Mixed Signals

Future of Nord Stream 2 threatened by US’ mixed signals on Russia

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Ready, set, pipeline. Source: DPA

The future of Nord Stream 2, a new gas pipeline to stretch across the Baltic Sea, is at a critical juncture just as the first pipes are ready to be laid in Finnish waters.

The pipeline, which will deliver gas directly from Russia to Germany, faces stiff resistance from the United States, not only because of new economic sanctions against Russia but because of longstanding concerns about Europe’s dependence on Russia for energy.

Nord Stream 2 has become the poster child for the reigning confusion in trans-Atlantic relations, as US President Donald Trump seeks to impose his will on Germany and other European countries while they try to maintain their independence from their main ally.

As it stands, the ultimate fate of Nord Stream 2 hangs much more with the internal political wrangling in the United States, between the White House and Congress, than it does with Germany. A visit to Berlin this week from the US point man on Russian sanctions, State Department official David Tessler, demonstrated again that Germany has little leverage to press its point of view.

A web of confusion

The US doesn’t have Russia policy in the classical sense but rather two prevailing, yet asynchronistic, camps of thought: The administration seems to want rapprochement with Russia, whereas Congress wants to impose increasingly severe sanctions. The sponsor of one new piece of legislation, South Carolina Senator Lindsey Graham, calls it “the sanctions bill from hell.” Mr. Trump, meanwhile, has linked European energy dependence on Russia to the type of security provided by NATO. In July, he said Germany is a “captive” of Russia’s oil and gas.

As a result, German diplomatic sources complain US policy has been “deinstitutionalized.” They often don’t know who to talk to in the administration and find very few, aside from Mr. Tessler and his boss, Brian Hook, who are reliable. The bottom line from the German viewpoint is that the US imposes sanctions and Germany pays for them: They fear German business will become collateral damage to domestic political strife in the US.

Just last week the Nord Stream 2 project got a scare with reports that Uniper, one of the German utilities taking part in the project, was considering pulling out because of US sanctions. The company quickly affirmed its participation, saying its expressions of concern about the sanctions were misinterpreted.

Toying with sanctions

Communication is a problem down the line. Berlin officials don’t know how seriously to take threats against German companies that don’t observe sanctions. One German manager said the US sometimes seems to be just toying with threats. A good many others believe the threats cannot always be taken literally.

When sanctions were first announced a year ago, German businessmen grew very nervous. Then, word came that already-signed contracts, such as Nord Stream 2, would not be subject to the new sanctions.

But as Congress readies its so-called “bill from hell,” or the Defending American Security from Kremlin Aggression Act (DASKA), which would ban support of Russian oil production and transactions in new energy projects backed by the Russian government, as well as the Defending Elections from Threats by Establishing Redlines Act (DETER), which would invoke sanctions on pivotal sectors on a foreign nation found to have interfered in elections, concerns are back.

European partners working with Russia’s Gazprom – BASF’s Wintershall and Uniper from Germany, along with Anglo-Dutch oil giant Shell, French energy company Engie, and Austrian oil company OMV – have already invested billions in the project. The pipes are ordered and ships are beginning to lay them.

Ultimately, much depends how tough Chancellor Angela Merkel and Economics Minister Peter Altmaier are prepared to be in standing up to US threats. Though neither is a big fan of the pipeline, they are well aware they cannot let Washington dictate German energy policy.

Klaus Stratmann covers energy policy for Handelsblatt and Moritz Koch is a correspondent in Berlin. Darrell Delamaide adapted this article into English for Handelsblatt Global. To contact the authors: stratmann@handelsblatt.com and koch@handelsblatt.com.

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