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14 I Companies & Markets bne February 2020
New sanctions on Nord Stream 2
The US put new sanctions on the Nord Stream 2 pipeline and promised to fine any companies participating in the project, which it admitted in almost the same breath have come
“too late” to stop the pipeline from being completed.
Sanctions against the Nord Stream 2 and TurkStream gas pipelines, included in the US military budget for the 2020 fiscal year signed by US President Donald Trump came into force on December 20.
Switzerland-based Allseas, pipe-laying company for the Nord Stream 2 pipeline, immediately suspended its pipe laying activities saying it needed to consult with the authorities.
“In anticipation of the enactment of the National Defense Authorization Act (NDAA), Allseas has suspended its Nord Stream 2 pipelay activities. Allseas will proceed, consistent
“With over 90% of the undersea pipeline completed both Gazprom and analysts are confident the pipeline will be completed sometime in May”
with the legislation’s wind down provision and expect guidance comprising of the necessary regulatory, technical and environmental clarifications from the relevant US authority,” Allseas said in statement.
However, with over 90% of the undersea pipeline completed both Gazprom and analysts are confident the pipeline will be completed sometime in May. There are no deep-water sections left to build and the most technologically challenging construction is already completed, which is where the international companies working on the project play a crucial role.
Russia will “continue to implement its economic projects,” despite sanctions, the Russian Foreign Ministry said in a statement on December 21 in connection with US sanctions against the Nord Stream 2 and TurkStream gas pipelines. The US officials admit to having little leverage to stop the completion of Russian Nord Stream 2 pipeline to Germany, Bloomberg reported on December 18 citing unnamed senior administration officials.
The Kremlin responded angrily to the new sanctions. The Russian Foreign Ministry said in a statement that the US is seeking to deprive its European allies of "guaranteed sources of supply" of energy from Russia with the sanctions.
"Russia has implemented and will continue to implement its economic projects regardless of anyone’s sanctions," the diplomatic service said, as cited by Tass.
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The Ministry added that the United States, by imposing sanctions on the Nord Stream 2 and Turkish Stream (aka TurkStream) that is the southern part of the trident of pipelines designed to delivery gas to Europe, is trying to “deprive its European allies of a guaranteed supply of energy from Russia and to impose its liquefied gas.”
Turkish Stream is also nearly completed and was due to come online in January, but on December 4 Russian President Vladimir Putin lambasted Bulgaria for “deliberately delaying Turkish Stream” due to pressure by the west.
Russia says that the sanctions on Nord Stream 2 have nothing to do with European energy security and are simply the use of foreign policy tools that are primarily designed to boost sales of US LNG on the European market.
Indeed, Gazprom recently reported that gas prices are at a 15 year low of $169.8 per thousand cubic meters largely because Europe has diversified its gas supplies and the rise in the use of imported LNG to Europe, including LNG imports from the US. Over the last decade Europe has already largely diversified its gas suppliers. Gazprom currently supplies 36% of Europe’s gas, down from over 80% in the 1990s thanks to gas market reforms in Europe and the availability of new supplies from things like LNG.
"Moreover, the desire to harm Russian exports is by no means the only or even the most important," the diplomatic service noted. "There is a tendency to impose US liquefied gas on Europe, which costs it much more than pipeline deliveries from Russia, and thereby slow development of economies, undermining the ability to compete with the US in global markets. As a result, Europeans are losing out on all counts," the ministry added, Tass reports.
According to Russia’s Foreign Ministry European, not Russian, companies that participate in construction of the Nord Stream 2 and Turkish Stream pipelines will suffer the most. "Washington has decided that for the sake of geopolitical ambitions and commercial gain, you can spare no one, even your closest NATO partners," the ministry concluded.
Russian presidential spokesman Dmitry Peskov said on December 18 that US sanctions against Nord Stream 2 violate international law and present a “perfect example of unfair competition.”
The United States Senate approved the National Defence Authorization Act (NDAA) specifying the annual budget
and expenditures of the US Department of Defence for the 2020 fiscal year that starts on October 1, which obliges the administration to impose sanctions on the Russian Nord Stream 2 and TurkStream pipelines. Earlier, on December 11, the House of Representatives voted the document into law.