U.S. Wants Nord Stream 2 Halted If Putin Were to Invade Ukraine

Author of the article: Bloomberg News Alberto Nardelli and Vanessa Dezem (Bloomberg) — The U.S. will push Germany to agree to stop the contested Nord Stream 2 gas pipeline if Russian President Vladimir Putin invades Ukraine, according to documents seen by Bloomberg and people familiar with the plans. President Joe Biden’s administration is seeking a…
U.S. Wants Nord Stream 2 Halted If Putin Were to Invade Ukraine

Author of the article:

Bloomberg News

Alberto Nardelli and Vanessa Dezem

(Bloomberg) — The U.S. will push Germany to agree to stop the contested Nord Stream 2 gas pipeline if Russian President Vladimir Putin invades Ukraine, according to documents seen by Bloomberg and people familiar with the plans.

President Joe Biden’s administration is seeking a commitment from the new German government that it would halt the project under such circumstances, one of the people said, asking not to be identified talking about confidential discussions.

Biden held a high-stakes video call Tuesday with Putin, with the pipeline one of the measures being discussed by the U.S. and European allies as providing potential leverage with the Russian leader. That’s as he again masses troops near the Ukrainian border and the U.S. and NATO fret about the possibility of an invasion in the early part of next year. Putin has denied his intention is to start a war.

Other possible options under discussion include sanctions on Russian banks and exports of the country’s commodities. The aim is to agree on a package that is comprehensive, quick to implement and economically painful enough that it serves as a true deterrent.

In a briefing Monday on Capitol Hill, Under Secretary of State Victoria Nuland faced push-back from senators who said the U.S. was limiting its options with Putin by not providing more weaponry to Ukraine and failing to stop Nord Stream 2, according to two people who asked not to be identified discussing the private meeting. 

Nord Stream 2 is important both for Putin, as a route to sell more gas into Europe, and for Germany, which relies on supplies from Russia. The long-running pipeline project has been a periodic source of tension between the U.S. and Germany, with the administration of Chancellor Angela Merkel unwilling to use it as a political tool with Putin.

As part of an agreement signed with Biden in July, Merkel’s government committed to taking action if Russia deploys energy as a weapon or acts aggressively toward Ukraine. The deal also provided assurances to Ukraine and its status as a transit country for other pipelines. In exchange, Biden backed off imposing new measures on German entities connected to the project’s construction.

Action by Berlin against Nord Stream 2 would mean a real threat for the project. A senior European intelligence official said the conditions in the July agreement would be met in the event of an invasion. The geopolitical concerns that underpinned that deal are real now, the person said.

While the Biden administration can’t stop the project outright, it can impose more sanctions on people and entities involved in it. 

A person familiar with the U.S. position said the administration believes the language in the July agreement allows for Germany to halt gas flowing through the pipeline if Russia attacks Ukraine, though ultimately that would be Berlin’s decision. Given the pipeline hasn’t started operating, it’s likely Germany would find ways to slow completion of the project in the event of an invasion, the person said.

“We’ve had intensive discussions with both the outgoing and incoming German governments on the issue of Nord Stream 2 in the context of a potential invasion,” National Security Advisor Jake Sullivan told reporters after the call between Biden and Putin, describing the pipeline as “leverage” for the West. “I’m not going to characterize it beyond that, other than it is it an object of great priority for the Biden administration.”

It’s unclear how the new coalition government in Berlin sees things. At a press conference on Tuesday, incoming Chancellor Olaf Scholz called the situation at the Ukraine border “serious” and said his government would watch developments there very carefully.

His government will continue to make sure Ukraine remains a gas transit country, Scholz told reporters. But he avoided a clear answer to the question on whether his government would stop Nord Stream 2 if Putin invaded Ukraine. Scholz’s Social Democrats, like Merkel, support the pipeline project as a whole.

Incoming Vice Chancellor Robert Habeck from the Greens, however, made clear that the review process of the project might be affected by developments in Ukraine. Germany’s Greens have in the past demanded an end to the project.

A muscular response to a Russian invasion wouldn’t necessarily involve singling out Nord Stream 2, according to a German official familiar with the thinking of the Social Democrats. In negotiations to form the new government, the SPD labored to ensure Nord Stream 2 wouldn’t immediately be politicized, the official said. Indeed, the pipeline isn’t referenced in the 177-page coalition accord between the SPD, Greens and the Free Democrats.

The newly completed pipeline under the Baltic Sea can’t start without approval from the German regulator and a review by European authorities. The evaluation process in Germany was halted in mid-November after the regulator decided that Russian energy company Gazprom PJSC will need to restructure its Nord Stream 2 operations to comply with European Union laws.

Critics of the pipeline, which include several EU members, have long argued against the project, claiming it makes Europe too dependent on Russian gas. Germany and Russia say it’s a commercial endeavor.

Gazprom supplied almost a third of all gas consumed in Europe in 2020 and will likely become an even more important source in the short term as the continent shrinks domestic production.

The U.S. hopes to finalize an agreement on the reprisals package for Putin this month, the people said. 

Ahead of the Biden-Putin call, two people told Bloomberg there were no signs Russia was de-escalating. One pointed to Belarus summoning Ukraine’s defense attache over an alleged airspace violation as the latest in a string of worrying signs. Ukraine denied the claim that one of its military helicopters flew into Belarusian territory. Still, one of the people said a window of opportunity to dissuade Putin was still open. 

The U.S. has shared intelligence with NATO allies suggesting Russia would be in a position to potentially carry out a rapid, large scale incursion into Ukraine from multiple locations in the early months of 2022. The plans would involve about 100 battalion tactical groups, roughly double the number currently positioned near Ukraine’s borders, according to the intelligence. 

Limiting Russian energy exports could put Europe’s economies at risk at a crucial time for the continent’s recovery. The region is experiencing one of the worst gas supply crises in recent years, which has pushed fuel prices to record highs, raising inflation and concerns about Europe’s ability to get enough gas supplies over the winter. Any moves on Nord Stream 2 have stirred the European market, and traders expect that Russian flows will ease the tightness in the market.

The EU’s executive arm wants the bloc to more quickly move away from fossil fuels and toward renewable sources as part of its green deal in order to also better deal with volatile energy prices.

©2021 Bloomberg L.P.

Bloomberg.com

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