US Senate looks to tighten sanctions on Nord Stream 2

The legislation would apply to offshore vessels engaged in all pipelaying activities, the companies that provide those vessels, “as well as to those which provide insurance, port facilities, or tethering services for those vessels, and ultimately to any company that provides certification for the Nord Stream 2 pipeline to begin operations.”

Building upon the Protecting Europe’s Energy Security Act (PEESA), the legislation was introduced by US Senators Ted Cruz (Republican-Texas) and Jeanne Shaheen (Democrat-New Hamphire), members of the Senate Foreign Relations Committee, and Senators John Barrasso (Republican-Wyoming), Tom Cotton (Republican-Arkansas), and Ron Johnson (Republican-Wisconsin).

In May 2019, Senators Cruz and Shaheen introduced PEESA to impose targeted sanctions on vessels that were being used to complete the Nord Stream 2 pipeline, which would bring Russian gas to Europe. The legislation was signed into law in the National Defense Authorisation Act of 2020 (NDAA).

"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," said Senator Cruz.

Allseas suspends pipelay activities

In December 2019, shortly before President Trump signed the NDAA into law, Senator Cruz and Senator Johnson sent a letter to the chief executive of Allseas Group warning the company it would face sanctions if it continued installing deepsea pipes for the Nord Stream 2 project.

In anticipation of enactment of NDAA, Allseas suspended its Nord Stream 2 pipelay activities on 21 December.

Switzerland-based Allseas had deployed its construction vessel Pioneering Spirit, pipelay vessels Solitaire, Audacia and Calamity Jane, construction vessel Fortitude and Oceanic in support of its pipeline installation work on the Nord Stream 2 project.

Russian state-owned gas company Gazprom is trying to complete construction of Nord Stream 2, a natural gas pipeline that will enable Russia to increase the amount of natural gas it exports directly to Germany and onward to other European Union (EU) member states. Pipeline construction was suspended in December 2019, after imposition of US sanctions related to the project. The Trump Administration and Congress have expressed opposition to Nord Stream 2, reflecting concerns about European dependence on Russian energy.

In May 2020, a pipelaying vessel owned by a subsidiary of Gazprom arrived at Germany’s Mukran port, a logistics hub for Nord Stream 2. Observers expect Gazprom to use that ship and a second pipelaying vessel to try to finish the pipeline, which has about 160 km of the approximately 1,200 km pipeline remaining to be laid and connected, according to the Congressional Research Service (CRS).

Being built at a cost of US$10Bn, Nord Stream 2 could be completed by the end of 2020 or early 2021, but Gazprom still would need to make significant changes to the ownership structure of the pipeline to comply with EU energy regulations, according to CRS.

Nord Stream 2 is being constructed alongside the Nord Stream 1 pipeline, in operation since 2011. Nord Stream 1 has a total capacity of 55Bn m³ (bcm) per year. In 2018, it ran at 107% of stated capacity. Nord Stream 2 also has a capacity of 55 bcm per year, which will double the Nord Stream system’s total capacity. It is owned entirely by Gazprom, with 50% of its financing being supported by five European energy companies: France’s Engie, Austria’s OMV, Anglo Dutch Shell and Germany’s Uniper SE and Wintershall.

Although the EU has an ambitious energy diversification strategy, Russian gas still is a critical energy source, accounting for 46% of EU imports in 2018.

While supporting Nord Stream 2 development, Germany is also looking to increase broader European energy supply by backing construction of new LNG terminals in the northern part of the country.

German LNG import terminal

For instance, Japan’s Mitsui OSK Lines Ltd (MOL) and a subsidiary of Uniper SE have signed a contract to build and charter the world’s largest capacity floating storage and regasification unit (FSRU)⁠ for the planned LNG import terminal in Wilhelmshaven, Germany.

The US, of course, is also looking to expand its LNG imports, with Germany appearing to be a ready customer as it moves away from coal and nuclear power.

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