The Biden administration has waived sanctions on multiple companies and individuals involved in the realization of Nord Stream 2, a controversial pipeline between Russia and Germany. As of today, the cost of the pipeline project has already amounted to more than 11 billion dollars. The decision has emerged as Secretary of State Antony Blinken, Russian foreign minister Sergei Lavrov and German foreign minister Heiko Maas all held a meeting to negotiate the terms of the infrastructure plan and reach an agreement.
Both Blinken and Biden have in the past shown their disapproval towards the major infrastructure plan and have been willing to impose sanctions on companies involved in the development of the pipeline. That includes firms such as insurers, certifiers and engineering companies, as well as any other firms involved in the assembly of the pipeline or monitoring the project’s safety arrangements. Since the start of the project, as much as 18 companies have pulled out (e.g. Allseas) to avoid sanctions.
A group of five European energy companies from France, Germany, Austria, Great Britain and the Netherlands are involved in the funding of Nord Stream 2, yet the Russian energy company Gazprom (which accounts for more than 5% of Russia’s annual GDP) is the only stakeholder. Russia’s increasing ownership of the Nord Stream 2 (through better stakes in infrastructure developments) enables it to exert more authority over the project’s operations, hence allowing Putin to resist U.S. sanctions more effectively. Yet, certification remains a major issue for Russia as DNV, one of the main certification companies, pulled out of the project.
The United States has reiterated its displeasure towards the Nord Stream 2 project, warning that it could “divide Europe and expose Ukraine and Central Europe to Russian manipulation and coercion,” and that it “goes against Europe’s own energy security goals.” Biden has been adamant about his position towards the pipeline, reiterating that the U.S. would do whatever it could to prevent the completion of the project. The U.S. has led the resistance against the risks and liabilities of Nord Stream 2, warning that the project could exacerbate Russia’s regional influence. From the U.S. perspective, the presence of pipelines in North-Eastern Europe is a foreign policy concern. Although, some have questioned the U.S.’ intentions due to the country’s eagerness to sell their own higher-priced LNG to Europe, hence why they would oppose Nord Stream 2.
Back in August 2020, the relationship between Germany and Russia was tense following the poisoning of Alexei Navalny, who was exposed to the nerve agent Novichok. The operation was incited by Putin and carried out by Russian Federal Service agents. Navalny, who openly denounced Putin’s corruption and criticized his authoritarian leadership, was viewed as a threat to Putin’s tenure. Paired with the attempted assassination, Navalny’s subsequent imprisonment called upon world leaders to coordinate economic sanctions on Russia. At the center of this struggle was German Chancellor Angela Merkel, who came to be pressured by the international community to abandon the near-completed Nord Stream 2 pipeline. Some see Russia’s imprisonment of Navalny as a political maneuver to give the Kremlin more bargaining power in negotiations over the construction of the Nord Stream 2 pipeline.
Today, Europe’s over-reliance on Russian gas is seen as a strategic liability for the United States. Countries neighboring Russia such as Poland, Ukraine and the Baltics have opposed the completion of Nord Stream 2 partly by fear of an overdependence on Russian energy by their Western European neighbors. Much like the U.S., they believe the pipeline could further the Kremlin’s regional political interest. Indeed, the project could have serious implications for exposed states in Russia’s sphere of influence, the best example being Ukraine which has been in a constant struggle with the superpower since 2014. With Nord Stream 2 completed, Ukraine would lose the important transit fees it benefited from when Russian LNG passed through the country. Ukraine would not only be deprived of income from the transit, but will also lose some leverage in the conflict with Russia. Yet, it remains possible for a snap back mechanism to be implemented, one which would put the Nord Stream 2 project on hold (or terminate) if Russia threatens Ukraine.
The temporary discharge of sanctions gives the U.S., Russia and the E.U. a few more months to negotiate a more definitive deal in regard to the multibillion-dollar project. Many see the pipeline as an important geopolitical achievement for Putin and Russia. The conduct represents a major financial and infrastructural asset for the Kremlin, the likes of which would secure a stable flow of income. More widely, the construction of the Nord Stream 2 pipeline would secure a long-term relationship between Western Europe and Russia. In Congress, Republican lawmakers have heavily criticized Biden’s decision to waive the sanctions. They believe the administration should extend financial punishments to contain the Russian threat on Ukraine and other European NATO organizational allies, at the expense of harming the U.S.-Germany relationship. Still, Biden’s decision was not unanimously approved by the members of his own party. For instance, the Chair for the Senate Foreign Relations Committee, Bob Menendez, has called for the removal of waivers in order to lessen Russia’s geopolitical leverage in Europe.
Blinken stated in a release that the decision demonstrates “the administration’s commitment to energy security in Europe, consistent with the President’s pledge to rebuild relationships with our allies and partners in Europe.” In fact, waiving sanctions favors the restoration of ties between the U.S. and the E.U., a relationship which had been severely undermined during the previous presidency. In fact, the Trump administration had called out many European countries for importing natural gas from Russia. He also called out Germany notably for not contributing enough financially to NATO and for carrying through with the Nord Stream 2 pipeline project. As anticipated, many E.U. countries spoke out against U.S. interference in the project, denouncing an unjustified intervention in foreign affairs that breaches national sovereignty. Hence, the lifting of U.S. sanctions has been welcomed as a reconciliatory measure. Ultimately, a better relationship between the U.S. and Germany is imperative to tackle broader issues such as climate change or the global economic recovery following the COVID-19 pandemic.
Many European countries consider the Nord Stream 2 project instrumental in securing a long-term energy supply too much of Europe. The pipeline would double liquid natural gas (LNG) exports to Western Europe, transporting it from the Russian Arctic to Germany passing below the Baltic Sea. Thus, Germany would become the main beneficiary of what they perceive is primarily a commercial project. Most importantly for consumers, the pipeline would cut down gas prices for businesses and individuals in the country.
Yet, the completion of Nord Stream 2 also comes at a time when the Russia/U.S. relationship is in a sensitive position. In the recent meeting between Blinken and Lavrov, the U.S. Secretary of State reiterated Joe Biden’s willingness to restore a stable relationship with Russia. Considering the previous instances of political interference and instability, both acknowledged the necessity for a more predictable relationship in which both parties can find common ground. In the end, the removal of sanctions will accelerate the completion of Nord Stream 2, with many reports expecting the project to be done within less than a year.
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