US welcomes German move to stop Nord Stream 2, promises 'our own measures'

The US signaled Feb. 22 it was prepared to block the Nord Stream 2 natural gas pipeline in coordination with Germany in retaliation for Russian President Vladimir Putin ordering troops into eastern Ukraine.

US President Joe Biden "made clear that if Russia invaded Ukraine, we would act with Germany to ensure Nord Stream 2 does not move forward," White House press secretary Jen Psaki said on Twitter.

"We have been in close consultations with Germany overnight and welcome their announcement," Psaki said. "We will be following up with our own measures today."

Biden is set to give an update on the Russia-Ukraine conflict Feb. 22, when it will become clearer if the White House is sticking with a limited sanctions response for now or if it is ready to impose harsher measures it has threatened for months.

US lawmakers from both parties Feb. 22 called for more severe economic penalties against Russia than the limited measures announced Feb. 21.

Washington might be "deliberately concealing much more significant economic force projection - the "swift and severe" financial sanctions against multiple Russian banks and senior officials/oligarchs, and export controls barring the use of U.S. technologies—to prevent Russia from readily taking steps to circumvent them," said Kevin Book, managing director at ClearView Energy Partners.

Russia's 'energy weapon'

Concerns about economic blowback may have also "stayed Washington's hand" as well, Book said.

"Moscow could retaliate by firing its 'energy weapon,' and even a modest curtailment of Russian energy exports could accelerate rising energy costs and contribute to inflation," he said.

Russia was the No. 3 oil supplier to the US in November after Canada and Mexico, US Energy Information Administration data showed Jan. 31, as the Ukraine crisis threatens to disrupt the flows.

Platts Analytics expects any disruption in the Russian crude to have a minor effect, as US refiners could backfill by easing exports of US Gulf Coast sour crudes, such as Mars. Lower US imports of Russian oil feedstocks would have a bigger impact, but Gulf Coast refiners could run Canadian or Latin American heavy grades at the cost of margins.

Nein to Nord Stream 2

German Chancellor Olaf Scholz said earlier Feb. 22 that the 55 Bcm/year Nord Stream 2 pipeline to Germany, which was completed in September, could not be certified after Putin's latest escalation.

"I have asked the economy ministry to re-analyze [our] security of supply," Scholz said. "The certification cannot take place now."

The protracted certification process for Nord Stream 2 has been a significant contributor to the recent gas price strength in Europe. The Kremlin has repeatedly said that approval of Nord Stream 2 and gas flows through the new pipeline would help ease the tightness in the European gas market.

The TTF day-ahead price hit an all-time high of Eur182.78/MWh on Dec. 21, an increase of 985% year on year, according to S&P Global Platts assessments.

It was was assessed at Eur71.60/MWh on Feb. 21, but prices surged again on Feb. 22 after Putin ordered troops into eastern Ukraine and Scholz's comments on Nord Stream 2.

The US and EU have for now held off imposing broad economic sanctions that could affect energy and commodity markets after Putin ordered troops into eastern Ukraine.

Specific sanctions will depend on what happens next in the standoff, said Paul Sheldon, chief geopolitical adviser for S&P Global Platts Analytics.

"Anything less than an overt military incursion would depend on the circumstances," Sheldon said.