New US sanctions threaten EU firms involved in Nord Stream 2

A worker appears inside one of the Nord Stream 2 pipes.[Nord Stream 2]

The US Senate voted nearly unanimously on Thursday(15 June)for legislation to impose new sanctions on Russia and force President Donald Trump to get Congress’approval before easing any existing sanctions on Russia.

In a move that could complicate Donald Trump’s desire for warmer relations with Moscow,the Senate backed the measure by 98-2.Republican Senator Rand Paul and Bernie Sanders,an independent who caucuses with the Democrats,were the only two“no”votes.

The measure is intended to punish Russia for meddling in the 2016 US election, its annexation of Ukraine’s Crimea region and support for Syria’s government in the six-year-long civil war.

If passed in the House of Representatives and signed into law by Trump, it would put into law sanctions previously established via former President Barack Obama’s executive orders, including some on Russian energy projects. The legislation also allows new sanctions on Russian mining, metals, shipping and railways and targets Russians guilty of conducting cyber attacks and supplying weapons to Syria’s government.

If the measure became law, it could complicate relations with some countries in Europe. Germany and Austria said the new punitive measures could expose European companies involved in projects in Russia to fines. This could include the Nord Stream 2 gas pipeline project.

The US Senate said it was the policy of the United States to continue to oppose Gazprom’s Nord Stream 2 pipeline project, saying it would have a detrimental impact on the European Union’s energy security, gas market development in Central and Eastern Europe and energy reforms in Ukraine.

Gazprom and its European partners are pushing ahead with the plans to double the capacity of the existing Nord Stream undersea gas pipeline to Europe from Russia as Moscow seeks to diversify its energy supplies and bypass Ukraine. The European Commission is trying to mediate between member states in favour and against Nord Steam 2.

Merkel sees no role for the Commission

Proposed Nord Stream 2 compromise guarantees Ukraine’s gas transit role

The European Commission hopes to bring together the friends and the foes of the Nord Stream 2 gas pipeline project around a mandate which would guarantee that Ukraine would remain a transit country for Russian gas to the EU.

German Chancellor Angela Merkel said yesterday she saw no need for a separate mandate for the Commission to negotiate with Russia over Nord Stream 2.

“I think some legal questions need to be clarified in relation to Nord Stream 2,” Merkel told a news conference with Estonian Prime Minister Juri Ratas. “Otherwise it is an economic project and I don’t think we need an extra mandate for it.”

Gazprom reacts

Gazprom’s Deputy Chief Executive Officer Alexander Medvedev commented yesterday that the proposed US sanctions are aimed at boosting liquefied natural gas (LNG) exports from the US to Europe.

“As far as the implementation of the sanctions is concerned, they don’t conceal that this is aimed at ensuring American LNG to Europe,” Interfax quoted Medvedev as saying.

The United States is eyeing new markets for its LNG exports, including Europe. Gazprom so far has dismissed the potential impact from the US proposal on its business in Europe, where it accounts for a third of gas supplies, saying that high transportation costs make US LNG too expensive.

Medvedev also said he hoped that US President Donald Trump will not approve the new sanctions.

“Let’s hope that, first of all, the draft law has not been passed yet; without the president’s signature it cannot become law,” he was quoted as saying by Interfax.

Germany and Austria on Thursday also censured the US Senate for approving the new sanctions on Russia, saying they expose European companies involved in Russian energy projects to fines for breaching US law.

Medvedev said that Gazprom has already received more than €1 billion from its partners for Nord Stream 2 financing.

In April Uniper, Wintershall, Shell , OMV and Engie agreed to each loan 10% of the cost of the venture, or up to €950 million each.

Gazprom will shoulder 50% of the cost of the 55 billion cubic metre pipeline, which is due to start operating in 2019.

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