NORD STREAM 2 SANCTIONS CONTINUED

PLATTS - 17 Feb 2021 -  The US remains on standby to impose sanctions against companies involved in completing the Nord Stream 2 gas pipeline from Russia to Germany, while diplomatic efforts to reach a compromise over the controversial project continue.

White House press secretary Jen Psaki said late Feb. 16 in a briefing that Washington would work "in partnership" with its allies on the use of sanctions.

"We're continuing to monitor activity to complete or to certify the pipeline," Psaki said.

"And if such activity takes place, we'll make a determination of the applicability of sanctions. Importantly, sanctions are only one among many important tools to ensure energy security. And we'll do this all in partnership with our allies and partners," she said.

Some 150 km of Nord Stream 2 remains to be laid in Danish and German waters, but the threat of US sanctions against companies involved in laying the pipeline has led to long delays in its completion.

If completed, the 55 Bcm/year 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.

Pipelaying work

Work resumed to lay the pipeline in Danish waters in late January despite sanctions being imposed against the pipelaying vessel, the Fortuna, and its Russia-based owner KVT-RUS on Jan. 19 in a final action taken by the outgoing Trump administration.

The timeline for completing the pipelaying work remains uncertain, with the Fortuna working at a much slower rate than the Pioneering Spirit, which laid much of Nord Stream 2 before its owner Allseas halted work in December 2019.

It is thought that the Fortuna is only laying one string of Nord Stream 2 for now, and that it would likely take months for it to even complete even one string, suggesting a completion date some time this summer.

However, the Nord Stream 2 development company could look to bring in another pipelaying vessel to speed up the work -- such as the Russian-owned Akademik Cherskiy, which has dynamic position capabilities.

Nord Stream 2 declined to comment on its plans for completing the pipeline. "We are not in a position to deliver information about construction details," a spokesman said.

The new US administration under President Joe Biden has been seen as taking a more collaborative stance toward Nord Stream 2, with Washington and Berlin both pledging talks over the project.

Germany remains committed to its completion, with German Chancellor Angela Merkel repeatedly backing the project and resisting calls to cancel it despite the poisoning of Russian opposition politician Alexei Navalny in August last year and his subsequent imprisonment in early February.

New compromises?

Several new options are being considered to deal with the deadlock over Nord Stream 2, with Germany set to make some proposals to the US on how the pipeline could be managed in the future.

These include the possibility for Germany to "shut off" future gas flows via Nord Stream 2 once it is operational depending on Russian "behavior", a source close to the matter told S&P Global Platts.

However, there would likely be legal ramifications from such a move, which would seemingly fly in the face of world trade rules.

Psaki said Feb. 16 that the US' fundamental position toward Nord Stream 2 was unchanged, namely that Biden considered it a "bad deal" for Europe.

It had been reported that the US State Department was preparing a list of European companies that were seen as in breach of sanctions legislation for publication.

The US has a number of legislative tools at its disposal for applying sanctions against companies involved in Nord Stream 2's completion -- from pipelayers to insurers and certifiers.

The US Senate on Jan. 1 voted to override Trump's veto of the National Defense Authorization Act (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.

And the sanctions were imposed against KVT-RUS and the Fortuna under the separate Countering America's Adversaries Through Sanctions Act (CAATSA).

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