In February 2021, the White House called Nord Stream II a bad deal for Europe. Reuters reported that 18 companies, including major European insurers, backed out of business associated with the pipeline after pressure from Washington. It was, therefore, something of a volte-face, albeit one that has been telegraphed for a while, when Germany and the US announced a deal allowing the pipeline to go ahead on July 21. The agreement was billed as two allies united against potential Russian aggression, but not everyone is convinced.

The announcement instantly provoked a response from Ukraine, which fears for its energy security. An alternative route to supply Western and Central European countries makes Eastern Europe vulnerable to politically motivated supply cuts. Quite aside from this, Kyiv receives around USD 2-3bn a year from gas transit through its territory. Although Germany has pledged a special envoy to extend the current transit arrangement, that hasn’t persuaded many in the Ukrainian capital who complain of being strong-armed by their ostensible allies. The Kremlin says that Nord Stream II is strictly a commercial venture. Even if that’s true, it presents an undeniable geopolitical risk that remains unmitigated.

US Republicans may grumble, but most of the pipe-laying took place during the Trump administration, despite the sanctions which rankled Berlin. The deal essentially represents an acceptance of current facts on the ground: it’s tough to stop a project that is 98% complete. Nobody should expect Kyiv to accept the outcome though. Promises of support for a green energy transition and reverse-flow systems don’t counterbalance the argument that this pipeline will weaken Ukrainian security. To present a united front against geopolitical competition, however, Washington needs its strongest allies, including Germany. Six months ago, Nord Stream II was too hot to handle, but the White House has grudgingly acquiesced to its inevitability. It serves as a testament to realpolitik and the limits of American power.


Many companies, including major European insurers, backed out of business associated with the Nord Stream II pipeline,  what the impact will be on the insurance market?. Find out with Axco.