US Warns Firms It Stands Ready to Sanction Supporters of Russia’s New Gas Pipelines

July 16, 2020 Updated: July 16, 2020

The Trump administration is warning investors in two Russian natural gas pipeline projects that they could face sanctions if the Kremlin uses energy exports as a tool of political influence.

The State Department has updated its public guidance on the Countering America’s Adversaries Through Sanctions Act (CAATSA) to “clarify” that the Trump administration stands ready to sanction “investments or other activities related to a broader scope of Russian energy export pipelines, including Nord Stream 2 and the second line of Turk Stream.”

U.S. Secretary of State Mike Pompeo said at a press conference on July 15, “It’s a clear warning to companies aiding and abetting Russia’s malign influence projects will not be tolerated.”

“Get out now, or risk the consequences,” he warned.

The United States considers the two energy projects “key tools” used by Russia to “exploit and expand European dependence on Russian energy supplies” and companies or persons that aid or abet them can be sanctioned, Pompeo said.

“These aren’t commercial projects,” he added. They are “tools that undermine Ukraine by cutting off gas transiting that critical democracy, a tool that ultimately undermines transatlantic security.”

U.S. Secretary of State Mike Pompeo
U.S. Secretary of State Mike Pompeo speaks during a news conference at the State Department in Washington, on July 15, 2020. (Andrew Harnik/Pool via Reuters)

The Nord Stream 2 pipeline, once completed, will transport natural gas about 750 miles (1,200 kilometers) under the Baltic Sea directly from Russia to Germany without transiting any other country. The gas pipeline is owned by Russian state-run company Gazprom, and is similar to the Nord Stream pipeline that’s already in operation and directly connects Germany with Russian gas.

Before the first Nord Stream had been built, Russia exported its gas to European countries including Germany through pipelines transiting Ukraine.

“Ukraine’s energy infrastructure serves as a deterrent to Russian aggression, yet the Kremlin now seeks to undermine Ukraine by making that infrastructure obsolete,” Assistant Secretary of State for Energy Resources Frank Fannon said at the press conference.

The possibility to sanction Nord Stream 2 sends “a clear signal about this administration’s determination to use the tools we have … to support energy security goals,“ he added.

The United States, which has abundant reserves of natural gas, is trying to increase its exports of liquefied natural gas (LNG) to Europe. It has also supported efforts by Europe to diversify its imports of LNG from sources other than Russia, including Norway.

The United States supports diversification of energy sources, “regardless of where that energy comes from or the type of energy,” Fannon said. It supports the Southern Gas Corridor project intended to bring gas from the Caspian region to South, Central, and Western Europe as well as the development of energy sources in the Eastern Mediterranean, he added.

Many countries in Europe are looking for opportunities to diversify their energy sources. Belarus has expanded its crude oil sources beyond Russia. Lithuania has acquired an LNG import vessel, and Poland has built an LNG terminal to bring gas from sources other than Russia, Fannon said. Ukraine, Greece, Bulgaria, Serbia, Croatia, Italy, and Romania also diversify their energy sources, he added.

A number of European countries share the United States’ concerns about the impact of Nord Stream 2 on European energy security and the potential for Russian aggression, Deputy Assistant Secretary of State for European and Eurasian Affairs Chris Robinson said.

Nord Stream 2
Allseas’ deep-sea pipe-laying ship Solitaire lays pipes for Nord Stream 2 pipeline in the Baltic Sea on Sept. 13, 2019. (Stine Jacobsen/Reuters)

Nord Stream 2 suspended construction in December 2019 after Swiss-Dutch company Allseas, which specializes in subsea construction, pulled out following sanctions imposed by the United States on the project.

Two Russian-owned pipe-laying vessels may finish the remaining 100 miles (160 kilometers) of the project. Gazprom is financing half of the project worth about 9.5 billion euros ($10.5 billion).

Other partners in Nord Stream 2 are Austria’s OMV, the German firms Uniper and Wintershall, Anglo-Dutch energy major Royal Dutch Shell Plc, and France’s Engie.

Russian foreign ministry spokeswoman Maria Zakharova said the sanctions on the two pipelines equates to political pressure, TASS news agency reported. Russia has also said it’s considering retaliatory measures.

The German government has said it regrets the threat of sanctions and considers them interference in the country’s domestic affairs. However, Chancellor Angela Merkel made it clear last week that Germany isn’t considering retaliation against the sanctions.

With the Turk Stream pipeline consisting of two 578-mile (930-kilometer) long lines, Russian gas passes through the Black Sea to Turkey. The sanctions warning applies only to the second Turk Stream line delivering gas to Southern and Southeastern Europe.

The first line of Turk Stream, which is designed exclusively to supply Turkey’s domestic natural gas market, isn’t subject to sanctions, according to the updated public guidance.

Russia to Germany gas pipeline
A ship works offshore in the Baltic Sea on the natural gas pipeline Nord Stream 2 from Russia to Germany on Nov. 11, 2018. (Bernd Wuestneck/dpa via AP)

US Lawmakers Aim to Expand Nord Stream 2 Sanctions

Last month, a bipartisan group of U.S. senators led by Jeanne Shaheen (D-N.H.) and Ted Cruz (R-Texas) introduced a bipartisan sanctions bill for entities involved in Nord Stream 2.

The measures, which will only become law after being approved by Congress and signed by President Donald Trump, would expand existing sanctions to include penalties on parties providing underwriting services, insurance or reinsurance, and pipe-laying activities.

“We must now continue that effort and ensure that Russia does not surreptitiously extend its malign influence throughout Europe,” Shaheen said in a statement. “Nord Stream 2 threatens Ukraine, Europe’s energy independence, and gives Russia an opening to exploit our allies.

“There is bipartisan and bicameral consensus that Russia’s Nord Stream 2 pipeline poses a critical threat to America’s national security and must not be completed,” Cruz said in the statement.

He added that as Putin continues to try to circumvent the sanctions already in place, the legislation will clarify that “those involved in any way with installing pipeline for the project will face crippling and immediate American sanctions.”

Reuters and The Associated Press contributed to this report.