NORD STREAM 2: EASING OF SANCTIONS

PLATTS - 09 Feb 2021 - A German environmentalist group said Feb. 9 the government should say whether its reported offer to the previous US administration to increase state support for LNG import infrastructure in return for sanctions relief over the Nord Stream 2 gas pipeline remained valid.

Deutsche Umwelthilfe (DUH) published Feb. 9 what it said was a previously confidential letter sent last August by German finance minister Olaf Scholz to his then US counterpart Steven Mnuchin.

In the letter -- parts of which were first made public last September by German newspaper die Zeit, Scholz said Germany was willing to considerably increase its financial support for LNG infrastructure by up to Eur1 billion ($1.2 billion).

In exchange, the US would allow the "unhindered construction and operation" of Nord Stream 2.

"[DUH] demands an explanation from Scholz and the German government for their behavior, as well as clarification as to whether the offer is also maintained with respect to the new US administration under Joe Biden," it said.

Germany's finance ministry could not be reached for comment Feb. 9.

When parts of the letter were first made public, the ministry said it would not comment on individual media reports.

DUH said it had made requests to the government for "disclosure" with regard to the letter but it had not confirmed the document.

"We want to know whether the deal between Scholz and the Trump administration is still valid," DUH federal managing director Sascha Mueller-Kraenner said in a statement.

Commercial project

The government and Chancellor Angela Merkel have long said they consider Nord Stream 2 to be a commercial project that will improve Europe's gas supply security and should not be politicized.

However, Germany also has three LNG import terminals in the planning phase, which could in future import LNG from the US, as well as from other supply sources.

In the letter, Scholz said the increased state funding would be used to secure the completion of two LNG import projects -- the Uniper-backed 10 Bcm/year project at Wilhelmshaven and the RWE-supported 8 Bcm/year Brunsbuettel facility.

However, it has not been plain sailing for Germany's LNG projects.

Uniper said in November it was it was re-evaluating the Wilhelmshaven project after market players showed lukewarm interest in booking long-term capacity at the plant.

And a final decision for the Brunsbuettel facility was not expected until the first half of 2021, according to utility RWE, which plans to take most of the capacity at the facility.

A third project, Hanseatic Energy Hub's 12 Bcm/year State plant, is in the non-binding capacity open season phase.

Germany has no LNG import terminals at present, and there have been question marks about the need for a plant given how well the country is connected to numerous gas supply sources.

The government has paid the US lip-service in the past around LNG too. Economy minister Peter Altair said in September said a German LNG import terminal would be a "gesture" to the US, which wants to secure a bigger market in Europe for its gas.

Navalny imprisonment

The Nord Stream 2 pipeline, meanwhile, remains unfinished, with around 150 km left to lay in Danish and German waters.

The threat of US sanctions against companies involved in laying the pipeline has led to long delays in its completion.

Calls for the project to be halted have also been growing in response to the imprisonment of Russian opposition politician Alexei Navalny.

However, Merkel on Feb. 5 reiterated that Germany's position on Nord Stream 2 was not affected "for the time being".

Merkel was speaking together with French President Emmanuel Macron following the expulsion by Russia of three EU diplomats accused of joining pro-Navalny protests.

Macron, speaking about Nord Stream 2, said a "European course" had been set for the project and that he would "stick to it".

"Nothing can be done without close Franco-German cooperation," Macron said.

On Feb. 1, France's European affairs secretary of state Clement Beaune said Nord Stream 2 should be abandoned given Russia's treatment of Navalny and his supporters, though its foreign minister subsequently backtracked, saying France would not meddle in Germany's affairs.

Engie is one of five European energy companies that have lent financial support to Nord Stream 2.

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