Five things to know about Nord Stream 2 shutdown

Germany announced Monday it would block certification of the Russian Nord Stream 2 natural gas pipeline after Russian President Vladimir Putin recognized the independence of two separatist regions in Ukraine.

The move to halt the project, the latest in a complex saga, has forced world leaders to weigh energy needs against international tensions.

The pipeline was set to carry natural gas from Russia to Germany, prompting concerns last year that it would further isolate Ukraine by bypassing the nation.

By the time German Chancellor Olaf Scholz announced the shutdown, pipeline construction had already been completed, though it was still awaiting final certification before it could begin pumping.

Here are five things to know about the pipeline:

It's been controversial every step of the way

The Biden administration made the decision to drop sanctions against those involved in its construction last year, determining it'd be impossible to prevent construction without sanctioning German entities too.

The decision immediately sparked backlash from members of Congress, both GOP critics of the president's energy policy and some Democrats. In August, Senate Foreign Relations Committee Chairman Bob Menendez (D-N.J.) joined his counterparts in other national legislatures calling on the U.S. and Germany to reverse the decision.

"The EU and United States must work together to increase sanctions pressure on the Kremlin to counter aggression in Ukraine," they wrote at the time. "We insist that any further agreements on Nord Stream 2 necessitate consultations across the transatlantic family. Moreover, such diplomacy should happen with the fundamental principle in mind - countering malign Russian aggression is in all of NATO's, all EU members, and our partners in Central and Eastern Europe vital national security interests."

The US has followed through with the threat of sanctions

President Biden threatened the pipeline a full two weeks before Scholz's announcement, saying on Feb. 7 that it would be shut down if Putin invaded Ukraine.

"If Russia invades, that means tanks or troops crossing the border of Ukraine again, then there will be no longer a Nord Stream 2. We will bring an end to it," Biden said at a joint press conference with Scholz. "I promise you we will be able to do that."

Biden did not specify then whether that would mean additional sanctions, but the president confirmed Wednesday that sanctions will take effect on Nord Stream 2 AG, the company that constructed the pipeline, as part of the sanctions package against Russia.

"These steps are another piece of our initial tranche of sanctions in response to Russia's actions in Ukraine. As I have made clear, we will not hesitate to take further steps if Russia continues to escalate," the president said in a statement.

On Wednesday afternoon, Sen. Ted Cruz (R-Texas) announced he would drop holds on certain State Department nominees in response to the sanctions unveiled by Biden, which he called "the right decision."

The biggest implications may be political in nature

Experts have said the proxy fight over the pipeline could mean a conflict where both sides use energy supplies and transportation as leverage amid the broader geopolitical fight.

In Europe, "there was this idea that Russia ... has always been a reliable supplier, and that it would not use energy as a political tool. This belief has now been shaken in the last at least half a year," Liana Fix, a resident fellow at the German Marshall Fund, told The Hill. "And so the debate about energy security in Europe has taken an entire jump forward."

Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies Gas Research Program, told The Hill in an email that the move has major political ramifications on the German side as well.

It "indicates a break with the previous German government's position of insulating [Nord Stream 2] from politics," she said. "Germany is now willing to add a political dimension to what normally would have been a technical/regulatory procedure. As such, [blocking certification] introduced further uncertainty over whether and when NS2 will be allowed to operate."

The U.S. also has "to recognize that we buy a certain amount of oil from Russia, something like 20,000 barrels a day," said former U.S. Ambassador to Azerbaijan Richard Morningstar, the founding director and chairman of the Global Energy Center at the Atlantic Council. "So if oil were cut off, I think that would have an inflationary effect, although I think we could find another source."

It's not clear yet how the shutdown will affect supplies and prices

While construction on the pipeline was complete, it had not yet come online, meaning no natural gas was flowing at the time of Germany's announcement on Tuesday. However, once it was certified, the pipeline was set to carry 151 million cubic meters of liquefied natural gas per day, equivalent to more than 5 billion cubic feet.

Europe, like much of the world, has been in the midst of an energy crunch in recent months, however, and top Russian official Dmitri Medvedev suggested Tuesday that European gas prices would spike as a result.

"Welcome to the brave new world where Europeans are very soon going to pay 2,000 euros for 1,000 cubic meters of natural gas!" tweeted Medvedev, the deputy chairman of Russia's Security Council.

Russia supplies about 40 percent of natural gas imports to the European Union, and as of Wednesday European gas prices had increased about 20 percent from Monday. Most of the rest of the supply comes from Algeria and Norway, the latter of which is already at pipeline capacity.

Biden has said he will work to ensure gas continues flowing to Europe from other allies, including Qatar and Australia.

"Prior to Scholz's decision, there was an expectation that NS2 would be certified and start flowing gas in the second half of 2022 thus providing additional capacity for refilling European storages which are bound to be extremely low by the end of winter," Yafimava told The Hill. "This schedule is now questionable, although not impossible. If a diplomatic solution is found to the Ukrainian crisis, one would imagine this to be reflected in the revised government's assessment of NS2 thus clearing a way for certification."

It could have major implications for Europe's, US's energy futures

Decarbonization advocates, including U.S. climate envoy John Kerry, have said natural gas should be a bridge to transition to fully renewable energy, rather than a long-term replacement for fossil fuels.

Morningstar told The Hill Tuesday that the ongoing crisis underscores that value as a transitional fuel.

"All of this that's happening now in Ukraine ... really shows that gas is going to be important" in at least the near term, he told The Hill. "It's really important that the U.S. and this administration have a clear message that gas is important and that the aspect of our LNG [liquefied natural gas] is critically important from a national security standpoint, from an energy standpoint ... the importance of gas and the continuing importance of gas is not a zero-sum proposition of the energy transition."

However, in Germany, "my sense is that now everybody is sort of pushing the need to really make the energy transition, and to sort of see this almost as an opportunity to get away from gas sooner rather than later," said Teresa Eder, a program associate with the Wilson Center's Global Europe Program.

"It's going to be a very tough process, obviously, but I think it's the only sustainable process in the long run, and especially now, with gas prices really rising, there is even more incentive to get away from fossil fuels and to really invest in solar and wind. And maybe also in the case of Germany, rethinking how whether shutting down nuclear power plants is actually going to help or whether they should keep them running," she said.

Germany has announced a phaseout of many of its nuclear power plants in recent months, announcing in December that it would shut down three of its remaining six nuclear reactors. The six plants collectively comprised about 12 percent of electricity generation in the country.

Rachel Frazin contributed