US Senate expands sanctions against Russia’s Nord Stream 2 gas pipeline project

Author: Diane Pallardy

2020/11/18

LONDON (ICIS)--The US Senate included new sanctions against the Nord Stream 2 pipeline project in a key US legislative act on 16 November.

Washington has long been trying to stop the offshore pipeline between Russia and Germany. In December 2019, the US made the construction to go on hold by forcing the pipe-laying vessels contracted for the project to withdraw from it.

The new sanctions voted in by the Senate on Monday complement those of December by including insurance, ports and certification services provided for Nord Stream 2. These sanctions are part of a wider US piece of legislation called the National Defence Authorisation Act, which enters into force once the US president signs it, which must be done by the end of the year.

Once finished, Nord Stream 2 would double Russia’s direct pipeline export capacity to the EU to 110 billion cubic meters (bcm) per year. This is 55% of what Russian state-owned gas producer Gazprom sent to Europe in 2018 and 2019. Gazprom owns the €9.5bn project and financed one half of it, while the other half of the funds was provided by French Engie, Austrian OMV, Dutch Shell, and German Uniper and Wintershall.

The new sanctions target foreign persons who provided:

-underwriting services or insurance or reinsurance for Nord Stream 2 pipe-laying vessels,

-services or facilities for technology upgrades, installation of welding equipment for, or retrofitting or tethering of, those vessels,

-services for the testing, inspection or certification necessary for, or associated with the operation of the pipeline.

Since the initially contracted pipe-laying vessels left the project in December, the project’s promoters did not announce any alternative vessel(s). Around 160km of the pipeline remains to be built in the Danish exclusive economic zone in the Baltic Sea. Nord Stream 2 is composed of two 1,230km-long parallel pipelines.

The new sanctions have been sent to the House of Representatives for approval before they can be submitted to the president. The House of Representatives had already agreed on new sanctions back in July, however, less tough than those voted in the Senate on Monday. The House of Representatives’ sanctions included foreign persons who provided:

-significant underwriting services or insurance for Nord Stream 2 pipe-laying vessels,

-significant services or facilities for technology upgrades or installation of welding equipment for, or retrofitting or tethering of, those vessels.

But they did not include those who provided testing, inspection or certification services linked to the operation of Nord Stream 2. The use of “significant” also indicated that insurance and technology upgrades services not deemed significant would not fall under the new sanctions.

The Nord Stream 2 operator told ICIS on Wednesday that it does not comment on ongoing legislative procedures. "Existing sanctions law and the draft PEESCA would, if imposed, directly or indirectly hit more than 120 companies from more than 12 European countries. Nord Stream 2 as well as the companies supporting our project are convinced that the soonest possible commissioning of the pipeline is in the interest of Europe’s energy security, European consumers, EU economic competitiveness, and climate protection commitments. We will inform about our plans in due time," the company said.