Nord Stream 2 gas pipeline faces sanctions under US defense bill | Business| Economy and finance news from a German perspective | DW | 12.12.2019
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Nord Stream 2 gas pipeline faces sanctions under US defense bill

Washington pushes ahead with sanctions against the gas pipeline, claiming it strengthens Russia's grip on EU energy markets. In Germany the move is condemned as an "unfriendly act" to promote US commercial interests.

Under efforts to halt the construction of the $10.5-billion (€9.6-billion) Nord Stream 2 gas pipeline, US lawmakers have imposed sanctions targeted primarily at companies providing pipelaying services to the project. The provisions were adopted on Wednesday as part of the 2020 National Defense Authorization Act, which is an annual Department of Defense policy bill aimed at covering measures unrelated to defense.

The legislation gives the Trump administration 60 days to identify those companies and individuals providing such services, and allows for the revocation of US visas and the blocking of property of these individuals. It also gives 30 days to those targeted by the sanctions to wind down their operations.

Nord Stream 2 is close to completion and largely follows the route of the existing Nord Stream conduit which already delivers gas from Russia to Germany for distribution across Europe. The new pipeline is expected to double the capacity for gas to 110 billion cubic meters annually. Proponents argue the gas will substitute for coal in Europe's energy mix and provide a back-up for renewable sources such as wind and solar power.

US lawmakers have repeatedly criticized the project, saying it would allow Moscow to sidestep gas transit via Ukraine and give Russia's energy giant Gazprom an export monopoly to European energy markets.

Republican senator Ted Cruz said in a statement that the bill, if signed into law, would safeguard Europe's energy security and prevent Moscow from obtaining billions of dollars "that could be used to fuel Russian aggression."

After approval by the House, the US Senate will now have to vote on the bill, which will then go to US President Donald Trump for signing.

Watch video 04:29

Nord Stream 2: A gas pipeline polarizes Europe

Race against time

According to the US State Department the requested report could be delivered to Congress in less than a week, allowing sanctions to take hold in a compressed time frame. "We're going to move quickly," an official said Wednesday.

Some 627 companies are involved in building Nord Stream 2 — among them only two pipelaying specialist firms — Allseas Group from Switzerland and Italy's Saipem. Allseas has deployed the world's largest pipelaying vessel, the Pioneering Spirit, to complete the tube's final offshore stretch.

A map of the Nord Stream 2 pipeline

Gazprom has said it needs about five weeks to complete the offshore section of the pipeline. The company is confident it can finish the work itself should Allseas be forced to leave the project, saying it would retrofit its own ships as well as ships belonging to Russian contractors.

"We will complete the pipeline one way or another," a Gazprom official said Thursday. "The sanctions, if they come, will only delay the construction and make it more expensive. But they are not going to kill it."

But Mikhail Krutichin, a partner in Russian consultancy RusEnergy, is skeptical about Gazprom's claim. "There are no replacements [to the pipelayer vessels]," he told DW, because a likely alternative vessel, Russia's MRTS Defender, can only lay pipes in depths of up to 150 meters (164 yards).

Sanctions against the members of the consortium financing Nord Stream 2 are less harmful, the experts agree. That is because the Russian state, or even Gazprom itself, has sufficient funds to continue building.

Watch video 02:52

Nord Stream 2 sanctions reflect 'fossil fuel war'

On collision course

The German government has long prepared for sanctions and says it "rejects extraterritorial sanctions that affect German and European businesses."

Matthias Schepp, managing director of the German-Russian Chamber of Commerce, has been terser in his rebuttal, rejecting Washington's claim of a Russian stranglehold on the European gas market as a "fallacious argument."

"A sober look at the facts clearly shows that we are less dependent on Russian gas than the Russians are dependent on hard currency from its gas exports to Europe," he said in a statement Thursday, adding that America would only seek to sell its more expensive Liquefied Natural Gas (LNG) in Europe.

Schepp called on the government in Berlin to prepare countermeasures against Washington, which should also include imposing European sanctions.

The German Eastern Business Association (OAOEV), a trade and commerce body, spoke in a similar vein, saying US interference in the pipeline project should be regarded as "more than an unfriendly act."

"America wants to sell its liquefied gas in Europe, for which Germany is building terminals. Should we arrive at the conclusion that US sanctions are intended to push competitors out of the European market, our enthusiasm for bilateral projects with the US will significantly cool," OAOEV said in a statement Thursday.

Watch video 01:32

Germany needs more Russian gas because of energy transition away from nuclear and coal