The Keystone Pipeline has been shut down following a leak discovered near the border of Kansas and Nebraska.
The shutdown of the major oil pipeline that carries crude from Canada triggered volatility in the energy market on Thursday, with oil prices briefly surging as much as 5% before retreating.
Federal safety regulators are investigating the leak and have deployed to the site, a spokesperson for the Pipeline and Hazardous Materials Safety Administration told CNN.
Canada’s TC Energy
(TRP) said it launched an emergency shutdown of the Keystone Pipeline System at 9 p.m. ET on Wednesday after alarms were triggered and pressure dropped in the system. The company said the system remains shut as “our crews actively respond and work to contain and recover the oil.”
Calgary-based TC Energy said there has been a “confirmed release of oil” into a creek located about 20 miles south of Steele City, Nebraska. An estimated 14,000 barrels of oil have been discharged as of late Thursday, the company said.
The PHMSA, an arm of the Transportation Department charged with enforcing safety regulations for pipelines, said the leak is located near Washington, Kansas, which is near the border with Nebraska.
The spokesperson said the agency continues to investigate the cause of the leak.
US oil prices climbed as high as $75.44 a barrel on the news, before easing. In recent trading, oil was up 0.8% to $72.57 a barrel.The gains follow a steep selloff in recent days that left crude at levels unseen since December 2021.
No timetable has been given for restarting the Keystone Pipeline, a 2,700-mile system that delivers mostly Canadian oil to major refineries across America. The pipeline can transport more than 600,000 barrels of oil per day.
Matt Smith, an analyst at commodity data provider Kpler, said Canadian oil normally transported by Keystone can’t be easily replaced.
“We’re seeing a pop in prices because this will impact refiners that take this crude,” Smith said.
“Our primary focus right now is the health and safety of onsite staff and personnel, the surrounding community, and mitigating risk to the environment through the deployment of booms downstream as we work to contain and prevent further migration of the release,” TC Energy said in a statement.
The leak happened on an existing Keystone pipeline that is separate from Keystone XL, a controversial pipeline project that was terminated last year after President Joe Biden revoked the pipeline’s permit on his first day in office.
The Keystone Pipeline has experienced leaks in the past, including one in South Dakota in 2016 and another one in 2019 in North Dakota that impacted nearly five acres.
Russia indefinitely suspended natural gas flows to Europe via a key pipeline hours after the Group of Seven agreed to an oil price cap for Russian crude—two opposing blows exchanged between Moscow and the West in an economic war running parallel to the military conflict in Ukraine.
Kremlin-controlled energy company Gazprom PJSC said late Friday it would suspend supplies of gas to Germany via the Nord Stream natural-gas pipeline until further notice, raising the pressure on Europe as governments race to avoid energy shortages this winter.
Gazprom said it had found a technical fault during maintenance of the pipeline, which connects Russia with Germany under the Baltic Sea. The company said the pipeline will remain shut down until the issue is fixed, without giving any timeline.
The pipeline was due to resume work early Saturday after three-day maintenance. Before the maintenance, the pipeline was operating at 20% of its capacity.
Russia first began throttling supplies via Nord Stream in June, saying that needed maintenance was being prevented by Western sanctions imposed following Russia’s invasion of Ukraine. The notion was dismissed by European officials as an excuse for Russian President
Vladimir Putin’s
regime to use its gas exports to punish Europe for its support of Ukraine.
Western leaders are preparing for the possibility that Russian natural gas flows through the key Nord Stream pipeline may never return to full levels. WSJ’s Shelby Holliday explains what an energy crisis could look like in Europe, and how it might ripple through the world. Illustration: David Fang
A complete shutdown of Nord Stream will compel European governments to accelerate their push to become independent of Russian gas ahead of the winter months and could force them to ration energy—a move that would hurt industrial companies and tip the continent’s already fragile economy into a recession.
“By further reducing gas deliveries, Russia is tightening the screws on the EU,” said Janis Kluge, an expert on Russia at the German Institute for International and Security Affairs. “Europe will now have to take its efforts up a notch to conserve more gas.”
At the same time, the move deprives Moscow of its most potent economic leverage on the continent and could remove any remaining misgivings in European capitals about raising sanctions on Moscow for fear of retribution.
“Until it is repaired, gas transport via Nord Stream is completely stopped,” Gazprom said Friday.
Moscow and the West have been engaged in an economic war since Russia invaded Ukraine in February. Western democracies have inflicted economic and financial sanctions on Russia, and Moscow has tried to choke unfriendly countries’ access to its natural gas, which Europe uses for heating and electricity production.
ArcelorMittal SA,
one of the world’s largest steelmakers, was the latest industrial giant to say it is reducing European production capacity amid the energy crisis. The company said Friday it will close two of its plants in Germany amid soaring electricity costs.
Steelmaking is particularly energy intensive, alongside other industries like fertilizer and chemical production and glass making.
G-7 countries said on Friday they would impose a cap on the price of Russian oil. The mechanism would force buyers seeking to insure their shipment via insurers located in a G-7 or European Union country to observe the price limit on their purchases. The cap, whose level will be set at a future meeting, originated in a U.S. initiative and has been under discussion for months.
Russia has said countries imposing a cap wouldn’t receive any Russian oil. Sales of oil make up a far bigger share of Russian state revenues than sales of natural gas.
Inspectors from the United Nations’ nuclear agency visited the Russian-occupied Zaporizhzhia nuclear-power plant, despite shelling near the facility for which Ukraine and Russia exchanged blame. On Friday, Ukraine accused Russia of hindering access to the plant. Photo: Yuri Kochetkov/Shutterstock
Hours before Gazprom’s Nord Stream announcement, German Finance Minister
Christian Lindner
praised the G-7 decision, saying “Russia is generating big profits from the export of commodities such as oil, which is something we must push back on vigorously.”
The cap, he added, would help combat inflation in the EU.
Russia would have enough capacity via other gas pipelines to Europe to compensate for the Nord Stream shortfall. However, flows via these other routes declined following the start of the war in Ukraine.
Ukraine halted one gas-transit route in May, blaming interference by Russian forces. Deliveries through another, called Yamal, which traditionally transported gas from Russia to Europe, have stopped this year due to sanctions imposed by Russia on the Polish part-owner.
Germany’s economy minister,
Robert Habeck,
said this week that the country can’t count on Nord Stream during the winter.
In reaction to the Nord Stream closure, a spokeswoman for the ministry said on Friday that Germany was far better prepared than a few months ago.
“We have already seen Russia’s unreliability in the past few weeks, and accordingly we have unwaveringly and consistently pursued our measures to strengthen our independence from Russian energy imports,” the spokeswoman said.
Klaus Müller, head of Germany’s energy regulator, said the country would need to boost gas imports from other suppliers, continue to fill up gas stores and cut gas consumption.
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European officials had expected that the Kremlin would use gas flows to keep markets and governments on edge and erode support for Ukraine among Western voters.
Gazprom’s shutting down of Nord Stream “under fallacious pretenses is another confirmation of its unreliability as a supplier,” European Commission spokesman Eric Mamer wrote on Twitter.
A senior manager of a German gas company formerly controlled by Gazprom said Friday that he expects local importers of gas channeled via Nord Stream to stop paying for their contractual obligations with Gazprom.
Natural-gas prices have broken records in recent weeks amid the energy crunch, though they have also dropped sharply in the past days, with some analysts crediting the speed at which Europeans have been filling up their gas storage facilities through the summer.
Goldman Sachs analysts said that the Nord Stream outage would cause prices to surge again. The Gazprom decision “will reignite market uncertainty regarding the region’s ability to manage storage through winter, driving a significant rally,” the bank said in a note to clients.
Gazprom began throttling gas flows in June, citing technical problems with the turbines. The company insists that a key turbine couldn’t be sent to Russia after it was maintained in Canada because of international sanctions on Moscow. But Germany, where the turbine was located, said that there are no obstacles, and that Moscow was in fact blocking the turbine’s return to Russia.
On Friday, Gazprom said that it found an oil leak in a turbine at the compressor station of the pipeline. Gazprom said that similar issues had been found with other turbines this summer that have led to the reduction of the gas flows.
Gazprom said it had notified German company
Siemens Energy AG
, which maintains the turbines, of the new leak. Gazprom said that the necessary repairs could only be done in a specialized repair facility. Previously, some turbines for the pipeline had been repaired by Siemens Energy in Canada.
Siemens Energy said that Gazprom’s announcement wasn’t a technical reason for stopping operation. “Such leakages do not usually affect the operation of a turbine and can be sealed on site. It is a routine procedure during maintenance work,” the company said. It said it wasn’t currently contracted for maintenance work but is ready to assist.
Europe has been preparing for a possible Russian gas cutoff, with EU gas- storage facilities filling up faster than expected this summer, to over 80%.
Still, if Nord Stream remains shut, Europe’s gas stores would end the winter at 26% of their capacity, which would complicate Europe’s situation next winter, Massimo Di Odoardo, vice president for gas and liquefied natural gas research at energy consulting firm Wood Mackenzie, wrote this week.
Germany, which received more than half of its gas from Russia before the war in Ukraine, has been racing to diversify its supply of gas and to install floating liquefied natural gas terminals to ship in gas from the U.S. and elsewhere. In recent months, Germany’s gas imports from Norway, Belgium and the Netherlands have far outweighed the reduced Russian flows.
The country is close to hitting its 85% gas storage target, initially set for Oct. 1. German officials, however, have warned that reaching the next milestone of 95% by Nov. 1 would be challenging unless companies and households cut consumption.
The 760-mile-long Nord Stream pipeline first opened in 2011. Russia and a consortium of European energy companies built a second pipeline, Nord Stream 2, running alongside the original one, that would have doubled capacity. But the German government froze the project in February over the war in Ukraine.
—Bojan Pancevski contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com and Andrew Duehren at andrew.duehren@wsj.com
BERLIN—Russian natural gas began flowing again at a reduced volume through a critical pipeline into Europe on Thursday, according to its operator, buying time for governments to decouple from the Kremlin’s exports amid what they expect will be an increasingly unreliable supply of energy from Moscow heading into the winter.
The Nord Stream pipeline connecting Russia with Germany under the Baltic Sea resumed operation after its annual maintenance, ending 10 days of tense speculation about whether President
Vladimir Putin’s
regime would cut off the gas flow to Europe in retaliation for Western sanctions after his invasion of Ukraine.
The operator, Nord Stream AG, said the pipeline was in the process of restarting, which would take a few hours. “Gas is flowing,” a spokesman for the operator said.
The spokesman said flows are expected to be at pre-maintenance level of around 40% of total capacity, but it would take a few hours to reach that volume. One of the German network operators, NEL Gastransport GmbH, later said Thursday that this volume of gas was currently flowing through the pipe, as also confirmed by Nord Stream’s own online monitoring tool.
The German energy regulator said gas flows could reach 40% of capacity Thursday.
“Unfortunately, the political uncertainty and the 60% cut from mid-June remain,” the regulator’s head, Klaus Müller, said on Twitter.
The restart sent wholesale European natural-gas prices down 5% Thursday to €154.55, the equivalent of about $157.50, a megawatt-hour. Including Thursday’s fall, prices have fallen by 14% over the past week but have more than doubled this year and are more than four times as high as 12 months ago. The rally has propelled electricity prices to historic highs across Europe. Broader financial markets were steady Thursday as investors awaited earnings reports from major U.S. companies and an expected interest-rate increase by the European Central Bank.
A compressor station in Mallnow, Germany.
Photo:
filip singer/Shutterstock
The pipeline has been operating below capacity since Russia began throttling supplies in June, invoking technical issues related to Western sanctions against Russia.
Mr. Putin earlier this week said Russia would meet its contractual obligations for gas deliveries to Europe. The Nord Stream pipeline is the main conduit for Russian gas into Europe. Mr. Putin also warned that Western sanctions adopted to punish Russia in the wake of the invasion could cause further disruptions and cap pipeline volumes as low as 20%.
European officials and executives had worried the pipeline might not restart at all, or do so at even lower volumes. While gas is now flowing again, how much Russia sends—and for how long—will be closely watched by European capitals, who are in the midst of filling reservoirs for the higher-demand winter just a few months away.
An abrupt cutoff would have pushed Germany, Europe’s largest economy and industrial powerhouse, and several of its neighbors into a severe recession, according to most economists. But even reduced flows and the uncertainty regarding future supplies mean governments may still be forced to ration energy and subsidize mounting costs for households, experts and officials say.
Nord Stream channels gas extracted from Siberia by state-controlled Gazprom PJSC.
Mr. Putin this week blamed the drop on the absence of a turbine that had been held up in Canada after undergoing repairs because of Western sanctions, but is now on its way back to Russia.
Berlin and most Western experts said the cut in supplies was an attempt to pressure the West into easing sanctions and to push up gas prices. Several German officials and a Gazprom manager in Europe told The Wall Street Journal that Nord Stream had an elaborate contingency system with at least one spare turbine available at all times.
German officials say they expect the pipeline to continue to operate at its reduced pre-maintenance capacity—a level they think was deliberately set to prevent Germany and others from building up enough gas reserves for the winter. Because of technical reasons related to the pressure levels in the pipeline, Nord Stream can’t transport volumes below 30% of its capacity of 55 billion cubic meters a year.
A German government minister said that Mr. Putin was deliberately causing anxiety in the global energy markets, but that he was unlikely to sever supplies completely because it would remove his leverage and risk a harsher response from the West.
The reduced flows and uncertainty are already hitting Germany’s economy. The largest gas utility,
Uniper SE,
is in bailout talks with the German government. The company said Monday that it had drawn down a €2 billion, or $2.04 billion, credit line with German state-owned KfW bank. A German Economy Ministry spokesperson said Monday that the government was working with Uniper and its Finnish parent,
Fortum Oyj,
to find ways to help the company.
Germany and other European Union nations, which pledged to end purchases of Russian energy by 2024, are now working on two basic contingency plans.
The Nord Stream pipeline has been operating below capacity since Russia began throttling supplies in June.
Photo:
Markus Schreiber/Associated Press
The first envisages a status quo, with Nord Stream operating at around 40% of its capacity. Under that scenario, Germany, where gas storages are currently 65% full, would have to significantly reduce consumption compared with the previous year to avoid a shortfall in the winter. Some regions, however, are expected to be more severely affected, possibly triggering local measures such as limited factory shutdowns and a cut in supply to some businesses.
Under this scenario, Germany would be unable to completely fill its reserves before year-end, leaving the country vulnerable to new surprise supply cuts and keeping energy prices high.
This could be politically explosive for Berlin, with some 66% of Germans currently feeling that the government isn’t doing enough to tackle high energy prices, while 53% believe the sanctions are hurting Germany more than Russia, according to a Forsa poll published on Wednesday.
“We need to prepare for a war economy…the next two winters will be difficult,” said
Günther Oettinger,
a former chief energy official of the EU and German politician. “Our very democracy is in danger of disruption from the energy costs fallout.”
The second scenario, seen in Berlin as less likely according to German officials, foresees an end to Russian gas supplies before the end of the year, triggering an emergency plan that would allow Chancellor
Olaf Scholz
to take control of the gas market and ration consumption.
Under legislation that protects households and critical infrastructure, rationing would hit mainly businesses, leading to a drop in Germany’s gross domestic product of between 5% and 6% in 2023, according to estimates by
Deutsche Bank.
With many European countries that depend on Russian gas reliant on supplies transiting through Germany, irregular or dwindling supplies through Nord Stream would have effects across the continent.
The EU this week issued guidelines recommending measures to cut gas consumption by 15% between August 2022 and March 2023, including by limiting the temperature in office spaces to 66 degrees this winter.
Germany’s immediate neighbors are working on their own contingency plans.
Germany and Austria negotiated a deal to share their gas-storage capacity and help each other’s regions that are at risk of fuel shortages.
“Russian dictator Vladimir Putin is using energy as a weapon against us. It is clear that the cooperation with Germany, through which almost all gas flows to us, will be essential for us in this direction,” Josef Sikela, the minister of industry and trade of the Czech Republic, told reporters earlier this month.
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Europe is also adjusting its gas infrastructure, which has so far been largely geared to receive supply from Russia. Belgium and Germany are working to expand the capacity of a pipeline connecting the two nations, while Austria and Italy are looking into importing their infrastructure to be able to channel more Norwegian gas into their storage.
The Netherlands, once among the world’s largest gas producers, is considering temporarily prolonging the life of a gas field scheduled for closure after mining work there caused numerous earthquakes.
Many governments are trying to secure gas from other suppliers, from Norway to Algeria, the U.S. and Qatar, which often comes in the form of liquefied natural gas transported by ship.
Germany is building several LNG terminals on its coast to receive shipments from faraway countries and has chartered five floating terminals that can handle those inflows in the short term. Increased LNG purchases by EU nations—Germany alone is investing over €15 billion—have caused a shortage on the global market, leaving countries such as Pakistan struggling to access supply.
Berlin, meanwhile, has said it would review its decision to shut down its three remaining nuclear-power plants. It is already planning to increase use of coal to produce electricity this winter to save gas for heating.
Write to Bojan Pancevski at bojan.pancevski@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com
said Russia would fulfill its commitments to supply natural gas to Europe but warned that flows via the Nord Stream pipeline could be curbed soon if sanctions prevent additional maintenance on its components.
Nord Stream, the main artery for Russian gas to Europe, is currently down due to regular maintenance and European governments are worried the Kremlin won’t restore its flow when the work ends Thursday. A prolonged outage could prompt governments to ration energy, hurting industry and hitting already fragile economic growth.
In comments late Tuesday after his visit to Tehran, Mr. Putin said that Kremlin-controlled energy exporter Gazprom PJSC, pipeline operator’s majority shareholder, “has always fulfilled and will fulfill all of its obligations.”
But the Russian president added that flows might fall to some 20% of capacity as soon as next week if a pipeline turbine that was undergoing repairs in Canada isn’t returned to Russia soon. Mr. Putin said that another turbine had to go for maintenance on July 26.
Even before the maintenance began, Gazprom last month cut deliveries on the pipeline to 40% of its capacity, blaming Canadian sanctions that had prevented the return of the turbine being repaired there. European officials have dismissed the turbine explanation as a pretext for Moscow to try and wreak economic havoc on the continent.
Germany has been racing to return the turbine to Russia after Canada earlier this month tweaked its own sanctions, allowing turbines for the Nord Stream pipeline to be repaired and returned to Russia.
The European Union is pressing governments to step up their energy-conservation campaigns, rolling out new plans for possible rationing on Wednesday. The commission’s plan is expected to offer guidelines for curbing energy use and establish criteria governments can use to determine which industries to give priority to if there isn’t enough gas to go around. The guidelines also call for public buildings to limit air conditioning to 77 degrees Fahrenheit and cap thermostats at about 66 degrees during colder months.
Gazprom has invoked force majeure for its failure to deliver contractually agreed natural-gas shipments in recent weeks, according to European energy companies. It isn’t clear whether the notice—a legal declaration that exempts the company from fulfilling contractual obligations because of circumstances outside its control—covers a potential decision by Russia not to resume Nord Stream flows after the maintenance.
While some European officials have in recent days cast doubt on whether Nord Stream would come back online on Thursday, Mr. Putin’s comments helped fuel expectations the pipeline would restart. Separately, flows of gas through the pipeline spiked several times on Tuesday, which analysts say could be pressure tests ahead of the end of the maintenance.
Analysts at Goldman Sachs said they expected the pipeline to come back online Thursday at its pre-maintenance capacity of 40%.
A full stop “would remove flexibility from Russia’s supply decisions, once you’re at zero, there’s only one place to go: up,” the bank wrote in a note to clients on Tuesday, adding that such a scenario would also deprive Russia of gas revenues.
But Mr. Putin’s new warning that the flows could be curbed to 20% next week shows that Moscow will continue to use gas to squeeze Europe, even if it doesn’t completely cut it off, analysts say.
“It’s absolutely clear that Moscow is cutting supplies for geopolitical reasons—it wants to create a European gas crisis this winter to bring Europe to its knees to the point where it cuts support to Ukraine and forces Kyiv to concede to Moscow’s demands,” said Timothy Ash, senior strategist for BlueBay Asset Management LLP in London.
Mr. Putin also warned the West that its plan to cap the prices of Russian oil would rock global markets and push prices up.
“Now we are hearing all sorts of crazy ideas about limiting the volume of Russian oil and capping the Russian oil price,” Mr. Putin said. “Oil prices will skyrocket,” he added.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
Ukraine reduced flows of Russian natural gas through its territory to Europe, sending prices higher amid the continent’s still-precarious reliance on Russian fossil fuels.
Within hours, though, enough gas was moving through an alternative route that prices fell back down again, ending essentially flat on the day.
The continued flow suggested some gas had been rerouted to travel through a separate pipeline, analysts and traders said. It was unclear what actions the Russian and Ukrainian sides took in the episode, but the quick rerouting demonstrated the country’s energy-grid flexibility despite the violence of the battlefield.
The reworked flows partly offset any lost exports to Europe. They also enabled Russia to continue piping its gas to its biggest customer, and collecting much-need payments for that gas. Ukraine benefited, too: Kyiv continues to pocket millions of dollars a month in transit fees that Moscow has paid it through the course of the war.
European gas prices leapt early in the day when Ukraine’s gas-transport company said it was shutting down a portion of the gas that travels across its territory from Russia to Europe. The company that runs Ukraine’s pipeline network halted the flow of gas through a major entry point in the east of the country Wednesday, blaming interference by Russian troops with critical gas infrastructure.
The border crossing accounts for a third of Russian gas exports through Ukraine to Europe and feeds 3% of the European Union’s overall gas consumption. An increase in flows of Russian gas through a separate section of pipeline in Ukraine-controlled territory near the city of Sumy partially offset the stoppage, limiting the rise in prices.
Europe has been shoring up its energy supplies ahead of a planned EU-wide embargo on Russian oil, being hashed out this week. Some member states, especially Germany, have also scrambled to find alternative supplies of gas amid the threat of a potential severing of exports by Moscow. Despite these moves, Europe is still heavily reliant on Russian gas, a slug of which flows through Ukraine. That gas had kept moving since the Feb. 24 invasion despite the raging conflict.
Ukrainian energy officials say Russia appears to have avoided deliberate strikes on pipelines that bring revenue into Russia’s bruised economy, though extensive damage to Ukraine’s domestic gas network left millions of residents without fuel. Ukraine, for its part, earns transit fees from Moscow for shuttling Russian gas to customers in Europe.
Wednesday’s cutoff at the Sokhranivka entry point, on the border between the Luhansk region of Donbas and Russia, marked the biggest interruption of gas supplies to date. It came as Russia continued to pursue its campaign to seize the Donbas area of eastern Ukraine.
Ukraine’s pipeline operator said Tuesday it was stopping the flow of gas through Sokhranivka because it had lost control of Novopskov, a gas-compressor station close to the Russian border. Russian forces had interfered in the pipeline network, including by siphoning off gas, in a way that endangered the stability of the broader system, the Gas Transmission Operator of Ukraine said.
Kremlin spokesman Dmitry Peskov, in a press briefing Wednesday, said Russia “has always reliably fulfilled and intends to fulfill contractual obligations.” A spokeswoman for Gazprom didn’t respond to a request for comment. In a statement Tuesday, a spokesman for Gazprom said Ukrainian gas specialists had continued to work at Sokhranivka and Novopskov and that it was impossible to pipe the gas through another entry point.
But gas flows appeared to switch around Wednesday, analysts and traders said. Shortly after the cutoff, gas moved in greater quantities through a separate entry point in Ukraine-controlled territory near the city of Sumy.
Ukraine has several hubs for receiving Russian gas, but only two entry points are included in the country’s current contract with Gazprom, a deal agreed to in 2019, according to the heads of Ukraine’s state gas company, Naftogaz, and its pipeline-network operator.
The two executives, in a press conference Wednesday, told reporters that Ukraine has asked Gazprom to increase flows through the alternative line to compensate for the stoppage in Luhansk. They said Russia in past years has piped much more gas through the alternate route than it currently is sending through.
Despite the war, Gazprom has kept up its contractual payments, called transit fees, to Ukraine for the right to send gas across the country, said
Yuriy Vitrenko,
chief executive of Naftogaz. In 2020, annual gas-transit capacity provided by Ukraine to Gazprom was worth $2.1 billion, according to Naftogaz. Analysts estimated the 2019 five-year contract between Gazprom and Naftogaz, covering 2020 to 2024, was worth about $7.2 billion.
Ukraine’s contract with Russia doesn’t prohibit rerouting of supplies into Ukraine, the executives said. If Gazprom purposely limits supply into Ukraine, they’ll be delivering less gas to customers in Europe, Mr. Vitrenko said: “It would be probably the first case of so-called self-sanctioning by Gazprom and by Russian entities.”
If the Ukraine route were cut off entirely, it would pose a huge challenge to a European economy that has grown accustomed to running on cheap Russian energy.
Moscow has sought over the past two decades to bypass Ukraine, building, with the help of Berlin, the Nord Stream pipeline under the Baltic Sea to Germany. That subsea pipe is now the main route for Russian gas into the EU. Another option is Yamal, a pipeline that threads through Belarus and Poland. Nonetheless, almost a third of Russian gas-pipeline exports to the EU still ran through Ukraine in the final quarter of 2021. The EU buys about 40% of the gas it burns to heat homes, fire factories and generate electricity from Russia.
The stoppage in Luhansk adds to nervousness among energy traders who were rattled in late April when Moscow halted gas exports to Poland and Bulgaria. Gazprom said it hadn’t received payment in rubles from the two countries as required by a decree by President
Vladimir Putin.
As Europe races to wean itself off Russian energy, American natural-gas producers are struggling to meet the demand and prices are rising. Factors including extreme weather and equipment needs have created a bottleneck amid the war in Ukraine. Illustration: Laura Kammermann and Sharon Shi
The EU is in the process of banning Russian coal and is working on a deal that would also phase out imports of oil. Natural gas, however, hasn’t been targeted as it is the hardest fuel for Europe to source from elsewhere.
The EU and the U.S. have pledged to expand liquefied-natural-gas exports to Europe through 2030. But the U.S. is already sending all it can to Europe, and industry officials say expanding volumes will require new, multibillion-dollar export terminals. In Europe itself, LNG import capacity that was unused last year could replace just under 29% of Russian pipeline gas supply, according to Natasha Fielding, an analyst at Argus Media.
Write to Joe Wallace at Joe.Wallace@wsj.com and Jenny Strasburg at jenny.strasburg@wsj.com
“If Russia invades, that means tanks and troops crossing the border of Ukraine, again, then there will be no longer a Nord Stream 2. We will put an end to it,” Mr. Biden said at a joint appearance with Chancellor
Olaf Scholz
of Germany after the leaders met at the White House. “I promise you, we will be able to do it.”
Mr. Scholz said Germany and the U.S. are aligned in their positions regarding Moscow’s potential invasion of Ukraine. In keeping with his past statements, he didn’t cite suspending the pipeline specifically as among the steps his government is ready to take to punish Russia.
“We are acting together. We are absolutely united, and we will not be taking any steps, we will do the same steps, and they will be very, very hard to Russia, and they should understand,” Mr. Scholz said.
The U.S., NATO and Russia are caught in a diplomatic standoff over Moscow’s buildup of troops at the border with Ukraine. WSJ looks at what Russia wants and how Ukraine and its allies are preparing for a potential crisis. Photo: Andriy Dubchak/Associated Press
The potential fate of Nord Stream 2 has been closely watched as the U.S. and its allies put together a raft of punishing sanctions and other economic measures to be imposed in the event of a Russian assault on Ukraine.
The meeting between Messrs. Biden and Scholz is part of a round of diplomacy to try to defuse the crisis over Ukraine, on whose borders Russia has amassed military forces.
President
Emmanuel Macron
of France met with President Vladimir Putin of Russia for more than five hours at the Kremlin on Monday and plans to travel to the Ukrainian capital Kyiv for talks with President
Volodymyr Zelensky
of Ukraine on Tuesday. Mr. Macron is also coordinating with Mr. Scholz.
Mr. Macron said the Russian leader had given him assurances that he was open to exploring ways to defuse the Ukraine crisis.
“It is our shared responsibility to agree on concrete measures to stabilize the situation,” Mr. Macron said, adding: “President Putin has assured me of his availability to commit to this logic.”
Mr. Putin said Mr. Macron had floated “a number of his ideas, proposals, which it is still too early to talk about. Nevertheless, I consider it quite possible to lay the basis for our further steps.”
The 765-mile-long Nord Stream 2 pipeline is a marquee project for the Kremlin and would boost Russia’s supply of natural gas to Germany. Although completed, the pipeline isn’t operating yet, with German officials saying it is undergoing certification that isn’t likely to be completed until the second half of the year.
The U.S. has opposed the project, with officials warning that it will increase Moscow’s influence over Germany and Europe. The Biden administration, however, waived sanctions on the parent company of the almost-completed pipeline last year out of deference to key ally Germany.
Over the past month, as Mr. Putin’s troop buildup has continued, administration officials said they would block the pipeline project if Russia invaded Ukraine.
The receiving station for the Nord Stream 2 gas pipeline near Lubmin, Germany, last week. The new pipeline has been completed, but is still undergoing certification.
Photo:
Sean Gallup/Getty Images
“We have made our position very clear, which is that if Russia invades Ukraine in one way or another, Nord Stream 2 will not move forward,” a senior administration official said Sunday.
Ahead of Mr. Scholz’s visit to Washington, U.S. officials urged the chancellor and his staff to specifically address the pipeline and signal that it would be scrapped in order to boost the deterrence efforts by the U.S., its European partners and members of the North Atlantic Treaty Organization.
The U.S. has attempted to get commitments from other nations to provide liquefied natural gas to Germany and other parts of Europe, including Ukraine, should Russia shut off pipelines and use energy as a weapon. U.S. officials have declined to provide specifics on any agreements.
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While Mr. Scholz has repeatedly pledged unity with the U.S. and other Western partners, he has yet to publicly announce that the pipeline would be halted if Russia attacks Ukraine. His aides have privately given such assurances, German and U.S. officials said.
At his appearance with Mr. Biden, Mr. Scholz was repeatedly asked about Nord Stream and Germany’s reliability as a partner to the West. Mr. Scholz called Russia’s moves toward Ukraine “a serious danger to security in Europe” that requires a united response from the West.
“We have made it clear: If there would be a military aggression against Ukraine, then there will be hard, commonly agreed and wide-reaching sanctions. The costs for Russia will be very, very high,” Mr. Scholz said. “I believe this message has been delivered in a way that it has been understood in Russia.”
Mr. Macron’s diplomatic efforts allow him to burnish his credentials as a statesman before he faces re-election in April.
The French public has long expected its leaders—from Gen. Charles de Gaulle to former President
Nicolas Sarkozy
—to act with autonomy on the world stage. France is the European Union’s only major military power with its own nuclear arsenal.
“Mr. Macron needs to bolster his record,” said Tatiana Kastoueva-Jean, an analyst at the Paris-based think tank IFRI.
Mr. Macron is also filling a leadership void in Europe left by the departure of Chancellor
Angela Merkel
of Germany. Her successor, Mr. Scholz, has come under fire at home for his relative absence from the diplomatic scene since the start of the Ukraine crisis while other European leaders have been more visible.
France and Germany share the view that the U.S., the U.K. and some Eastern European states have been too alarmist about the buildup of Russian forces.
France and Germany are eager to demonstrate unity with the U.S. and other NATO allies, but both countries have been historically skeptical of the prospect of Ukraine joining the alliance. Germany was also slower than the U.S. to show support for the protests of 2013 in Kyiv that eventually led to the departure of pro-Russia President Viktor Yanukovych.
What sets Germany apart is its high dependence on Russia for its energy supplies and the economic disruption it would face should Russian gas deliveries be interrupted by a conflict. The country imports well over half its gas from Russia and this dependence is set to rise as it phases out its last nuclear power plants this year and shifts away from coal.
Mr. Scholz has also faced criticism in the U.S. for refusing to send weapons to Ukraine. Chancellery officials have said Mr. Scholz was working behind the scenes to defuse the crisis.
Ahead of the U.S. and German leaders’ meeting in the Oval Office on Monday, Mr. Biden said the two nations were “working in lockstep to further deter Russian aggression in Europe.”
On Monday, Germany said it was sending up to 350 troops to Lithuania as part of NATO’s enhanced forward presence on the alliance’s eastern flank. Foreign Minister
Annalena Baerbock
of Germany, who was in Kyiv on Monday, said she plans a trip to the frontline zone in eastern Ukraine and will visit a military hospital that Germany has supplied with medical equipment. She added that Germany is ready to continue backing Ukraine financially.
“We’re ready to pay a high economic price because what’s at stake is the security of Ukraine,” she said.
Some analysts warn that Mr. Macron risks playing into the hands of Mr. Putin with his outreach to Moscow.
In discussing plans to revamp European defense, analysts said, Mr. Macron must be careful not to undercut NATO’s role in the continent’s security.
—Alex Leary in Washington and Ann M. Simmons in Moscow contributed to this article.
Write to Gordon Lubold at Gordon.Lubold@wsj.com, Noemie Bisserbe at noemie.bisserbe@wsj.com and Bojan Pancevski at bojan.pancevski@wsj.com
