Russia will restart construction of its Nord Stream 2 gas pipeline to Germany this week in the face of US sanctions that have paused construction for more than a year.
Kremlin-controlled gas group Gazprom will commence pipe laying in a section of the Baltic Sea administered by Denmark on Friday, despite measures from Washington designed to cripple the politically divisive project financed by five of Europe’s biggest energy companies.
The US, backed by Poland and other eastern EU states, claims the pipeline is a political project designed to increase Europe’s reliance on Moscow and bypass already existing pipelines through Ukraine. Russia and Germany say it is a purely commercial initiative to meet future higher gas demand in Europe.
The €9.5bn pipeline has long been one of Europe’s most hotly debated geopolitical issues and a bellwether for relations between Moscow and EU states.
But the Donald Trump administration’s decision to impose sanctions against the pipeline, while also promoting exports of its own gas to Europe, sparked intense arguments over Europe’s right to choose its own energy supplies and broader commercial relations with the US.
Those sanctions have delayed the pipeline beyond its initial planned opening date of mid-2020, and forced Gazprom to adjust its approach to accommodate for the loss of foreign contractors, while Washington has vowed to keep imposing restrictions necessary to block its completion or usage.
“The US sanctions will delay the launch of the project but will not stop its completion. Ultimately, Moscow, with the help of Berlin, will find ways to bypass the sanctions,” said Naz Masraff, director for Europe at Eurasia Group, a risk consultancy.
Where climate change meets business, markets and politics. Explore the FT’s coverage here
Work on the 1,230km-long pipeline was abruptly halted in December 2019 when Swiss pipe-laying company Allseas abandoned the project to avoid US sanctions designed to punish companies assisting in construction, with 94 per cent of the length completed. That forced Gazprom to find and prepare its own vessels to lay the remaining 120km on the seabed.
Denmark’s energy agency said in a statement that it had received the necessary documents to approve for pipe laying to resume on January 15. Gazprom will use the pipe-layer Fortuna ship and two support vessels, which are capable of laying about 1km of pipe a day. That could see it finish construction in about four months, dependent on weather conditions.
New US sanctions passed this month also apply to companies who insure and certify the pipe-laying operations, further complicating Gazprom’s efforts. DNV GL, a Norwegian risk assessment company, has already said it had ceased all inspection activities relating to the pipeline and would not be able to certify its completion.
Nord Stream 2 said in a statement that it was “not in a position to comment on potential impacts” of future US sanctions. Russian president Vladimir Putin has vowed that the pipeline will be finished regardless of Washington’s opposition.
The pipeline runs alongside the already operational Nord Stream 1 and will add another 55bn cubic metres of gas supply a year.
While the pipeline is wholly owned by Gazprom, half of its cost has been provided by five EU companies: Shell, Uniper, OMV, Wintershall and Engie. It also has been steadfastly supported by Berlin.
Twice weekly newsletter
Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.
An official in the German foreign ministry told the Financial Times: “Nord Stream 2 is a commercial project run by a consortium made up of private companies . . . According to our information, the construction permits necessary for laying the pipeline have been issued.”
Ms Masraff said that US president-elect Joe Biden would probably be more open to compromise given his desire to rebuild relations with Europe that have suffered under Mr Trump.
“Biden will be a lot more sensitive than Trump to European and particularly German sensitivity around Nord Stream 2 in the context of strengthening transatlantic ties,” she said. “Sanctions will likely be used as leverage to co-operate with the German government on restrictions to make the pipeline operational while also paying attention to Washington’s concerns over Ukraine.”
Additional reporting by Richard Milne in Oslo and Katrina Manson in Washington
Get alerts on EU energy when a new story is published