The Daily Update - Trump threatens Germany

The leader of the free world has again used one of his two favourite words, sanctions (the other of course being tariffs), this time to threaten Germany over the Nord Stream 2 project. The proposed project is a 1,225-kilometer pipeline to ship gas from Russia under the Baltic Sea to Germany and would double the capacity of the existing Nord Stream pipeline, however, the idea has also divided the European Union.

Germany’s problem is that it produces very little energy. It imports 92% of its gas needs and a massive 98% of its oil needs. As such, Germany needs to step up efforts to secure a reliable supply of gas. With Germany weaning itself off of nuclear and coal power generation, natural gas must take up the slack, especially for its manufacturing sector.

However, by concentrating its gas imports from Russia, Germany has raised eyebrows. Not only on the other side of the pond. Many believe it risks becoming too dependent on what they consider to be an adversarial source. This could make Germany more vulnerable to threats of cutting off that supply. Added to this, countries in Eastern Europe, the Baltic Sea and the Nordic also believe the proposed pipeline would increase Russia’s economic grip on Europe. Added to this, Nord Stream 2 is controversial because Russia seems to be by-passing Ukraine for geopolitical reasons. Both Nord Stream projects are offshore via the Baltic Sea and by-pass Ukraine altogether. Currently, about 40% of Europe’s natural gas supply from Russia flows through Ukraine.

Trump told reporters last week ‘We're protecting Germany from Russia and Russia is getting billions and billions of dollars from Germany’ adding the second pipeline ‘really makes Germany a hostage of Russia if things ever happen that were bad’. He has even threatened to move US troops out of Germany and relocate them to Poland.

Of course, the threats have nothing to do with US natural gas producers who are eyeing Europe as a major export market. Indeed last week the Polish Oil and Gas Company (PGNiG) and U.S. company Venture Global LNG signed a deal for 1.5 million metric tons of LNG per year from 2023, bringing the total planned purchase from the Polish company to 3.5 million metric tons per year, worth around USD8bn. At the moment Poland gets most of its gas from Russia, however that contract ends in 2022.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.