NORD STREAM 2 SANCTIONS UNCHANGED

PLATTS - 27 Jan 2021 - The position of US President Joe Biden toward the controversial Nord Stream 2 gas pipeline from Russia to Germany has not changed, the White House said late Jan. 26.

At a briefing, White House press secretary Jen Psaki said Biden "continues to believe that Nord Stream 2 is a bad deal for Europe."

Biden first said in 2016 that Nord Stream 2 was a "fundamentally bad deal" for Europe.

Russian President Vladimir Putin in late December 2020 said he hoped the new US administration would treat its partners "with respect" and not impede the completion of the pipeline, allowing a return to "fair competition in international markets."

Biden spoke with Putin on Jan. 26 following a call with German Chancellor Angela Merkel on Jan. 25, but according to readouts from the White House of the conversations, Nord Stream 2 was not mentioned in either.

Sanctions review

Despite Biden's stance toward the project remaining constant, Psaki said the new administration would review certain sanctions measures imposed by the Trump administration.

"We're aware that the previous administration imposed new restrictions on activities related to the pipeline under the National Defense Authorization Act [NDAA], and we will be reviewing those measures," Psaki said.

The US Senate on Jan. 1 voted to override former President Donald Trump's veto of the NDAA, which include new provisions related to Nord Stream 2 under the Protecting Europe's Energy Security Clarification Act (PEESCA).

These expand the threat of US sanctions against companies that provide services to ships laying the Nord Stream 2 pipe and companies that carry out pipeline testing, inspection or certification activities.

In one of its final actions, the former US administration on Jan. 19 also imposed sanctions on Russia-based KVT-RUS, owner of the Fortuna pipelaying ship, because of its role in the Nord Stream 2 project under the separate Countering America's Adversaries Through Sanctions Act (CAATSA).

Despite sanctions being imposed, the Fortuna is currently preparing to resume pipelaying work in Danish waters, according to the Nord Stream 2 development company.

Analysts have said that Biden and Merkel could try to find a workaround to the problem to enable Nord Stream 2 to be completed, but with strict rules around its use.

Merkel has repeatedly backed the pipeline, with some commentators referring to it as the Chancellor's "pet" project, and has resisted calls to cancel it following the poisoning of Russian opposition politician Alexei Navalny in August 2020, and his arrest this month on return to Moscow.

Transatlantic alliance

In his call with Merkel, Biden expressed his intention to "revitalize the transatlantic alliance" including through NATO and with the EU, according to the readout.

It said the leaders agreed to work together on common foreign policy priorities, including Russia and Ukraine.

On his call with Putin, Biden reaffirmed the US' firm support for Ukraine's sovereignty, and said the US would act "firmly in defense of its national interests in response to actions by Russia that harm us or our allies."

If completed, the 55 Bcm/year Nord Stream 2 pipeline would reduce the need for Gazprom to use Ukraine as a transit route for gas supplies to Europe, which Kyiv relies on for state revenues.

Ukraine was paid $2.1 billion for transiting Russian gas via its territory in 2020 under the five-year transit deal agreed at the end of 2019.

Gazprom has booked 40 Bcm/year of capacity via Ukraine for 2021-24, well down on transit levels in the 2010s.

The total amount of Russian gas transited via Ukraine in 2020 totaled 55.8 Bcm, almost 10 Bcm short of its contracted volume, in part due to lower European gas demand in the first half of 2020.

On top of the annual long-term booked capacity, Gazprom can also book additional capacity in the Ukrainian system, which has room to ship significantly higher volumes of Russian gas.

Gazprom has to pay extra for any additional capacity it books in the Ukrainian system.

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