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Political rumblings continue as Nord Stream 2 prepares to resume work

Highlights

US calls for 'moratorium' on construction of gas link

Russia rejects US political 'aggression' against project

Akademik Cherskiy, Fortuna vessels both in Baltic Sea

London — As the Nord Stream 2 development company prepares to resume gas pipelaying work on the controversial project in German waters, the political row over the pipeline continues with the US and Russia trading blows in recent days.

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With the US set to vote this week on new sanctions measures against the project that have been included in the country's latest defense spending bill, the stakes continue to rise.

Without the almost-complete 55 Bcm/year capacity Nord Stream 2 pipeline, Russia's Gazprom will have to rely on the transit of gas via Ukraine in much larger volumes than it intended when it signed a five-year deal at the end of last year.

US opposition to the project -- on the grounds that it gives Russia too much leverage over European energy security -- continues to intensify.

"Now is the time for Germany and the EU to impose a moratorium on the construction of the pipeline," the acting US ambassador to Germany, Robin Quinville, told German daily Handelsblatt on Dec. 5.

Quinville said it would send a clear signal that Europe would no longer accept Russia's "malicious" behavior.

In response, Russia's foreign ministry spokeswoman Maria Zakharova denounced US political "aggression".

Zakharova said the US had repeatedly interfered in Russian energy pipeline projects over the past decades, "wherever and whenever they go and regardless of which treaties legitimize them".

US President-elect Joe Biden has also made his position regarding Nord Stream 2 very clear, saying in 2016 that Nord Stream 2 was a "fundamentally bad deal" for Europe, with his election campaign confirming that he would continue to oppose the project.

German waters

Nord Stream 2 remains unfinished, with a little over 150 km left to lay in German and Danish waters.

According to a notice to sea-farers published by the German Waterways and Shipping Authority Stralsund, a 2.6 km stretch of pipe will be laid for both strings of Nord Stream 2 in German waters in the period between Dec. 5 and Dec 31.

Vessels that could potentially carry out the work -- the Akademik Cherskiy and the Fortuna -- are both on standby in the Baltic Sea.

But the German authorities would have to issue a new notice to sea-farers giving an exact date for when work would be carried out several days in advance before pipe-laying can begin.

Asked for comment Dec. 7, Nord Stream 2 told S&P Global Platts it was "not in a position to deliver any information about construction details and planning".

If work resumes, however, it would mark the first activity on laying the pipe for almost a year and would suggest the developer has found a way to continue work despite the threat of US sanctions.

However, a larger section still needs to be laid in deeper Danish waters and Nord Stream 2 must inform the Danish authorities of its plans to lay the pipeline in its waters in advance.

US sanctions

The threat of US sanctions against companies involved in laying the pipeline saw work suspended at the end of last year.

US measures introduced as part of the expanded Protecting Europe's Energy Security Act (PEESA) statute in October target companies involved in pipe-laying at depths of 100 feet or more below sea level.

It remains unclear when and how the Nord Stream 2 operating company will lay the final kilometers of the pipeline in Danish waters.

In the meantime, measures included in the US 2021 National Defense Authorization Act (NDAA) look to tighten the screws further on Nord Stream 2.

House and Senate committees reached agreement on the final version of the bill last week and is expected to be voted on this week. It will then need to be signed off by US President Donald Trump.

The NDAA calls for sanctions on companies that knowingly provide underwriting services or insurance or reinsurance for vessels engaged in the construction of Nord Stream 2, as well as those providing services for upgrades to vessels and for inspection and certification activities.

However, it also provides for the possible granting of a waiver, which could give the project some leeway.