Russia-Ukraine war: How does gas producer Gazprom fit in this conflict 

As Russia continues to wage war on Ukraine, its state-owned gas producer Gazprom has come into prominence. Europe’s dependence on Russian gas is a cause for concern as the European Union mulls further sanctions on the country. 

So, gas and in turn Russia's Gazprom, are now the overarching thought when any big economic sanction like barring Russia from SWIFT payments is being discussed. This is because it will likely lead to collateral damage for those looking to punish Russia for invading Ukraine.

To put it in perspective, the Russian company Gazprom is the majority shareholder in Nord Stream AG that owns and operates the gas pipeline Nord Stream 1 of 1,224 km pumping 55 billion cubic meters of gas per year. Nord Stream 2 AG, a wholly-owned subsidiary of Gazprom, owns and plans to operate the twin pipelines, Nord Stream 2, of 1,234 km. 

Nord Stream 1 runs from Vyborg in northwestern Russia to Lubmin in northeastern Germany, while the twin pipelines of Nord Stream 2, run from Ust-Luga in northwestern Russia to Lumbin.

The first line of the longest sub-sea pipeline, Nord Stream 1, was inaugurated in November 2011, and the second line in October 2012. Nord Stream 2 was laid in 2018-2021, with the first line being completed in June 2021 and the second line in September 2021. The Nord Stream 2 is yet to be operational. It has been stuck pending certification by Germany and the European Union.

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How Gazprom fits in the Russia-Ukraine conflict

To begin with, Germany recently halted the Nord Stream 2 project, after Russia recognised the two breakaway regions of Donetsk and Luhansk. Following that German soccer team FC Shalke 04, decided to remove the logo of sponsor Gazprom from the club’s shirts. The club said that it “shares the international community's significant concern for the security”. 

Along with repercussions for the invasion, it must be noted that Germany gets half of its gas from Russia, and hence, is heavily dependent. The pipeline faced opposition within the European Union as well as from the United States since the dependence for gas on Russia would increase. The opposition also came over Russia’s denying of transit fees to Ukraine, which is a host to another gas pipeline. 

German Economy Minister Robert Habeck said the country’s gas supply was secured even without Nord Stream 2, but added that prices are likely to rise further in the short term.

Meanwhile, the US that has imposed sanctions on companies involved in the project has only picked Russian firms and not German for fear of damaging diplomatic relations with the latter. Washington has been opposing the construction of the Nord Stream 2 but not the German companies involved. In July 2021, Germany and the US made a deal under which they committed to counter Russian attempts to use the Nord Stream 2 pipeline as a political weapon. 

But that does not leave the EU without troubles. According to Politico, in 2021 more than 42 per cent of the union’s gas imports came from Russia, up from 26 per cent in 2010. 

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The Russian gas producer said that the pipeline would complement the existing ones and help meet Europe’s demand for affordable natural gas. It presented Nord Stream 2 as an alternative to Ukraine’s old system that needs to be spruced up. It also argued that it saves transit fees paid to Ukraine and prevents cut-offs over pay disputes. 

But Russia, which owns the gas giant and by extension the entire pipeline, has had to pay only half the cost, with the rest being split between Germany's Wintershall, Dutch-British Shell, German-Finnish Uniper, Austria's OMV and France’s Engie. If the company is sanctioned, it would unwind the loans, which amounts to half of the 10-billion-euro pipeline. 

The gas giant, as evinced, is important for the Russian budget, as well as for Europe that seeks to shift from nuclear to coal power plants. Europe needs the gas and Russia the moolah, meaning that there might not be any supply cut for now. Moreover, Russia has stated that there are no plans to cut supply. 

Ukrainian President Volodymyr Zelenskyy has described the pipeline as a powerful geopolitical weapon for Russia. 

Along with Ukraine, Poland, the UK and US also strongly oppose Nord Stream 2 as it would give Russia a stronghold over gas supplies to Europe. Poland and Ukraine are both NATO allies and UK and US are members. 

Like in 2006, when Russia cut off gas supplies going through Ukraine because of financial issues, leading to energy shortages during winter in central and eastern Europe, there are fears that it might stop gas supplies again for political reasons. 

Thus, the riches of gas and the reach of Gazprom with its distribution might till the heart of Europe has in some ways limited options for those looking to take any action against Russia for its Ukraine invasion. 

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