,” referring to the US and the UK. Russia was quick to pounce on the conclusions of a report by veteran US investigative journalist Seymour Hersh released early last year, which concluded, based on a source, that the US navy sabotaged the pipelines, on the order of the Biden administration. 

Meanwhile, according to The New York Times, intelligence reviewed by US officials indicates that a pro-Ukraine group was responsible. Other international media have also pointed to Ukrainian involvement, including actors within the country’s military.

While Russia remains steadfast in accusing the US, it has notably not presented any evidence of its own to substantiate this claim. Moscow says it has been excluded from the European investigations into the Nord Stream bombings, which it has criticised for not being transparent. Even so, Russia has not revealed any findings from its own vast security service apparatus. Putin was asked point-blank by right-wing US political pundit Tucker Carlson in a recent interview in Moscow why Russia had not presented evidence to implicate Washington.

The Russian leader said he wouldn’t get into details. Even when Carlson said Russia would score a propaganda win from disclosing whatever evidence it had, Putin reiterated that people should be asking in who’s interest was it for the Nord Stream pipelines to be blown up, and who had the capability to do so. A widely-held view in Russian political and academic circles is that the US wanted to sever the Russian-European energy relationship, to get Europe hooked on its own gas, and deindustrialise an economic competitor.


What next?

Germany has provided no guidance on how long it expects its investigation to continue. And Moscow’s attempt last year to get the UN to launch an independent inquiry was unsuccessful, as all members of the Security Council save for Russia, China and Brazil abstained from voting.

As such, it looks increasingly unlikely that those behind the attacks will be implicated with concrete evidence. But beyond the obvious political fallout, identifying the perpetrator may have consequences for ongoing arbitration proceedings over Russian gas supplies to Europe in 2022.  German energy utilities Uniper and France’s Engie have all filed claims against Gazprom at the Stockholm arbitration court, arguing that they are owed damages for the Russian company’s failure to supply contractual volumes.

After losing their Russian supply, these companies had to resort to much more expensive volumes on the spot market. Based on average TTF prices, the cost of buying gas this way to replace Nord Stream 1’s 55bn m3/year of supply would have been about $40bn in the second half of 2022, Ed Crooks, vice chair for Americas at Wood Mackenzie, has estimated. The extra cost for Gazprom’s European customers would have been this amount minus what they would have paid under their contracts with the company, details of which have not been publicly disclosed.

Complicating legal proceedings further, Gazprom substantially cut gas supply via Nord Stream 1 over the summer of 2022, issuing forces majeures to its customers. The Russian company claimed the pipeline could not run at capacity because sanctions prevented the repair of compressor equipment, although Germany and other European countries dismissed the drop in deliveries as politically-motivated. Gazprom then shut Nord Stream 1 down altogether on August 31, 2022, and flow was not resumed before the explosions.

Another issue is whether Gazprom would abide by any ruling from the Stockholm court, given the present political situation. The Russian company would do well not to ignore the court, however, as it is still looking to sign contracts with other buyers around the world, and being perceived as a supplier that respects contract terms and arbitration decisions is important.

Depending on the outcome of investigations, there would be little intent on the EU side to pursue a case against Ukraine, if there was such a case.

“The EU is building a strategic alliance with Ukraine, having in December greenlighted membership talks with it; a major control over Nord Stream 1 would just be counterproductive,” Alexey Eremenko, associate director at Control Risks, tells NGW. “Especially if, as some media reports have speculated, Ukraine’s top political leadership was not involved, or even aware of the alleged attacks.”

There would be interest in launching a case against Russia if supply contracts permit Gazprom to be blamed for interrupting gas supply, even in the event of sabotage, but this is not a current priority given that the investigation is ongoing, and the odds of collecting any hypothetical damage from Russia are low.

“Overall, the EU has many other concerns, and has mostly just accepted that the gas relationship with Russia is over,” Eremenko explains. “Admittedly, this may change if/when the war enters a quiet phase or a ceasefire.”

He adds that there is still hope in the Kremlin that relations with the West could be normalised and former gas trade revived, even though the likelihood of this happening is low.

“The Russian leadership has a track record of counting on unrealistic hopes,” he says. “Besides, there still appear no viable alternative markets capable of taking all of the gas that Gazprom has been sending to the EU, and so in a way, resumption of EU-bound supplies is the only good scenario for the company.”