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Germany suspends critical oil pipeline with Russia, triggering astronomical threat by Russia

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Germany's Chancellor Olaf Scholz (Sergei Guneyev\TASS via Getty Images)

German Chancellor Olaf Scholz announced Tuesday that his country has stopped the certification process of the Nord Stream 2 pipeline after Russian troops moved into Ukrainian territories.

"The situation now is fundamentally different," Scholz said, explaining that he needed to "send a clear signal to Moscow that such actions won’t remain without consequences."

Why does this matter?

The Nord Stream 2 pipeline, which was not yet functional, has been a hotly contested pipeline in European affairs. The pipeline would permit Russian oil to flow directly to Germany, thereby depriving Ukraine of billions of dollars in oil-transit taxes. The pipeline would also increase Russia's geopolitical influence in Europe, an undesirable prospect for Western allies considering that Germany is already reliant upon Russian oil.

Thus, Scholz's announcement means Germany is serious about causing Russia economic harm, which in theory could deter Russian President Vladimir Putin from moving forward with plans for a full-scale military invasion of Ukraine. But it remains to be seen whether a temporary setback of the Nord Stream 2 would convince Putin to back down.

What was the reaction?

Russia responded by threatening to significantly raise energy prices, underscoring Europe's dependence on cheaper Russian energy supply and Russia's desperation for the Nord Stream 2 pipeline to become operational.

"German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline. Well. Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!" Dmitry Medvedev, deputy chairman of the Russian Security Council and former Russian president, said.

To give an idea of the scope of Medvedev's threat, natural gas in the U.S. was $7.03 per 1,000 cubic feet last November, according to the most recent government data. Raising energy prices to that extent, then, would be a double-edged sword; while it would likely send Europe into an energy crisis, it would also damage Russia's economy, which is reliant upon oil export revenues.

Meanwhile, Ukrainian Minister of Foreign Affairs Dmytro Kuleba celebrated Germany's announcement.

"I welcome Germany’s move to suspend the certification of Nord Stream 2. This is a morally, politically and practically correct step in the current circumstances," Kuleba said. "True leadership means tough decisions in difficult times. Germany’s move proves just that."

Still, Richard Grenell, the former U.S. ambassador to Germany, explained why Scholz's announcement is but a small victory, noting the certification process for Nord Stream 2 was only temporarily halted.

"This is purely TEMPORARY. And is entirely too late," Grenell said.

What about President Biden?

Just last year, President Joe Biden lifted sanctions on the company behind the pipeline project, Nord Stream 2 AG, and its chief executive, Matthias Warnig, who is reportedly a close Putin ally.

Although the move essentially approved the completion of the pipeline, the Biden administration reportedly lifted the sanctions in an effort to improve relations with Germany. The sanctions had been implemented by former President Donald Trump.

Just two weeks ago, Biden promised the U.S. "will bring an end" to the pipeline if Russia invades Ukraine. White House press secretary Jen Psaki said Tuesday the Biden administration will announce its "own measures" later Tuesday, but did not immediately offer details about any forthcoming sanctions.

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