US Nord Stream 2 Strategy Works 50:50 On Germany – OpEd

President Biden said at a joint press conference along with German Chancellor Olaf Scholz in Feb 2022; “Nord Stream 2 pipeline from Russia  to Germany will not go forward if Russia invades Ukraine…then there will be no longer Nord Stream 2. We will bring an end to it…I promise you we will be able to do that.”

The Ukrainian crisis for the US is less about Ukraine but more about gas. It’s about Germany and, in particular, the Nord Stream 2 pipeline that connects Germany to Russia. It was almost fully-operational and ready to pump. Germans would have got a reliable source of gas energy while Russia would have got a boost to their gas revenues. This win-win situation for both Parties was not liked by the US Foreign Policy establishment. This is why the Biden administration opposed Nord Stream. It’s not just a pipeline; it’s a window into the future bringing Europe and Asia closer while leaving the US on the limb both politically and economically resulting in slowly losing the hold on NATO.

The Russia-Ukraine conflict had the world realigned with new groupings taking shape of the multi-polar world order. Germany in this US-NATO alliance to support Ukraine to oppose Russia was becoming  irrelevant within the EU and NATO. However, the events post Nord Stream 2 attack the German foreign-policy commenced working seriously towards a strategic realignment of their policies towards their own interests. The non-operation of Nord Stream 2 forced  Germany to fundamentally rethink and forget about Nord Stream 2 for the near future or till the present combine team of Chancellor Olaf Scholz continues.

President Biden, NATO and US allies had warned Russia that an invasion would result in devastating sanctions and crippling costs. The US has also been telling its allies to avoid trade with both Russia and China. On 24 Feb., the US, along with Allies and partners  imposed severe and immediate economic costs on Russia in response to Putin’s war  against Ukraine. The sanctions include sweeping financial sanctions and stringent export controls that will have profound impact on Russia’s economy, financial system, and access to cutting-edge technology. The sanctions are to further isolate Russia from the global financial system. The EU, Australia, Japan, Canada, New Zealand and the UK, have in place  their plans for parallel actions. Note that Germany was not really aligned to this game of sanctions keeping their country interests in mind and has been a fence sitter to a degree on US directions.

Over the period nearly 30 countries have imposed various forms of sanctions on Russia’s energy and financial sectors, as well as on Russian import of semiconductors and key technology components. However, some of the countries are talking of a rethink. In a thinly veiled criticism of Washington’s policies, Scholz said “Beijing’s rise did not justify the calls by some to isolate China.”

Germany’s U-Turns

• German Chancellor Olaf Scholz is the first European leader to visit China post commencement of the Russia-Ukraine conflict. The significance of this visit is that Germany has again shown its desire to attain strategic autonomy from the US. This was a goal of the German coalition and of German and European countries before the Ukraine crisis.
• Despite the Ukraine crisis and critical focus on China, German investment in China increased by 30 per cent in 2022.Germany as Europe’s largest economy is  more dependent on China. German imports are up by 54 per cent.  KfW (the German state-owned development and investment bank) is financing a railway project linking North China’s Tianjin city and Beijing Daxing International Airport. China is buying 140 Airbus air-crafts. Before the visit  Scholz has consented  to China Ocean Shipping Company (COSCO) to acquire a stake  of the Hamburg container terminal. In 2002, Volkswagen sold 513,000 vehicles in China – setting a new high and exceeding the company’s own sales in Germany, becoming its most important foreign market. Today, the Volkswagen Group in China has factories across the country, producing vehicles and components in more than 40 plants.
• The ruling SPD believes that German enterprises cannot afford a decoupling from China, since they are already suffering due to the pandemic, the energy crisis and the delinking from Russia. The Scholz visit indicated German strategic autonomy. The same autonomy is visible in the context of German relations with Russia.
• How will Germany maintain its leadership of Europe, if it swings away from US-NATO alliance convergence which has taken place due to the current Russia-Ukraine conflict. Europe is perturbed that Germany is engaging with China .
• According to French officials, President Emmanuel Macron had proposed that he and Scholz should visit Xi together to demonstrate unity and show that Beijing cannot divide European countries by playing their economic interests off against each other — an initiative that the German leader rejected.
• Scholz said he wanted Germany and the EU to cooperate with a rising China — including on the important issue of climate change — rather than trying to box it out.

On the eve of his visit, Scholz  acknowledged that the world had changed drastically since Merkel last visited China in 2019. Russia was a threat to be tackled with Chinese help. Scholz spoke about multi-polarity in the world and the need to expand Germany’s partnerships and seeks strengthening diversification. Olaf Scholz has started to soften his stance on China and cosying up with Beijing. Germany has sought to sell parts of the Hamburg Port to a Chinese state-owned enterprise despite protests from all relevant ministries and is also pushing ahead with the Chinese takeover of a German chip plant. Commerce remains Berlin’s main interest in China. 

Policy Shift to Deal with China

• It appears that Germany is being dictated by the US for its China policy. However,Germany’s economy ministry will also aim to reduce dependence on Chinese raw materials, batteries and semiconductor products. Many German companies remain fixated on the Chinese market, and accuse Berlin of being disconnected from reality.
• Germany is seen to be losing its competitiveness in the face of an increasingly powerful China. American investment in China is only 2 percent of its foreign investment, while Germany’s investment there is 14 percent of its total foreign investment.Germany’s industry has contributed heavily to China’s growth at a price of its own  industrial base. 
• German Chancellor Olaf Scholz wrote in an op-ed article for POLITICO and the German newspaper Frankfurter Allgemeine Zeitung. Scholz defended his trip to China but stressed that German companies would need to take steps to reduce “risky dependencies” in industrial supply chains, particularly in terms of “cutting-edge technologies.” Scholz noted that President Xi Jinping was deliberately pursuing a political strategy of making international companies reliant on China. Chancellor Olaf Scholz insisted that the goal was not to “Decouple” — or break manufacturing ties — from China. US itself continues to trade with China as immediate  Decoupling of tradeis not possible.It has to be in a phased manner.

Scholz is believed to have told China “to stop its support for Russia’s war against Ukraine and as a permanent member of the UN Security Council, China bears a special responsibility.”  He also cautioned  Beijing that it should not pursue policies striving for “Hegemonic Chinese dominance of the world order.”

The war in Ukraine has exposed the geopolitical contradictions. Berlin was forced to abandon a natural gas pipeline connection to Russia, scramble for energy from elsewhere and promise to boost its defense spending. The US in regard to its foreign policy has repeatedly provoked clashes and even wars across the world. A lot of countries and regions, even including many of its allies, no longer regard it as a reliable country and have lost their confidence in its so-called democratic system.

The significance of  German Chancellor Olaf Scholz’s this visit and the timing is that Germany is trying to show its desire to attain independence from the US dictates and influence. This was a goal of the German coalition and of German and European countries before the Ukraine crisis. But the Russian invasion in Ukraine saw a major shift by being forced to once again come under the US-NATO leadership due to security concerns, with the US playing the game smartly and cleverly in the name to weaken Russia and try a regime change of President Putin. 

The Ukraine crisis has made Europe pay the price of inflation and reduced energy supplies courtesy the American Energy game and sanctions which was making Europe economically linked to Russia and resulting in the reduction of US influence. Germany seems to be ready to not give up on China despite European and domestic opposition. Germany needs to look into its economic development and exercise its domestic and strategic options to acquire the leadership status within the EU to match up to the Merkel era. Merkel was the first female chancellor of Germany and during her tenure as Chancellor, Merkel was frequently referred to as the de-facto leader of the EU, the most powerful woman in the world, and since 2016 the leader of the free world.