Denmark allowed; Gazprom to resume gas pipeline construction in its territorial waters, but US sanctions may stop the project
This week, the lower and upper houses of the US Congress approved amendments to tighten sanctions against the construction of the Russian Nord Stream 2 pipeline. Previous sanctions, which came into force in December last year, put the pipelaying companies involved in the construction at risk. The main contractor – the Swiss company Allseas Group – withdrew from the project, which suspended the construction of the gas pipeline almost at its final stage.
Gazprom is trying to finish laying the pipes with the help of the Russian ship Akademik Chersky, which, however, cannot fully carry out the work without the special barge Fortuna. Denmark, which generally allowed pipe-laying in its territorial waters last fall, did not give the green light to use the barge Fortuna because the latter uses anchor positioning instead of dynamic positioning. Anchor positioning requires the use of an anchor in deep waters, which is contraindicated in the Baltic Sea, as the anchors can touch unexploded ordnance after WWII at the bottom of the sea. However, in early July, the Danish authorities gave permission to use anchor positioning in their territorial waters..
After that, the United States announced the strengthening of sanctions against participants in the Nord Stream 2 project. First, the US Department of State announced the lifting of restrictions that the department had previously imposed to prevent the pipeline from being sanctioned by the Countering America’s Adversaries Through Sanctions Act (CAATSA) of 2017. The provisions of this draft law give the administration the power to impose sanctions on any person or company involved in the Nord Stream 2 project or another gas pipeline of Gazprom – Turkish Stream..
Also, this week, both houses of Congress passed an annex to the new US defense budget for 2021 (National Defense Authorization Act, or NDAA), which expands the US sanctions on Nord Stream 2, which came into force in December last year. The expanded sanctions target any companies that will work with Russian vessels trying to complete the pipeline. This NDAA amendment must be signed by the President of the United States to take effect. The NDAA is one of the few bills that pass the status of law every year, as the security of the country depends on it, therefore it is often used by legislators as a tool for implementing initiatives that are not directly related to the financing of defense spending..
The United States actively opposes the construction of Nord Stream 2, as it believes that it increases Europe’s energy dependence on Russia, and also aims to deprive Ukraine of revenues from the transit of Russian gas to Europe. However, the question of whether active US actions will be able to stop Nord Stream 2, which has already been completed by more than 90%, cannot be answered unequivocally..
“The Nord Stream 2 gas pipeline is now facing the biggest challenge from the United States since the start of its construction,” said an expert at the Center for European Policy Analysis and the Jamestown Foundation. Margarita Assenova (Margarita Assenova, CEPA, Jamestown Foundation). “I think extended US sanctions will be able to stop the project and prevent the pipeline from being put into operation.”.
She explains that the removal of restrictions by the US Department of State on the use of the provisions of the CAATSA law allows the Trump administration to impose sanctions on any companies involved in the construction of Nord Stream 2, including European co-financing companies, or companies helping with the supply of equipment and security. insurance. Potential extended sanctions under the NDAA, if approved by the president, would allow any vessels involved in the pipe-laying work, insurance companies, contractors, or agencies to be required to certify the pipeline before it can function. Thus, even if today there is permission to use the Fortuna barge to complete the pipeline in the Baltic Sea, the sanctions deprive the Russian vessels of any support. “Akademik Chersky has not been able to find a western insurer for the project since March, and now it will be impossible,” notes Margarita Assenova.
“Thus, this could be the end of Nord Stream 2,” the expert concludes. “But even if this turns out to be not the case, and it is somehow miraculously completed, there will not be a single Western agency that would take the risk and certify the project for operation. And I’m not even talking about the Third Energy Package yet. “.
The “Third Energy Package” of the European Union, or the Gas Directive, specifies that a gas supplier cannot simultaneously be the owner of the gas pipeline, and its operator must also grant access to the pipeline to other gas suppliers. This EU provision demonopolizes Gazprom’s position.
Former US Department of State Sanctions Policy Coordinator and Atlantic Council expert Daniel Freed (Daniel Fried, Atlantic Council) notes that Secretary of State Mike Pompeo overturned the current restrictions of the CAATSA, but the provisions of the Congress require the US president to consult with allies about the application of sanctions. At one time, the legislators introduced this provision, as they wanted to avoid direct confrontation with Germany and the European companies involved in the construction of the project. The US president can theoretically ignore this position, especially since after three years of negotiations between the US and Germany, no consensus was found on the Nord Stream 2 issue, but such a move would increase tensions in an already weakened transatlantic relationship. The deteriorating relationship between Western allies benefits the Kremlin, says Daniel Fried. “CAATSA is not a simple tool for imposing sanctions on Nord Stream 2,” he notes..
If sanctions, under the provisions of CAATSA, can be imposed without delay, then the US defense law is usually signed at the end of the year. The question arises, will Gazprom be able to complete the construction of the remaining kilometers of the pipeline before that time? Daniel Fried notes that an early version of the NDAA amendments contained a retroactive sanction clause, which would mean that the sanctions would apply retroactively. However, it was decided to abandon this provision for legal reasons..
The former coordinator of the State Department’s sanctions policy believes that the sanctions policy regarding Nord Stream 2 may not be the most successful: Nord Stream 2 has become a symbolic issue between Germany and the United States, which, in my opinion, overlooks the fact that the problem actually lies in Russian energy leverage in Europe in general, and in relation to Ukraine, the Baltic countries, Poland and other Central European countries in particular. ” According to Daniel Fried, the US and Europe should focus on mitigating the potential risks of using energy as leverage from the Kremlin and continue to diversify energy sources and energy infrastructure in Europe..
A similar point of view is shared by the director of the Caspian Political Center Efgan Nifty (Efgan Nifti, Caspian Policy Center). He believes that new US sanctions, if applied, are likely to be able to slow down, but are unlikely to stop the completion of the construction of Nord Stream 2: “Perhaps there will be other ships and companies that will participate in this process. I think that at the moment these sanctions are hindering or at least delaying the process of completing construction. “.
“In general, we are seeing a significant decline in hydrocarbon prices, which affects the interest in investing in oil and gas fields. And we’ve seen big companies cut their investment by about 30%. This is an additional problem for the construction of the gas pipeline, ”adds Efgan Nifti..
He also notes that if Gazprom nevertheless completes the construction of Nord Stream 2, it will have to compete with an increased supply from various gas suppliers, including LNG supplies, and in an environment of lower prices. Despite the growing demand for energy in Europe, it has opportunities to diversify its energy supply. This is the key to ensuring Europe’s energy security, the expert said..
However, he does not expect the US to ease pressure on Nord Stream 2. “Regardless of the next US administration, there is tremendous bipartisan support for the action being taken. Therefore, I think this line will continue, ”says Efgan Nifti..
Voice of America journalist. Prior to that, she worked for international non-governmental organizations in Washington and London, in the Russian-language version of the Estonian daily newspaper “Postimees” and as a spokesman for the Estonian Ministry of Internal Affairs. Interests – international relations, politics, economics