Amy Mackinnon – Foreign Policy Aug 2020

Russia’s controversial Nord Stream 2 gas pipeline is close to the finish line—but might be closer to finished as a viable project, after one of the companies involved in laying the pipe on the Baltic seafloor said Wednesday that it would withdraw from the project.

For years, the United States has tried to kill off Russia’s latest effort to strengthen its energy stranglehold on Europe, to little avail. But targeted U.S. sanctions that go after the pipe-laying vessels needed to finish the 760-mile-long pipeline from Russia to Germany might finally do the trick, if they arrive in time. To get around U.S. sanctions on firms helping to build the project, which would double Russian gas flows to Germany, Russia acquired a specialized ship, the Akademik Cherskiy, which can weld the steel tubes needed to carry highly pressurized natural gas. But Russia has been relying on a second ship to lay the pipe, and the pipe-laying barge Fortuna now seems to be out of action. That could double the time left to finish the project, which is 94 percent done.

The big question now is whether new U.S. sanctions contained in this year’s defense spending bill can be passed and signed into law before the project is completed.

“The race then is between a slow pipe and a slow sanctions bill,” said Kevin Book, the managing director of ClearView Energy Partners, an energy consultancy. The Akademik Cherskiy, which Gazprom acquired in 2016 in anticipation of just such a U.S. move, could finish the pipeline in around 110 days, Book said. The National Defense Authorization Act is not expected to be signed into law until December—at least 117 days away.

New sanctions on the project that were included in both the House and Senate versions of the defense spending omnibus bill would expand existing sanctions to include companies that support pipe-laying activities, as well as insurance and underwriting services. The Senate version of the bill goes one step further and would slap sanctions on support vessels and companies involved in certifying the pipeline once it’s complete. The two versions still need to be reconciled, and the scope of the final bill will play a decisive role in whether the project is completed.

Meanwhile, U.S. lawmakers are redoubling their pressure. On Wednesday, Republican Sens. Ted Cruz of Texas, Tom Cotton of Arkansas, and Ron Johnson of Wisconsin warned the German company that operates the port of Mukran, a key staging post for ships involved in the pipeline’s construction, that the company, its board members, corporate officers, shareholders, and employees were at imminent risk of “crushing legal and economic sanctions,” including visa bans and asset freezes, if they did not cease their cooperation with the project.

Since the Obama administration, the United States has tried to shoot down Russia’s latest pipeline project, which would bypass Ukraine and redouble Europe’s reliance on Russian natural gas. German leaders, as well as many Western European energy companies, are on board with the project, which they say will bolster the availability of cheap energy in Europe. Critics fear more Russian energy tricks, like the shut-off of gas to Europe in 2006 and 2009.

The United States took a stab late last year. Construction of the pipeline was brought to a halt after U.S. sanctions passed as part of the 2020 National Defense Authorization Act compelled the Swiss company Allseas to withdraw its deep-sea pipe-laying vessel, forcing Russia to improvise a new plan to finish the pipe.

In July, after Denmark gave permission for the project to proceed, Washington doubled down on efforts to stop the project. On July 15, U.S. Secretary of State Mike Pompeo announced a reversal to guidance issued by his predecessor Rex Tillerson in 2017, paving the way for further sanctions to be slapped on the pipeline. The so-called Tillerson guidance had grandfathered in the pipeline and had exempted it from wide-ranging sanctions under a blockbuster bill passed by Congress that same year. “Get out now, or risk the consequences,” Pompeo said.

Former senior administration officials and congressional aides told Foreign Policy that one of the reasons efforts to stop the pipeline have come down to the wire is that the Treasury Department has been hesitant about using sanctions to thwart the project. “It’s known that the Treasury has interfered in the interagency process to slow and water down the technical implementation of sanctions, going back to 2017,” a Republican aide said.

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