The State Department this week waived fresh sanctions on the Nord Stream 2 AG (NS2) consortium that is building the natural gas pipeline from Russia to Europe as the Biden administration looks to strengthen relationships in the region.
The 745-mile, 5.3 Bcf/d line as designed would traverse the Baltic Sea from Russia, to Greifswald, Germany.
In a report to Congress on Wednesday, the State Department said it was “in the national interest” to waive sanctions on the Swiss-based consortium and corporate officers including CEO Mattias Warnig. Waivers were not provided for four Russian-flagged vessels and four Russian entities associated with marine oversight and vessel ownership.
Secretary of State Antony Blinken said the Biden administration still continues to oppose the project.
“Our opposition to the Nord Stream 2 pipeline is unwavering,” Blinken said. “Though we may not always agree, our alliances remain strong, and our position is in line with our commitment to strengthen our Transatlantic relationships as a matter of national security.”
The decision comes as the Biden administration seeks to mend ties with European allies. Former President Trump had championed tough sanctions on NS2 participants, including restrictions impacting about a dozen European companies.
The actions “demonstrate the administration’s commitment to energy security in Europe, consistent with the president’s pledge to rebuild relationships with our allies and partners in Europe,” Blinken said. The project, he noted, would weaken energy security across the European Union (EU) and beyond.
The sanctions may slow construction but are unlikely to stop the pipeline, according to analysts with ClearView Energy Partners LLC. “We suspect, however, that the administration may also intend for today’s action to send a different signal to Berlin: That it is willing to trade NS2 for a stronger U.S.-EU partnership,” the analysts led by Kevin Book said.
ClearView’s team noted the timing of the delay could be significant. Germany is scheduled to go to the polls in September, “creating the prospect — however dim — that a NS2-skeptical chancellor might succeed the outgoing, pro-pipeline Angela Merkel.”
It was unclear what the sanctions mean for U.S. liquefied natural gas exports, which have competed in Europe with pipeline gas from Russia.
LNG Allies CEO Fred Hutchinson, while not commenting specifically on NS2, said he believed U.S. LNG demand in Europe would remain strong as the continent increasingly switches from coal to natural gas power. “We’re encouraged that gas will continue to have a role in those markets for quite some time,” he said.
Meanwhile, the decision to waive sanctions found a number of critics in Congress on both sides of the aisle. Sen. Bob Menendez (D-NJ), who chairs the Foreign Relations Committee, said he was opposed to the sanctions waiver.
“The administration has said that the pipeline is a bad idea and that it is a Russian malign influence project,” Menendez said. “I share that sentiment, but fail to see how today’s decision will advance U.S. efforts to counter Russian aggression in Europe.”
Republican Sens. Ted Cruz of Texas, John Barasso of Wyoming and Ron Johnson of Wisconsin jointly said the sanctions did not adequately punish Russian President Vladimir Putin for his aggressive policies.
“Projects like the Nord Stream 2 pipeline are a threat to European energy security,” they said. “This type of weakness only encourages Putin’s aggression; he’s not paying a significant price for his malign activities and with decisions like these, the Biden administration is only encouraging him.”
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