NORD STREAM 2: THE NEW SANCTIONS

PLATTS - 16 Jul 2020 - The developer of the Nord Stream 2 gas pipeline on July 16 again criticized US measures against the project following a new move by Washington to harden its stance with changes to guidance on the Countering America's Adversaries Through Sanctions Act (CAATSA).

The US State Department on July 15 updated part of the CAATSA legislation from August 2017 so that companies involving in building the Nord Stream 2 link from Russia to Germany and the onshore extension of the TurkStream pipeline -- which both remain under construction -- can now be targeted.

"We are aware of a new CAATSA guidance announced by Secretary of State [Mike] Pompeo yesterday," a Nord Stream 2 spokesman said.

The spokesman said that efforts to obstruct the project reflected a "clear disregard" for the EU's right to determine its own energy future. "Decisions about EU energy policy should be left to Europeans," he said.

The changes to the CAATSA guidance is the latest move by the US to put pressure on companies involved in building both Nord Stream 2 and the TurkStream extension in Bulgaria and Serbia into Hungary.

The original CAATSA guidance was that sanctions could not be imposed on Russian pipeline projects that had been approved before August 2, 2017, and only after coordination with US allies.

The updated guidance July 15 removes the timing caveat, meaning Nord Stream 2 and the onshore extension of the TurkStream pipeline are now included.

"Today the Department of State is updating the public guidance for CAATSA authorities to include Nord Stream 2 and the second line of TurkStream," Pompeo said.

"This action puts investments or other activities that are related to these Russian energy export pipelines at risk of US sanctions," he said.

Pompeo said the action was a "clear warning" to companies that helping to build the pipelines would "not be tolerated."

"Get out now, or risk the consequences," he said.

Despite the increased rhetoric, it remains the case that the imposition of sanctions under Section 232 of CAATSA remains discretionary.

Existing Russian pipelines also remain unaffected as do companies investing or working on maintenance of pipelines capable of flowing commercial volumes as of August 2017.

Following the update, the guidance is clear though that Nord Stream 2 and the TurkStream extension were not considered complete as of August 2017 and that as a result "investments or other activities related to the standard repair and maintenance of these pipelines could be the target of sanctions."

EU, German stance

The EU and Germany have hit out at the US for introducing possible sanctions measures against companies working on Nord Stream 2.

German Chancellor Angela Merkel said on July 1 that it was "right" to complete Nord Stream 2, saying US sanctions "did not correspond" to Germany's interpretation of international law.

The EU High Representative Josep Borrell in late June said it was the EU alone that could decide on the rules that apply to European economic operators in this field.

"The EU's position on US sanctions against European companies that are engaged in legitimate and lawful activities under European law is unequivocal," Borrell said.

"They are unacceptable and in contradiction with international law, and the EU is firmly opposed to them," he said.

The US has already introduced other measures targeting Nord Stream 2.

In June, a US Senate bill was introduced that aims to block completion of the project by expanding existing sanctions to target more companies involved in building the line's final segment.

The Protecting Europe's Energy Security Clarification Act would modify an earlier Nord Stream sanctions law signed by President Donald Trump in December 2019 as part of the fiscal 2020 defense budget.

That led principal pipe-layer Allseas to halt work on laying the pipeline with just 160 km (99 miles) out of the total 2,460-km, two-string line left to lay in Danish waters.

The US sanctions in place since December would target vessels laying the pipeline, but the proposed new measures would also take aim at vessel insurers and service companies, making it significantly more difficult to complete the pipeline.

Nord Stream 2 has said it is still considering different options for completing the pipeline.

On TurkStream, meanwhile, Bulgartransgaz continues work to build its 474-km pipeline to enable increased flows from TurkStream to flow on to Serbia and Hungary.

In March, Serbian energy minister Aleksandar Antic said the country's 403-km onshore extension of TurkStream had been laid, with work to continue over 2020 to build the link's supporting infrastructure.

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