Nord Stream And Germany’s Shrinking Economy

The German economy has been deprived for more than a year of cheap Russian gas, thanks in part to Joe Biden and his decision early last year to destroy the Nord Stream pipelines. Meanwhile, German politics is continuing its tumble to the right. It may bring much of Western Europe with it.

Last week Alternative for Germany (AfD), a rigid anti-immigrant party in a nation where immigrants make up 18 percent of the total population, backed its first successful mayoral candidate since it was formed a decade ago. The New York Times described the victory in Pirna, a small town in Saxony, as a reflection of the party’s surging popularity. It is backed by 35 percent of voters in Saxony and 22 percent nationwide—a figure that has doubled in the past two years.

Germany once dominated the world’s markets with its luxury cars and industrial machinery but is now in a process of what some have called rapid deindustrialization. Three months ago, the television network Euronews called Germany “the world’s worst performing major developed country, with both the International Monetary Fund and European Union expecting it to shrink this year.” The political gains of AfD, I was told by Max Paul Friedman, an American academic who knows Germany well, “make many Germans very scared” because the economic gloom causes other political parties in Germany and throughout Europe, as well as in the US, to take up anti-immigrant policies.

“If the pipelines were flowing, would this all be different?” asked Friedman, a professor of history and international relations at American University. “Yes and no. Energy prices are central, but they would still have the sclerotic bureaucracy, the Chinese market decline, the lack of skilled labor. And given what is happening all over the North Atlantic countries, they would still be in an Islamophobic, anti-immigrant mood like their neighbors anyway.”

Given those realities, Friedman told me, he would depict “the pipeline issue as a catalyst or maybe the straw that broke the camel’s back, rather than the sole critical factor contributing to Germany’s woes.”

Sarah Miller, who has spent four decades writing for and editing the best of America’s oil and gas magazines—she now blogs on Medium—has depicted these days as “desperate times, especially for German and some European companies facing inflated energy bills and ongoing and possible entrenched inflation at home.” Germany is at risk, she told me this week in an email, “of losing a big part of the industrial base that has been key to its continued industrial strength and political clout within the EU over the last few decades. This industrial base is also emotionally important to the Germans—that goes especially for cars and chemicals—making it a huge political issue.”

Miller said that Germany’s gas supply crunch is “stabilizing, with some ten-year or longer deals to purchase liquified natural gas, mainly from the US and Qatar and, most recently, pipeline gas from Norway. But the amount of gas Germany is using is down sharply from pre-war levels, with energy intensive-industries taking the biggest hit. Germany’s legendary industries have been weakened. Fear that they won’t recover is widespread, as is concern that to the extent that the companies involved do bounce back, it will be with heavier reliance on China. These industries are important to the country’s sense of security and self-confidence, and the political consequences could be severe” for Chancellor Oaf Scholz’s coalition government.

“It’s interesting,” Miller said, “that what everybody fears most—from Germany to China and lots of places in between—is a repeat of the deindustrialization, financialization, and economic hollowing out that the US experienced over the last decades. America is a cautionary tale. It’s pretty pathetic when you think about it that way.”

America has been the most controversial factor in Germany’s recent hard times, so controversial that its role is rarely mentioned. Biden’s decision in the fall of 2022 to order a CIA-led team working undercover in Norway, with the best of Norway’s special forces, who have been an American asset since the end of the Second World War—to blow up the Nord Stream pipelines in the Baltic Sea. Nord Stream 1 had been supplying Germany with cheap Russian gas since 2011. The newly constructed Nord Stream 2 was in the final stages of completion when it was shut down, under American pressure, by Chancellor Scholz in February 2022, just before the Russian invasion of Ukraine. 

American and Western national leaders have warned since the early days of the Cold War about Russia’s ability to politically weaponize its vast stores of national gas and oil located in western Siberia near the Arctic Circle. One energy expert, over a recent early morning coffee in New York, called the world’s nations with no oil or gas reserves “zombies” who have a desperate daily need to find blood to drink to sustain life. 

The Americans assigned to the covert mission in the Baltic Sea in the weeks before the Russian invasion of Ukraine in February 2022 assumed that the goal was to persuade Russian President Vladimir Putin not to invade. When the invasion took place, despite earlier public threats to destroy the pipeline by Biden and Victoria Nuland, now acting deputy secretary of state, the American team in Norway was ordered to continue its work and find a way to get the job done. 

The operatives had prepared for the mission and were ready to go by late May, but the plan was called off on short notice by Biden. There was no explanation because presidents, whether or not they are deeply involved in mission planning or, as in the case in hand, know very little about the planning, have no need to explain their thinking. The CIA team remained deeply involved and enthusiastic because they assumed that Biden would eventually pull the trigger and then tell Putin that he authorized the destruction and why he did so—because he had publicly told Putin what he was going to do and he did it. The message the men and women on the mission wanted to hear was: “Don’t mess with me.” The Russian leader needed to know that when an American president makes a threat he means it. 

The White House did, however, order that the CIA find a way to give the White House the option to blow up the pipeline at a time of Biden’s choosing. The bombs were already in place. Arranging that option, with the necessary assurance or success, was much more difficult than the president and his advisers would ever know. It was made possible with the help of outside academic technical experts. The presidential order came in late September and three of the four pipelines were destroyed after the explosives were triggered by a specially assembled low frequency sonar device. (No bombs were laid at the fourth pipeline because the two Navy divers who had practiced for months were under a strict timeline and were returned to safety before they could finish their mission.)

Biden’s timing seemed aimed at Chancellor Scholz. Some in the CIA believed that the president’s fear was that Scholz, whose constituents were lukewarm in their support for Ukraine, might waffle with winter coming on and conclude that keeping his people warm and his industries prosperous was more important than backing Ukraine against Russia. He might decide to let the gas flow. Once again, as US presidents since Kennedy have feared, Russian gas would be a strategic asset.

This week news broke, as Miller noted, that Sefe, a German state-owned energy firm, struck a $55 billion energy deal with Norway’s Equinor that, according to Reuters, will supply Germany with one-third of its industrial gas needs for ten years, with an option for a five-year extension. Reuters went to great lengths to rewrite history and informed its readers that the deal was, for Germany, “a milestone in Berlin’s efforts to replace former long-term supplier Russia, which first cut and later suspended delivery in 2022, stoking fears of cold German homes.” The destroyed Nord Stream pipelines were no longer relevant.

In the ten months since I published my first account of the Nord Stream sabotage the German government and media, as in the United States, have either ignored or provided alternate accounts of the how and why the pipelines were destroyed. The idea that a sitting US president would deliberately destroy a vital source of energy and of a close ally has been, as Freud would say, taboo.

One American official, who is knowledgeable about the political use of energy, called the Norwegian deal, with some sarcasm, “an amazing stroke of good luck for Scholz, just when his base was facing another gas-free winter. Out of the blue the Norwegians found a customer for almost exactly the same percentage of gas lost from Nord Stream closures.

“Magically,” he added, “the deal coincides with Russia’s earlier closure of gas and oil fields that—except for the destruction of the Nord Stream pipelines—would have been the source of gas for the two pipelines.” Putin responded to the earlier Scholz decision to refuse delivery of the Russian gas on Nord Stream 2 by announcing he would end the supply.

So, the official said, Scholz may have understood that the Russian gas for Nord Stream 2 would not be available when “he and Biden stood shoulder to shoulder” in the White House on February 7, 2022, a few weeks before Russia invaded Ukraine, and Biden announced that if Russia invaded Ukraine there would be no Nord Stream 2.

“As for the Norwegians,” the official told me, “the best way to expand market share has always been to eliminate the competition.

“Ain’t history grand?” he concluded.