Germany Pulls Plug on Putin's $11Bn Gas Pipeline, Nord Stream 2

Germany has halted the Nord Stream 2 pipeline project that would have significantly increased its supply of Russian gas, in response to Moscow's actions in eastern Ukraine.

German Chancellor Olaf Scholz announced Berlin would stop the certification of the pipeline, which has been constructed at a cost of $11 billion but is not yet operational.

It is estimated to be worth about $2.7 billion a year to the Russian economy, and about $1.8 billion for Germany. Many Western leaders and U.S. senators have suggested the pipeline gave President Vladimir Putin a geopolitical weapon in Europe.

"We need to reassess the situation also with regard to Nord Stream 2. It sounds very technocratic but it is the necessary administrative step in order to stop certification of the pipeline," Scholz said on Tuesday.

It comes after Putin announced that Moscow would recognise the sovereignty of self-proclaimed "people's republics" of Donetsk and Luhansk in Ukraine, where he has sent in troops in what he claims is a "peacekeeping" mission.

Scholz had been tight-lipped about the $11 billion pipeline until Tuesday, but he said that following Putin's actions, "the situation has fundamentally changed."

Earlier on Tuesday, Ukrainian president Volodymyr Zelenskiy had demanded an immediate halt to Nord Stream 2.

Timothy Ash, emerging markets senior sovereign strategist at Bluebay Asset Management told Newsweek earlier this month that Ukraine's huge gas transit capacity would play into Putin's hands even if the pipeline was scuppered.

"If he is successful in what he wants to do to Ukraine and puts it under his sphere of influence, then he does not need Nord Stream 2."

With gas prices on the continent already high, the cost of energy has surged even further on Tuesday amid concerns over Putin's next move and the threat of further sanctions.

Oil prices approached $100 a barrel, the highest in more than seven years. The price of Brent crude was up 3.5 percent, while West Texas Intermediate was trading at nearly $95.50 a barrel, up about 5 percent.

Russia provides more than a third of Europe's supply and European gas futures briefly jumped more than 13 percent on Tuesday.

Former Russian president Dmitry Medvedev warned of the consequences of sanctions and Scholz's ending of Nord Stream 2.

"Welcome to a new world where Europeans will soon pay 2,000 euros for a thousand cubic meters of gas!" he tweeted.

There is expected to be a swift response against Moscow with European Union ministers meeting on Tuesday to discuss sanctions.

These are expected to include targeting banks financing Russian military activities and curbing the ability of Russia to access the EU's financial markets.

Europe will also sanction 27 entities linked to "illegal activities" in the rebel regions, CNN reported.

On Tuesday, British prime minister Boris Johnson announced sanctions against five Russian banks and three "high net worth" individuals: Gennady Timchenko, Boris Rotenberg and Igor Rotenberg.

Vladimir Putin and Nord Stream 2
Pipes of the Nord Stream 2 gas pipeline near Lubmin, Germany. Nord Stream 2 are shown in this image from February 2, 2022. President Vladimir Putin's recognition of two breakaway republics in Ukraine has led to Germany ending the pipeline project. Getty