US Lifts Nord Stream 2 Sanctions Exemption
US Secretary of State Mike Pompeo on July 15 said Washington would remove a sanctions exemption for Russia's Nord Stream 2 gas pipeline, meaning further punitive action can be taken against the project.
The US imposed sanctions against Nord Stream 2 under the Protecting Europe's Energy Security Act, threatening to punish companies assisting with construction. That brought work on the pipeline to a halt, after Swiss pipelaying contractor Allseas left the project.
However, back in 2017 the US laid out additional sanctions against the pipeline that covered tougher financial penalties, under the Countering America's Adversaries Through Sanctions Act. But then-Secretary of State, the former ExxonMobil CEO Rex Tillerson, exempted Nord Stream 2 as well as Russia's southern European export pipeline TurkStream from the measures, given that work on the projects had already begun.
Pompeo said the state department was now revising its guidelines, lifting those exemptions. But the Trump administration will still need to authorise the punitive measures.
"This action puts investments or other activities that are related to these Russian energy export pipelines at risk of US sanctions," Pompeo told a news conference. "It's a clear warning to companies aiding and abetting Russia's malign influence projects will not be tolerated. Get out now, or risk the consequences."
Nord Stream 2, which will carry up to 55bn m3/yr of gas to northern Germany at full capacity, had been expected online before the end of last year. But Denmark's delay in issuing necessary permits, and last year's sanctions, mean the launch is now scheduled for early 2021, according to Russian officials.
Unable to use foreign contractors, Russia has its own pipelaying vessels in northern European waters that are expected to complete the remaining 6% of the pipeline's offshore section.
"Let me be clear: These aren't commercial projects," Pompeo continued. "They are the Kremlin's key tools to exploit and expand European dependence on Russian energy supplies, tools that undermine Ukraine by cutting off gas transiting that critical democracy, a tool that ultimately undermines transatlantic security."
Yet Russia insists that Nord Stream 2 is simply a commercial venture and shorter route to market than the aging pipelines crossing Ukraine. It has also accused the US of using sanctions to ensure there is room in Europe for expanded US LNG imports.
"This is the use of political pressure for unfair competition," Russia's foreign ministry said in a statement to the Tass news agency. "It is an indicator of the weakness of the American system. Apart from forceful methods, there are no effective tools."
A separate bill entitled Protecting Europe's Energy Security Clarification Act is also making its way through US congress increasing the scope of sanctions against Nord Stream 2. That bill has prompted harsh criticism from Germany, a strong supporter of the pipeline, which has urged the US not to meddle in its affairs.
"“As elected representatives of the American people, you undoubtedly and rightfully resist all attempts to interfere in the internal Affairs of Texas, Wisconsin, or Pennsylvania," the chairman of the German parliamentary economic and energy committee, Klaus Ernst, said in a letter this week addressed to US lawmakers. "Europe, in turn, expects that you will respect the decisions that were taken democratically within the European Union."