Industry News

U.S. Partially Waives Sanctions on Russian Pipeline

May 24, 2021

On May 19, 2021, the Department of State submitted a report to Congress pursuant to the Protecting Europe’s Energy Security Act, determining that it is “in the national interest of the United States” to waive the application of sanctions on Nord Stream 2 AG, its CEO Matthias Warnig, and Nord Stream 2 AG’s corporate officers. An accompanying press statement was published shortly after delivery of the report. The move seemingly paves the way for the completion of the much-maligned Nord Stream 2 natural gas pipeline which up to this point had been hindered by United States sanctions. The Nord Stream 2 pipeline is designed to carry Russian natural gas from Vyborg, Russia to Greifswald, Germany.

Currently, Russian natural gas must pass through Ukraine before making its way to central, southern, and western Europe. Once completed, Nord Stream 2 would give Russia the ability to bypass Ukraine all together via a direct pipeline to Germany. Many in the United States see the completion of Nord Stream 2 as a geopolitical win for Russia, potentially handing Moscow substantial new leverage in Europe. American politicians have been quick to point to several past instances in which Russia has either cut off or threatened to cut off Ukrainian natural gas, leading to fears that Moscow may one day use Nord Stream 2 as a means of imposing geopolitical pressure in central and western Europe.

While there has been much speculation following the move as to why the administration has chosen to lift sanctions, it has been reported that sources close to the situation say that the Biden administration is simply unwilling to risk rupturing its relationship with Germany over the pipeline. According to the May 19th press statement, the decision to partially lift sanctions reaffirms President Biden’s pledge to “rebuild relationships with our allies and partners in Europe.” It has also been reported that top Biden officials feel the only way to effectively obstruct the project at this point would be to subject future end users of the natural gas to United States sanctions. It is estimated that despite attempts by the United States to prevent completion of the project that it is roughly 95% complete. The move to partially lift sanctions sets up a relatively unique situation, one in which the administration will continue to sanction ships involved in the construction of the pipeline yet refuses to sanction the company in charge of the project. Thirteen vessels associated with the project remain subject to sanctions.

While the move seems to on one hand to represent a softened United States stance on Nord Stream 2, seemingly paving the way for its completion, the administration is publicly maintaining its strong opposition to the project overall. The May 19th statement did not mince words regarding the administrations overall view of the project, with Blinken stating that United States opposition to the Nord Stream 2 pipeline is “unwavering,” and that the United States will continue to oppose the completion of the project which would “weaken European energy security and that of Ukraine and Eastern flank NATO and EU countries.”

If you have any questions relating to Nord Stream 2 or United States sanctions do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.