The US Ambassador in Berlin calls on German companies to rethink their involvement in Nord Stream 2. Can US sanctions stop the construction of the Baltic Sea pipeline from Russia to Germany?

“We continue to emphasize that companies involved in the Russian energy export sector are participating in something that carries a significant risk of sanctions.” This was written by the American Ambassador in Berlin, Richard Grenell, in early January in a letter to the German companies participating in the Nord Stream 2 project . These are the energy company Uniper, which emerged after a spin-off from the Eon Group, but also the largest German oil and gas producer Wintershall, a subsidiary of BASF.

Nord Stream 2 also includes the Austrian OMV, Royal Dutch Shell and the French group Engie. Of the project’s foreign partners, only OMV boss Rainer Seele reacted. He told the Handelsblatt, “Washington relies on confrontation rather than cooperation with allies.” All five companies are considered by Nord Stream 2 as “financial investors”.

The US has long since established a legal framework for the imposition of sanctions. The Countering America’s Adversaries Through Sanctions Act (CAATSA), adopted in 2017, allows Washington to impose financial sanctions on individuals investing in the construction of Russian export pipelines. Sanctions under CAATSA would deprive the project of financial support. Each company contributes € 950 million to the project. But even if Nord Stream 2 loses billions of financial investors, it can hardly be stopped. According to observers, Russia and its energy group Gazprom are able to secure financing even without foreign participants.

Infographic Map Gas Pipelines Europe Nord Stream DE

Important construction companies

Michael Harms, Managing Director of the East Committee of German Business, told DW that Nord Stream 2 has 627 suppliers from all over the world, including the pipe-laying companies. “These are absolute specialist companies that have unique know-how and sanctions against these companies would at least greatly delay or extremely jeopardize the entire project,” says Harms.

Among the specialist companies that ship the pipes on the Baltic Sea by boat are the Allseas Group headquartered in Switzerland and the Italian company Saipem, which has almost completed its part of the work begun in the summer of 2018. Most of the construction is carried out by the Allseas Group. Your ship ‘Pionieering Spirit’ can lay around five kilometers of pipes a day. No other ship can do this faster today.

US sanctions against Allseas would not delay, but freeze, the Nord Stream 2 project, says Mikhail Krutichin, partner of consulting firm RusEnergy. “There is no substitute,” he told the DW. According to Krutichin, Gazprom can count on the Russian pipe-laying ship ‘MRTS Defender’ alone. But it could only be used in shallow water and not in the whole Baltic Sea. According to the company, the depth to which the ship is oriented is no more than 150 meters. The ‘Pionieering Spirit’, on the other hand, can lay pipes at a depth of up to four kilometers.

Germany Nord Stream 2 off the island of Rügen (picture-alliance / dpa / B. Wüstneck)
A laying ship from Allseas in the Baltic Sea off the island of Rügen

race against time

In his letter to German companies, Richard Grenell emphasized that there is growing pressure in Washington to crack down on Nord Stream 2. Both leading parties, Republicans and Democrats, passed a joint resolution in December 2018 supporting sanctions against the project under the CAATSA Act. In addition, according to Grenell, another law will be reviewed in Congress, which also provides for sanctions against Nord Stream 2.

But why is the US not sanctioning even before the project is finished? Finally, the CAATSA Act, signed in 2017 by President Donald Trump, allows the US President to crack down on Nord Stream 2. All the more so that the project is mentioned in the law as a possible target. But the fact is that, according to the law, sanctions should be coordinated with European partners. But Germany, the main European partner in Nord Stream 2, is against sanctions. One argument: Russian deliveries account for only about one third of all natural gas imports to Germany. 

According to Michael Carpenter of the American think tank “Penn Biden Center” also some members of the US administration reject sanctions. “They are convinced that this would increase tensions in the transatlantic relationship,” he told DW. The former senior Pentagon employee believes that President Trump is quite willing to accept “cracks” in relation to his European allies. But many employees of his administration would also consider sanctions “an exaggerated step” and prefer threats. “If further steps prove ineffective to stop the construction of Nord Stream 2, penalties will be a very likely last resort,” said Carpenter.

As for the new Sanctions Act, mentioned by US Ambassador Richard Grenell, Congress will test this spring. Washington does not have much time to stop building Nord Stream 2. Meanwhile, more than 370 of the 1200 planned kilometers of pipes have been laid on the bottom of the Baltic Sea. By the end of the year, the first gas could flow through the new pipeline.

Leave a Reply

%d bloggers like this: