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Calls build to accelerate US sanctions pressure against Nord Stream 2

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Calls build to accelerate US sanctions pressure against Nord Stream 2

Highlights

Senators urge Blinken to impose new sanctions

Work to lay 55 Bcm/year pipeline continues

Blinken reaffirms opposition to project in Maas talks

New York — Calls for the US to expand its package of sanctions measures against the Nord Stream 2 gas pipeline from Russia to Germany continue to grow, in a bid to halt the controversial project.

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Work on the pipeline -- which is around 95% complete -- continues, with a second pipelayer due to join the Fortuna vessel soon to speed up operations.

US Secretary of State Antony Blinken reaffirmed Washington's opposition to the project during a visit March 23 to Brussels, which included talks with German foreign minister Heiko Maas.

Germany, though, continues to support the pipeline despite the US position, which has led to heightened trans-Atlantic tensions.

Two US senators late March 23 called on Blinken to intensify the use of sanctions to block the project before it is completed.

In a letter, Senators Jeanne Shaheen and Bob Menendez called on the Biden administration to engage in a "full diplomatic push" to stop Nord Stream 2.

They specifically called on Blinken to accelerate the process of building new sanctions packages through the Protecting Europe's Energy Security Act (PEESA) and the Protecting Europe's Energy Security Clarification Act (PEESCA).

"The Trump administration failed to permanently stop this pipeline, and for almost four years never used the sanctions tools available to do so, so we appreciate your leadership during this critical period as the pipeline is close to completion," the senators wrote.

"We urge you to use all the tools available to stop the pipeline's construction. We would also emphasize that PEESA and PEESCA sanctions are not simply an authority provided to the executive branch -- they are mandated in law -- and publicly available information suggests that further sanctions are warranted at this time," they wrote.

Blinken stance

In a statement March 18, Blinken repeated the US stance that Nord Stream 2 was a bad deal for Germany, for Ukraine, and for the US' Central and Eastern European allies and partners.

"The Department is tracking efforts to complete the Nord Stream 2 pipeline and is evaluating information regarding entities that appear to be involved," he said.

"The Department reiterates its warning that any entity involved in the Nord Stream 2 pipeline risks US sanctions and should immediately abandon work on the pipeline."

In his meeting with Maas on March 23 in Brussels, Blinken underscored the US' commitment to work with allies and partners "to counter Russian efforts to undermine our collective security."

"In that vein, [he] emphasized US opposition to the Nord Stream 2 pipeline," a State Department spokesman said.

The US has a number of legislative tools at its disposal for applying sanctions against companies involved in Nord Stream 2's completion.

They include the 2020 National Defense Authorization Act, or NDAA, which in December 2019 forced Allseas to halt pipelaying work, and its updated version approved in 2021 that includes new provisions related to Nord Stream 2 under the PEESCA.

These expand the threat of US sanctions against companies that provide services to ships laying the Nord Stream 2 pipe and companies that carry out pipeline testing, inspection or certification activities.

Sanctions were imposed by the Trump administration against the Fortuna and its owner KVT-RUS under the separate Countering America's Adversaries Through Sanctions Act, or CAATSA.

The Biden administration, in a report to Congress on Feb. 19, also pointed to only two sanctions designations related to Nord Stream 2 -- against the Fortuna and KVT-RUS.

There had been calls for the Biden administration to intensify sanctions designations to include a wide range of companies involved in the construction of Nord Stream 2, including service companies, insurers and certification companies.

In late February, senior US lawmakers Senator Jim Risch and Representative Michael McCaul slammed the Biden administration for failing to step up its opposition to Nord Stream 2 through increased sanctions designations.

McCaul, House Foreign Affairs Lead Republican, said the Feb. 19 sanctions designations were "wholly inadequate."

"Congressional intent is clear and cannot be ignored: the mandatory authorities passed with bipartisan support in the last two NDAAs are meant to stop the completion of the Nord Stream 2 pipeline. Period," McCaul said.

"Sanctioning only the Russian pipelaying vessel Fortuna and its owner, KVT-RUS -- which were both already sanctioned by the previous administration under separate authorities -- does not meet that intent," he said.

Pipelaying work

The Fortuna -- which uses anchors in pipelaying, meaning a slower rate of work -- resumed operations in Danish waters on Feb. 6.

A second Russian pipelaying vessel, the Adakemik Cherskiy, which has dynamic positioning capabilities allowing for accelerated pipelaying, is expected to join the Fortuna soon.

The vessel departed from the port of Wismar in Germany on March 4 and is currently in waters off Kaliningrad where it was set to undergo sea trials, according to S&P Global Platts trade flow software cFlow.

"Upon the sea trials completion, the vessel will start pipelay works in the Danish EEZ," the Nord Stream 2 developer said at the time. A spokeswoman declined to give more guidance on March 24.

The Fortuna underwent around two weeks of sea trials before beginning pipelaying work.

Nord Stream 2 would allow for an additional 55 Bcm/year of Russian gas to reach Germany on top of the first 55 Bcm/year Nord Stream pipeline.

The fact Nord Stream 2 will alter the European gas landscape significantly once operational has led to major interest in the timetable for pipelaying work.

Without Nord Stream 2, Russia's Gazprom may have to rely on the transit of gas via Ukraine in larger volumes than it intended when it signed a five-year deal at the end of 2019.