The U.S. will stop Nord Stream 2, if it wants to.
On Tuesday, the German-Finnish energy company Uniper warned shareholders in a report that, due to American sanctions (expected to pass in October along with the National Defense Authorization Act), the Nord Stream 2 pipeline will likely be delayed or not completed at all.
“With the U.S. intensifying their efforts on targeted sanctions against the Nord Stream 2 project, the probability of a delay or even non-completion of the pipeline is increasing,” the company wrote in its report. The same news was reported earlier by the German joint gas company Zukunft Erdgas.
Such pessimism is justified. The United States threatened sanctions against everyone who has anything to do with the pipeline, including the German port of Sassnitz, which is owned by the federal state of Mecklenburg-Vorpommern — that is, directly against the state. Moreover, Washington refuses to engage in any kind of negotiations with the European Union on this issue.
Europe Acknowledged Political Pressure
Twenty-four countries in the E.U. have signed a note of protest against U.S. interference in the construction of the Nord Stream 2 gas pipeline, the German newspaper Die Welt has reported. It has also been disclosed that the demarche containing charges of a violation against international law was sent to the U.S. State Department on Wednesday.
This is a good sign for the construction of the pipeline and for the fortunes of Gazprom, the Russian gas firm.
The action makes sense, as the threat harms more than just Russia and Germany. Nord Stream 2 AG is headed by Gazprom, but is backed by companies from all over Central Europe: Uniper and Wintershall (BASF) from Germany, Royal Dutch Shell from Great Britain and the Netherlands, OMV from Austria and Engie from France.
The Project is Economically Beneficial to Europe
Europe depends on obtaining 35% of their natural gas from Russia, and that share is decreasing, as Germany relies on only 10%. Therefore there is no need for a concern of dependence on Russia, which the U.S. is so worried about.
The economic benefit for the EU is clear: natural gas will play a key role in Europe’s transition to clean sources of energy, and pipeline gas is cheaper in the long term than liquefied natural gas.
Furthermore, let’s not forget that the Nord Stream pipelines were originally intended to provide greater independence from politically unstable transit countries such as Ukraine and now, Belarus.
Europe Understands: “The Further into the Forest, the More Firewood”*
The situation is not simple: the U.S. can indeed block the project, but then Europe can say goodbye to its sovereignty. Americans will understand that sanctions are effective and will push their interests in other areas: steel, aluminum, automobiles, aviation, solar energy, power plants, IT and other internet technology.
There are reports in the German press that Europeans will work anonymously on the last 160 kilometers of Nord Stream 2. Texan senator Ted Cruz, in response to rumors of “mysterious” living quarters and anchorage of ships off the island of Rugen, threatened “crushing legal and economic sanctions” against the port of Sassnitz.
Three Response Options at This Moment
At the moment, the German magazine Focus writes, there are three possibilities for Germany and the E.U. to confront the U.S:
1. Respond to each of President Donald Trump’s attacks with a counterattack — sanctions against sanctions. For example, a ban on LNG imports from the U.S.
2. Utilize all diplomatic powers: according to Article 96 of the Charter of the United Nations, the General Assembly or the UN Security Council may seek the opinion of the International Court of Justice on any legal matter. When the International Court of Justice in The Hague declares sanctions related to the U.S.’ Countering America’s Adversaries Through Sanctions Act to be contrary to international law, the U.S. government will be considered a criminal worldwide. With such a loss of face, it will be much more difficult for Trump to implement his threats. Thus, there is some hope for diplomacy. But international law experts have doubts as to whether the prevailing opinion will be in favor of Nord Stream.
3. File a complaint with the World Trade Organization: this will only have a chance of legal success if the U.S. not only threatens sanctions, but also implements them. So far, however, the U.S. has been successful at only leveling threats: construction work on Nord Stream 2 has been suspended for several months.
The magazine concludes that none of the three options offer a dramatic ‘silver bullet’ solution. Trump has effectively cornered the E.U. Indeed, the next few months will prove a toxic test for German and European diplomacy, as well as global trade.
Our take is that the U.S. may win this battle, but will lose good relations with its allies, who will begin the painstaking work of distancing themselves from Washington, first by lifting sanctions on Russia. The situation resembles that of Belarus: Lukashenko won the battle for the presidency, but lost Belarus. Trump will win the battle for Nord Stream 2, but he will lose Europe.
The Umka Rushes to the Rescue
Meanwhile, the Poles believe that Gazprom continues to prepare for the completion of the pipe, and not from Sassnitz, but from Kaliningrad. On Aug. 2, the Umka multipurpose supply ship set off for the Baltic Sea from Murmansk and will arrive in Kaliningrad on Aug. 14. The ship is owned by the rescue service of the Russian Ministry of Transport, writes Polish news site BiznesAlert.
It is also likely, according to BiznesAlert, that the Baltic Researcher (which arrived in Kaliningrad in early August), the ships, Ivan Sidorenko and Ostar Sheremet (which were previously registered as units owned by Gazprom) and the supply vessel Erri (owned by the Russian company Femco) will be used in the continuation of the pipeline’s construction.
The ships are equipped with positioning systems, some of which have already been used in laying pipes along the seabed.
*Editor’s note: This is a Russian idiom meaning the deeper you dig into a situation, the more problems you encounter
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