Report

U.S. Close to Imposing Sanctions on European Companies in Russian Pipeline Project

The decision would test already fraught relations with Germany, other allies.

An employee works on an iron cage at the Nord Stream 2 facility in Sassnitz, Germany, in October 2017. (Carsten Koall/Getty Images)
An employee works on an iron cage at the Nord Stream 2 facility in Sassnitz, Germany, in October 2017. (Carsten Koall/Getty Images)

The Trump administration is edging closer to imposing sanctions on energy companies from Germany and other European countries in a bid to scuttle the construction of a politically contentious Russian gas pipeline across the Baltic, according to three sources familiar with the issue.

Officials are still looking at other ways to block to project, known as Nord Stream 2, a natural gas pipeline project meant to bring Russian gas into the heart of Europe. But key figures in the administration now view sanctions as an increasingly likely option.

The measure would add yet more tension to the relationship between the United States and Germany, where officials are already fuming over President Donald Trump’s punitive moves on trade, his decision to withdraw from the Iran nuclear deal, and other issues.

“They will stop at nothing to block Nord Stream,” one of the sources said, referring to members of the Trump White House.

Successive administrations opposed the pipeline since it was first broached in 2015, fearing it would undercut Ukraine in its lucrative middle-man position for energy flows between Russia and Europe. Congress passed a bill last summer making sanctions possible.

Many Central and Eastern European countries also oppose the project, which they fear will tighten Moscow’s energy stranglehold on Europe by doubling the amount of natural gas that flows directly from Russia to Germany.

The State Department would not respond directly to the matter but said companies working on the project were doing so at their own peril.

“We have been clear that firms working in the Russian energy export pipeline sector are engaging in a line of business that carries sanctions risk,” a State Department spokeswoman said. 

Trump has complained that Berlin is spending billions of dollars on the pipeline while refusing to earmark more money for defense. (In fact, the cost of the project would be borne by private companies, not public funds.) He has also criticized Germany repeatedly for its trade practices.

The friction was apparent during German Foreign Minister Heiko Maas’s visit to Washington last week, which included tense exchanges between officials from both sides — over the Iran nuclear deal, trade, and the Nord Stream project.

National Security Advisor John Bolton and other top U.S. officials see the project as a threat to the United States and European security and are determined to stop it, the source said.

“Everything is on the table. … The administration is taking a whole of government approach to stopping the Nord Stream project.”

In response to a query, a National Security Council spokesman said the administration wanted to reduce Russian economic leverage over Europe.

“There is consensus across the U.S. government that Nord Stream 2 deepens this dependence at a time when Russia’s activities have become increasingly dangerous and unpredictable,” the spokesman said.

One of the officials leading the push for sanctions is Wess Mitchell, the assistant secretary of state for European and Eurasian affairs. He raised the issue repeatedly on a visit to Europe in recent weeks, according to U.S. diplomats and one former senior U.S. official.

Congress passed strict sanctions legislation on Russia last summer in part to tie Trump’s hands on policy toward the Kremlin. But until recently the White House had downplayed the need for more economic sanctions over the pipeline.

“If the White House is serious now about targeting Nord Stream 2, that would be a remarkable change,” said Tim Boersma, an energy expert at Columbia University’s Center on Global Energy Policy.

Boersma suggested that unraveling U.S.-European relations in recent months might account for the shift in the White House’s approach to Russia’s big energy project.

The sanctions would affect several companies, including Wintershall Holding and Uniper of Germany; Engie of France; Royal Dutch Shell, an Anglo-Dutch oil company; and Austria’s OMV. Nord Stream 2 has secured nearly all the permits it needs for the $11 billion project from countries around the Baltic.

“Certainly, the only one who can stop Nord Stream 2 now is the United States via sanctions,” said one European diplomat who works on energy issues. “If there is no dramatic step from the U.S. government, Nord Stream 2 will be built.”

Opposition to Nord Stream has been one of the Trump administration’s few consistently anti-Russia positions since it took office, though opposition has been stronger at the State Department than in the White House.

FP reporters Colum Lynch and Emily Tamkin contributed to this report.

Robbie Gramer is a diplomacy and national security reporter at Foreign Policy@RobbieGramer

Keith Johnson is Foreign Policy’s global geoeconomics correspondent. @KFJ_FP

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