Argument

Sanctions Won’t Stop Nord Stream 2. Diplomacy Will.

Quiet negotiations with Berlin can do what economic coercion can’t.

By Edward Fishman, a former member of the Policy Planning Staff at the U.S. State Department, is a nonresident senior fellow at the Atlantic Council and an adjunct fellow at the Center for a New American Security.
Angela Merkel and Joe Biden pose for photographers prior to their trilateral talks during the Munich Security Conference in Munich on Feb. 7, 2015.
Angela Merkel and Joe Biden pose for photographers prior to their trilateral talks during the Munich Security Conference in Munich on Feb. 7, 2015. CHRISTOF STACHE/AFP via Getty Images

Nord Stream 2, a gas pipeline that would connect Russia and Germany under the Baltic Sea, has become a rare thing in today’s Washington: a bipartisan bête noire.

Last month, U.S. Secretary of State Antony Blinken called it “a bad deal” and warned that “any entity involved in the Nord Stream 2 pipeline risks U.S. sanctions and should immediately abandon work on the pipeline.” Meanwhile, two leading Republican lawmakers wrote a piece in Foreign Policy urging President Joe Biden to “stop dragging his feet” and impose sanctions on “all vessels and companies currently working to complete the Nord Stream 2 pipeline.”

With the project around 95 percent complete, time is running short to stop it. But the solution most are pushing for—sanctions—is not the answer.

That’s because there are only two players capable of killing Nord Stream 2: the Russian and German governments. As Washington has escalated sanctions against the pipeline, many international companies have backed out. If Nord Stream 2 were just a “commercial project,” as Berlin maintains, the risk of U.S. sanctions would have almost definitely halted it by now. But the Russian and German governments have stepped in to keep the project afloat. Russia redeployed a pipe-laying ship, the Akademik Cherskiy, from the Pacific to the Baltic to work on Nord Stream 2, replacing a Swiss vessel. And in Germany, the state of Mecklenburg-Western Pomerania, where the pipeline makes landfall, set up a foundation to shield German contractors from sanctions.

So, to achieve its objectives, Washington will need to change minds in the Kremlin or the German chancellery. Moscow, which is racing to finish the project despite sanctions against one of its vessels, is unlikely to cooperate. For Russian President Vladimir Putin, Nord Stream 2 would provide continued leverage over Europe—the European Union relies on Russia for around 40 percent of its gas supplies—while also weakening Ukraine, which currently earns billions of dollars by clipping transit fees for the exports that cross its territory. That leaves altering Berlin’s calculus as Washington’s only hope for squashing the project.

The question, then, is how. Imposing sanctions on German companies involved in the project would no doubt hurt. But it is hardly guaranteed that this would actually shift Berlin’s policy. American sanctions are powerful because they cut off access to the U.S. financial system—and such access is critical to operate as a global company. Yet sanctions are far from omnipotent: They cannot, for instance, stop ships from laying pipes in the sea or prevent gas from flowing. They are best understood as a threat: If you work on the pipeline, you face economic consequences.

Were the United States to impose sanctions on German companies involved in Nord Stream 2, there would be little incentive for those firms to stop working on the project. The risk of U.S. sanctions is well known; by now, any company working on the pipeline has already made up its mind that continuing the effort is worth the potential penalties. Moreover, given that these firms are aiding Nord Stream 2 with Berlin’s approval, they very likely would receive support from the German government were they to come under U.S. sanctions.

To make matters worse, such sanctions would also likely cause a serious rift in U.S.-German relations, shifting public opinion in Germany against the Biden administration and potentially in favor of finishing the pipeline.

Nobody enjoys the sight of their government being bullied. Sanctions against German firms could cause Germans to rally around the flag, drawing an association between opposition to Nord Stream 2 and bending to America’s will—and thereby making such opposition politically toxic. By wielding sanctions against Germany, the United States could give Nord Stream 2 just the domestic boost it needs to get done. It could also motivate Berlin to throw its weight behind efforts to build workarounds to the U.S. financial system—which would weaken all American sanctions programs.

Sanctions against Germany, therefore, could very well backfire. Thankfully, there’s a better way to stop Nord Stream 2: stalling the project until after the upcoming German elections, which are scheduled to take place this September.

Two factors suggest that delay is Washington’s wisest policy option. The first involves Chancellor Angela Merkel, who will be stepping aside after nearly 16 years in office. Merkel herself has been a halfhearted supporter of Nord Stream 2, having publicly mulled terminating the project after the poisoning of Russian opposition leader Alexei Navalny last year. Merkel has a proud legacy of standing up to Kremlin aggression and has been dubbed the “Climate Chancellor” for her long-standing championing of green policies.

Merkel has not been willing to expend political capital to kill Nord Stream 2. German business interests strongly support the pipeline, leading her government to insist that it is a “commercial project.” But it is hard to believe Merkel wants one of her final acts as chancellor to be a ribbon-cutting ceremony celebrating the completion of one of the world’s longest offshore gas pipelines. A delay could suit Merkel nicely.

The second factor is the German Green party, which is polling a close second to Merkel’s Christian Democratic Union and stands likely to play a “kingmaker” role in the next government. In March, the Greens added a pillar to their platform stating that Nord Stream 2 “should be stopped” for both climate and geopolitical reasons.

If the Greens are part of Germany’s new governing coalition, as appears probable, the pipeline may well be toast.

All of this suggests that Washington’s best hope of scuttling the pipeline is stalling its completion past September. The way to do that is not by sanctioning German companies—which could well produce the opposite effect. It is through quiet negotiations with Berlin, encouraging the German government to throw just enough sand in the gears to delay the project. Call it a truce: In exchange for Berlin’s placing a moratorium on pipeline construction and regulatory approvals through the end of the year, Washington would agree not to sanction any German companies for the same time period.

Cutting such a deal would require reviving an art all but lost during the Trump administration: diplomacy. Biden has committed to doing just that. Here’s his chance.

 

Edward Fishman, a former member of the Policy Planning Staff at the U.S. State Department, is a nonresident senior fellow at the Atlantic Council and an adjunct fellow at the Center for a New American Security. Twitter: @edwardfishman