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Nord Stream 2 gas link developer shrugs off Wintershall Dea loan move

Highlights

German company plans no 'further disbursements' on sanctions

Nord Stream 2 'fully funded' to complete link, begin operations

EU sees need for 'limited' engagement with Moscow on energy

London — The developer of the almost-complete Nord Stream 2 gas pipeline from Russia to Germany said Feb. 26 that it had the financing in place to complete the pipeline, shrugging off a decision by Germany's Wintershall Dea to suspend its funding.

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Wintershall Dea said this week it did not plan to make any more payments to the project because of the threat of US sanctions.

In response, a spokesperson for Nord Stream 2 said: "Nord Stream 2 is a fully funded project and has the necessary financial support to complete the investment phase and to be put into the operation phase."

One of five European gas companies helping to finance the pipeline, Wintershall Dea pledged to loan Eur950 million ($1.15 billion) to Nord Stream 2, but having lent Eur730 million to date it said "further disbursements" were not planned.

In its 2020 annual report on Feb. 24, Wintershall Dea said its Eur730 million in loan payments to Nord Stream 2 were completed prior to the revision of the Countering America's Adversaries Through Sanctions Act (CAATSA) in July 2020.

The original CAATSA guidance was that sanctions could not be imposed on Russian pipeline projects that had been approved before August 2, 2017, and only after coordination with US allies.

The updated guidance in July removed the timing caveat, meaning Nord Stream 2 was then included.

"The US has decided to put the Nord Stream 2 project in a broader geopolitical framework and is threatening all industries or parties involved in the project with sanctions," Wintershall Dea said.

"Recent activities of the US could have consequences for the timing of construction of Nord Stream 2," it said.

It added that further sanctions within the scope of the Protecting Europe's Energy Security Clarification Act (PEESCA) "cannot be excluded."

Despite the warnings, CEO Mario Mehren said Europe needed the pipeline due to falling domestic gas production, adding that he had seen signs of a desire for "better relations" between the US and Europe.

Certification requirement

According to a report from the administration of new US President Joe Biden to Congress, a total of 18 companies have pulled out of participation in the Nord Stream 2 project, including insurers and certifiers, because of the threat of US sanctions.

They include Norway-based certification company DNV GL, which had been engaged by Nord Stream 2 to certify the pipeline system once completed.

It remains unclear which company Nord Stream 2 might look to for this service once pipelaying is finished, but the developer said all requirements would be met.

"The planning, construction and operation of Nord Stream 2 does and will comply with national permits and relevant legislation as well as with relevant technical standards," a project spokesperson said Feb. 26.

Russia has its own certification companies, including Intergazcert, which was founded by Gazprom in 2016.

According to the permit for laying the remaining kilometers of Nord Stream 2 in Danish waters, there are no requirements as to which company be used to carry out the certification work.

The Fortuna pipelaying vessel is currently working in Danish waters to lay the pipeline, which before work started in early February had around 150 km left to lay.

EU stance

While the US sanctions measures continue to impact Nord Stream 2, the EU remains divided on the project.

Countries in eastern Europe -- including Ukraine and Poland -- continue to express their strong opposition to the project, calling for it to be halted.

However, Germany remains in support of the pipeline being completed despite increased pressure from opponents due to the imprisonment of Russian politician Alexei Navalny.

And the EU's top diplomat, Josep Borrell, stressed this week the need to remain engaged with Moscow in certain areas, including energy supply.

Speaking on an Atlantic Council webinar on Feb. 22, Borrell said: "We need to find a modus operandi and preserve a limited engagement on issues like Iran -- we need Russia to go back to the full implementation of the Iran deal -- on climate change, and on energy supply."

Russia, he said, "is a big energy supplier to many European countries."

Speaking after his recent trip to Russia during which foreign minister Sergey Lavrov called the EU an "unreliable partner," Borrell said Moscow was "disconnecting" from Europe.

However, he said sanctions in response to the Navalny case should only be imposed on Russian officials directly involved, and should not spill into other areas.

The European Parliament has called for Nord Stream 2 to be abandoned in response to the treatment of Navalny.