On February 18, Washington announced sanctions on the ship laying Nord Stream 2 and its owner. They amount to little and will not placate pipeline opponents. However, a better gas transit contract for Ukraine could provide a way to move past U.S. pipeline sanctions.
When, or if, completed, Nord Stream 2 will bring up to 55 billion cubic meters of gas per year from Russia under the Baltic Sea to Germany (in 2019, Germany consumed 95 billion cubic meters of gas). Its 1,200 kilometers are 94% complete. Of course, it needs to be 100% to work.
A geopolitical or a commercial project?
Americans and many Europeans outside of Germany see Nord Stream 2 as a geopolitical project. A purely commercial venture would have updated existing pipelines that transit Ukraine, Belarus and Poland — at a fraction of the cost of a new undersea pipe. Moreover, Nord Stream 2 will not bring new gas; it will simply divert gas from those other pipelines.
Moscow engaged in this expensive undertaking to circumvent Ukraine and deny gas transit revenues to Kyiv. That is part of a multi-vector Russian effort to weaken its western neighbor.
Given the Kremlin’s egregious misbehavior — the conflict in Donbas, killings and attempted killings of regime opponents, and cyber and disinformation campaigns — Nord Stream 2 offers a big target for U.S. sanctions. Congress has happily obliged, authorizing sanctions against entities that take part in construction of, provide services for, or certify the pipeline.
In a February 17 letter, a bipartisan group of congressional representatives expressed their readiness to work with the executive branch “to counter Russian malign influence, including by ensuring Nord Stream 2 is never completed.” They will not regard the administration’s new sanctions as enough and will press for more.
Germany’s dilemma: finish the pipeline while avoiding sanctions
Berlin, hoping to finish the pipeline, seeks to persuade Washington that it will ensure that a regulatory mechanism will act to constrain any Russian market manipulation attempts; provide support to build terminals that could receive American liquified natural gas; and agree that certain Russian actions could trigger a halt to gas imports via Nord Stream 2.
These proposals will not suffice for pipeline opponents. A regulatory mechanism makes sense, but who knows now how it will work in practice? Liquified natural gas (LNG) terminals will not overcome the price advantage that gas shipped by pipeline enjoys. And Americans and Germans could well differ over what Russian actions should justify turning off the gas flow.