US sanctions against Nord Stream 2 up for final sign-off

LONDON (ICIS)–The US Senate passed the National Defence Authorization Act (NDAA), containing sanctions against Russian pipeline Nord Stream 2, on Tuesday night. The sanctions target the vessels building the pipeline and could affect its completion, should the pipe-laying companies observe them.

The final stage of approval required is now the US president’s signature.

According to the document , the Secretary of State, in consultation with the Secretary of the Treasury, will have 60 days after the act enters force to submit a list of vessels engaged in pipe-laying to the appropriate congressional committees.

The vessels currently building Nord Stream 2 are highly specialised and not easily replaceable. The sanctions could pose serious problems for the completion of the Russian project.

“This is a lose-lose situation,” said Jacopo Pepe, research fellow at Robert Bosch Centre for Central Eastern Europe, Russia and Central Asia. “Not observing the sanctions might have a long-term impact on their business, and not fulfilling their obligations will mean an immediate loss and potentially high compensation costs.”

Three companies have been contracted to lay the pipes: Swiss Allseas is responsible for 96% of the pipe, Italian Saipem for the connection to German onshore territory, and Russian MRTS for the Russian section. Earlier this year Saipem told ICIS that it did not think the sanctions would impact its work on Nord Stream 2.

CONSTRUCTION PROGRESS

On 30 October, Denmark gave the last permit required for the construction of the pipeline.

“Pipelay has been completed in Russian, Finnish and Swedish waters, and for the most part in German waters. The construction of both landfall facilities in Russia and Germany is nearing completion,” pipeline developer Nord Stream 2 AG said in a statement on the same day .

The pipeline developers confirmed to ICIS on 4 December that pipelay in Denmark was proceeding according to the permit.

If Gazprom’s five week estimate to finish this section is still valid, there is a chance pipelay could be finished by the start of January .

The main pipe-laying vessels, Allseas’ Solitaire and Pioneering Spirit, had reached southeast of the Danish Bornholm island on Wednesday.

Solitaire was located around halfway through the Danish section and Pioneering Spirit had reached further south. Nine other vessels were supplying them with pipes, ship tracking website Marine Traffic showed, giving an indication of the intense speed of works.

Pioneering Spirit has a pipelay speed of 5km per day, Allseas website shows. Solitaire can lay over 9km per day.

GERMAN OPPOSITION TO SANCTIONS

US sanctions against Nord Stream 2 are unacceptable , several German MPs told ICIS, adding that Germany should examine countermeasures.

President Trump’s threats to block Nord Stream 2 serve to promote US LNG exports to Germany, one MP underlined.

However, Pepe told ICIS that the current government is unlikely in the short term to vote countermeasures against US LNG.

“The sanctions do not directly target German companies, so I don’t see the legal basis,” he said. “

He added that imposing unilateral countersanctions on the basis of political consideration or national security would take much longer to approve and a parliament debate.

It would also require closer coordination with EU partners, which might prove difficult as not few EU countries, particularly in the east, openly oppose the pipeline and criticise Germany for undermining Europe’s energy solidarity.

“It is very clear that the sanctions will worsen the political and economic relationship between Germany and the US and their consequences could well spill over outside the energy sector,” said Katja Yafimava, researcher at the Oxford Energy Institute.

NDAA PROCESS

The NDAA now needs to be submitted to Trump. In the past three years, the president signed it around ten days after receiving it, and before the end of the year.

The NDAA is a key piece of legislation for the US defence and energy departments, establishing defence policies and nuclear weapon programs among other things.