NORD STREAM 2 SANCTIONS: NOT ENOUGH

PLATTS - 22 Feb 2021 - Senior US lawmakers have slammed the Biden administration for failing to step up its opposition to the almost-complete Nord Stream 2 gas pipeline through increased sanctions designations.

The State Department on Feb. 19 sent an overdue report to Congress detailing its latest sanctions designations with regard to Nord Stream 2, which according to senior Republicans fell well short of expectations.

Senator Jim Risch and Representative Michael McCaul said the report pointed only to two sanctions designations -- against the Russian pipelaying vessel Fortuna and its owner KVT-RUS -- which were both already slapped with sanctions on Jan. 19 by the Trump administration.

The Fortuna continues to carry out pipelaying activity in waters off the Danish island of Bornholm in a bid to complete the 55 Bcm/year line, which would divert Russian gas supply away from the Ukrainian transit corridor and reshape European gas market dynamics.

There had been calls for the Biden administration to intensify sanctions designations to include a wide range of companies involved in the construction of Nord Stream 2, including service companies, insurers and certification companies.

However, there have been signs that Biden and German Chancellor Angela Merkel could be looking to reach a compromise over the project, which could have led Biden to hold off on new sanctions for now.

Sanctions report

The congressionally mandated report had been expected to identify more entities actively involved in the construction of Nord Stream 2.

"I am deeply troubled and disappointed by the State Department's report on Nord Stream 2 activities and their decision to forgo additional sanctions on other entities involved in its construction," Risch -- a ranking member of the Senate Foreign Relations Committee -- said.

"Congress has passed multiple bipartisan laws regarding this project, and specifically broadened the mandatory sanctions to include the types of pipe-laying activities occurring right now. The administration's decision to ignore these activities demands an immediate explanation," Risch said.

The US has a number of legislative tools at its disposal for applying sanctions against companies involved in Nord Stream 2's completion.

They include the 2020 National Defense Authorization Act (NDAA), which in December 2019 forced Swiss pipelayer Allseas to halt work, and its updated version approved in 2021 that includes 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.

The sanctions imposed by the Trump administration against KVT-RUS and the Fortuna under the separate Countering America's Adversaries Through Sanctions Act (CAATSA).

McCaul, House Foreign Affairs Lead Republican, said the sanctions designations were "wholly inadequate."

"Congressional intent is clear and cannot be ignored: the mandatory authorities passed with bipartisan support in the last two NDAAs are meant to stop the completion of the Nord Stream 2 pipeline. Period," McCaul said.

"Sanctioning only the Russian pipelaying vessel Fortuna and its owner, KVT-RUS -- which were both already sanctioned by the previous Administration under separate authorities -- does not meet that intent," he said.

"Allowing this pipeline to be completed would be nothing short of a victory for Vladimir Putin. Therefore, we expect a briefing from the State Department as soon as possible to discuss when the Biden administration plans to take further action against additional Russian entities currently engaged in sanctionable activity as is required by law."

'Bad deal'

The State Department on Feb. 19 said it would continue talks with Congress over Nord Stream 2.

"We certainly understand Congress's legitimate interest in this issue, and we're committed to engaging with Congress," spokesperson Ned Price said in a briefing.

"We've been clear for some time that Nord Stream 2 is a bad deal and that companies risk sanctions if they are involved. But we don't preview any potential sanctions," Price said.

"We'll continue to work with our allies and partners to ensure that Europe has a reliable, diversified energy supply network that doesn't undermine our collective security."

The timeline for completing the pipelaying work on Nord Stream 2 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 complete even one string, suggesting a completion date of that line 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 positioning capabilities.

Nord Stream 2 has repeatedly declined to comment on its plans for completing the pipeline.

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