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OMV buoyed by signs of 'rapprochement' between Germany, US on Nord Stream 2

Highlights

CEO Seele calls for resolution of 'political' conflict

Reports that US prepared for talks with Germany

US sanctions have long delayed completion of gas link

London — Austria's OMV is encouraged by reports the US is ready to engage with Germany over the future of the Nord Stream 2 gas pipeline, with CEO Rainer Seele saying Feb. 4 there should be a "political solution" to a "political conflict".

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The 55 Bcm/year Nord Stream 2 link from Russia to Germany remains incomplete, with the threat of US sanctions against the project delaying its finalization long past its original end-2019 start-up date.

OMV and four other European energy companies -- Anglo-Dutch Shell, France's Engie and Germany's Uniper and Wintershall Dea -- each committed Eur950 million ($1.15 billion) to the Eur9.5 billion project, adding up to 50% of the expected total cost.

Reports this week in the German press suggested the administration of new US President Joe Biden would be open to direct negotiations with Germany over the pipeline.

"I am keeping my fingers crossed for our colleagues to complete the pipeline as quickly as possible, because that should be our objective as a financial investor," Seele told reporters following the release of OMV's fourth-quarter results.

Seele said the recent development over a potential "rapprochement" between the US and Germany over the project was a positive sign.

"There are some early indications that there would be talks between Berlin and Washington," he said, which could see the pressure of sanctions reduced.

"I hope this political conflict can be solved by diplomatic means. I call for political and diplomatic dialogue and rapprochement and not to focus on our investment project," he said.

"We have to wait and see how these suggested talks of rapprochement between Berlin and Washington will play out. It is still early days."

Also speaking on the call, OMV CFO Reinhard Florey said the company's engagement in Nord Stream 2 did not depend on the operating performance of the pipeline.

"It is purely an investment commitment. The repayment of the loan is not called into doubt. There is no reason to make any impairments on our balance sheet," Florey said.

Navalny poisoning

The future of Nord Stream 2 has also been called into question once again in recent days following the imprisonment of Russian opposition politician Alexei Navalny.

In the US, six US senators from both the Democratic and Republican parties on Feb. 3 reintroduced the Holding Russia Accountable for Malign Activities Act of 2021, which would impose targeted sanctions against Russia over the Navalny case.

The bill in particular calls on Germany to withdraw its support for Nord Stream 2 emphasizing the impropriety of its involvement in a project supported by the Russian government given its treatment of Navalny.

Opposition is also growing in Europe, with the European Parliament on Jan. 21 calling for the project to be halted.

And in France, European affairs secretary of state Clement Beaune said Feb. 1 that Nord Stream 2 should be abandoned given Russia's treatment of Navalny and his supporters, though its foreign minister subsequently backtracked, saying France would not meddle in Germany's affairs.

Engie is one of five European energy companies that have lent financial support to Nord Stream 2, which remains incomplete with some 150 km left to lay in Danish and German waters.

However, the Fortuna laybarge is now at the site of the pipeline to the south of the Danish island of Bornholm, either carrying out pipe-laying or preparing to resume work despite US sanctions imposed on its owner KVT-RUS on Jan. 19.

German Chancellor Angela Merkel, meanwhile, has repeatedly backed the project and has resisted calls to cancel it following the poisoning of Navalny and his arrest on his return to Russia last month.

US stance

The White House said on Jan. 26 that Biden's position toward the controversial pipeline had not changed and that he "continues to believe that Nord Stream 2 is a bad deal for Europe".

However, White House press secretary Jen Psaki said the Biden administration would review certain sanctions measures imposed by the Trump administration.

"We are aware that the previous administration imposed new restrictions on activities related to the pipeline under the National Defense Authorization Act, and we will be reviewing those measures," Psaki said.

Nord Stream 2 -- which has been criticized by the European Commission, the US and countries in eastern Europe for focusing too much European gas import capacity on one route and one source --- will double the Russia-Germany subsea gas export corridor to 110 Bcm/year.