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SEPTEMBER 2020

US Congress Prepares Extra Sanctions In Effort To Kill Off Nord Stream 2

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US Congress Prepares Extra Sanctions In Effort To Kill Off Nord Stream 2

Gas pipelines from Russia to Europe

The US has stepped up its effort to kill off the Nord Stream 2 natural gas pipeline, with the announcement of a bill presented to the Congress that would expand sanctions against companies participating in the project. The latest US machinations pose a great challenge for the EU as a whole as well as for individual member States, which must decide whether to comply with the latest US dictates – and thereby lock themselves into dependency on much more expensive and distant gas suppliers for many years – or to defy the US actions and face the prospect of a major sanctions war with the US.

A bipartisan group of U.S. senators on Thursday introduced a bill proposing to retroactively expand the scope of sanctions enacted in December to include any company that will or has provided insurance, equipment and technology services, port facilities, tethering, site surveying, or even the placing of rocks on the Gazprom-owned infrastructure project. It also applies to the TurkStream pipeline from Russia to Turkey.

The December sanctions targeted pipe-laying ships, causing Swiss-Dutch company Allseas to pull out of the project just before Christmas.

“The original sanctions legislation … was tremendously effective at thwarting the completion of the Nord Stream 2 pipeline,” New Hampshire Democratic Senator Jeanne Shaheen said in a statement. “We must now continue that effort and ensure that Russia does not surreptitiously extend its malign influence throughout Europe.”

An article in Russian outlet RBC last week reported that the pipe-laying ship most likely to resume construction on Nord Stream 2, Akademik Cherskiy, was removed from the Gazprom fleet’s official website. It is now listed in Russia’s ship registration database as belonging to the Samara Thermal Energy Property Fund — a private joint venture between two regional Gazprom subsidiaries.

Gazprom Flot’s apparent divestment of the ship is widely perceived as an attempt to shield itself from sanctions.

The 1,240 kilometre-long pipeline — meant to double the amount of gas shipped from Russia to Germany under the Baltic Sea to 110 billion cubic meters per year — has two parallel sections of pipe, each about 75 kilometres long, left to be laid in Danish and German waters.

The project is fiercely opposed by the US, Poland, Ukraine and the Baltic countries, supposedly on the basis that it as an instrument of Russian geopolitical influence. However, their opposition also has a major economic component, as the US is attempting to capture a large part of the market for the supply of gas that would be left vacant if Nord Stream 2 is not completed for itself (at a much higher cost for EU members), and Poland and the Ukraine in particular fear that Russia may reduce its shipments of gas through their countries once Nord Stream 2 is completed.

Apart from the higher cost of alternative US gas supplies, many European energy companies have invested heavily in the project and would suffer enormous losses if they abandon the project when it is so close to completion.

“Western European energy companies from Austria, Germany, France and the Netherlands have committed to invest almost €1 billion each in the project, and more than 1,000 companies from 25 countries are fully committed to seeing the project completed,” said Sebastian Sass, spokesperson for Nord Stream 2.

When Allseas abandoned the project, Russian President Vladimir Putin vowed in January that his country could finish the job alone by year’s end.

Akademik Cherskiy sailed from the Sea of Japan to the Baltic, arriving in May. By mid-May, aerial photos showed sections of pipe being moved at the Nord Stream 2 logistics base off the German port of Mukran. It is expected that the final pipe-laying will take three to four months.

However, doubts remain over whether the Cherskiy can complete the project under the terms of Nord Stream 2’s construction permit from the Danish Energy Agency, which would be certain to face a series of legal challenges if the sanctions are ineffective.

If Washington passes the legislation— or actually imposes the December sanctions against the main Gazprom entity, which it has so far refrained from doing — that would put huge pressure on the EU to respond given the company supplies some 40 percent of Europe’s natural gas.

Josep Borrell, the EU’s high representative for foreign affairs and security policy, affirmed last year, “The EU does not recognise the extraterritorial application of U.S. sanctions, which it considers to be contrary to international law.”

“We should remember that in energy there is mutual dependency,” Borrell said last month at Germany’s annual ambassadors’ conference. “We need a smart balance between firmness and sanctions with Russia with a careful attempt at engagement in selective areas.” LINK

Nonetheless, the EU has repeatedly given in to US demands in the past. A question submitted on 23 March by French MEP Emmanuel Maurel asking the Commission what it intends to do to protect European companies involved in the project has so far gone unanswered.

Meanwhile, the transit of Russian gas through Poland is set to continue despite the geopolitical disputes, threats and other obstacles. A gas transit deal between Russia and Poland concluded in the 1990s expired on May 17, as Warsaw amends its energy regulations to comply with European Union rules and seeks to reduce its dependence on Russian fuel.

On May 17 Poland’s gas grid operator started auctioning off capacity on the Yamal pipeline that carries Russian gas from the northern Yamal peninsula to Poland and on to Germany. The pipeline through Poland has annual capacity of 33 billion cubic metres (bcm).

“The new mechanism entered into force on May 17 and there is a client who uses the new mechanism. One can assume that it is Gazprom Export, which has been using this route from Russia to Germany. It booked 90% of capacity for the third quarter and on Monday booked capacity for June,” Piotr Naimski told Reuters.

On July 6 an annual auction will be held for pipeline capacity between 1 October 2020 and 30 September 2021 on the EU’s pipelines.

Although the Nord Stream-2 undersea pipeline expected was expected to be completed early next year, construction has faced many delays because of US sanctions. In the meantime, it is expected that Russia will continue to transport gas through Poland as before:

“Taking into account a potential delay in Nord Stream-2, it seems that gas transit via Yamal will be continued. Most likely Yamal will be used in the same or very similar extent as it has been up to date,” Naimski also said.

Gazprom’s spokesman Sergei Kupriyanov told Reuters last week that gas would still transit through Poland, but did not go into details about whether transit fees might rise.

Nord Stream 2 is meant to carry 55 billion cubic meters of gas from Russia to Germany via the Baltic Sea when it is completed in 2019, doubling the capacity of the existing Nord Stream pipeline.

Germany has recently begun linking Nord Stream 2 with continued Ukrainian gas transit.

“After Nord Stream 2 is finished, the role of Ukraine as a transit state will have to remain because it is a strategic point for us and Germany is prepared to participate in that process,” Merkel said.

Putin also addressed U.S. opposition to the pipeline project, saying it is a way for President Donald Trump “to promote the interests of U.S. producers, trying to push for the sale of U.S. shale gas.”

However he said that American liquefied natural gas is 30 percent more expensive than Russian pipeline gas… LINK

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