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Forbes: Russia’s Nord Stream II Handed A Potential Death Knell

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New York, NY, June 26, 2020 | comments

The Russian energy giant Gazprom isn’t going to like this. Angela Merkel might like it even less.

The Russia to Germany pipeline, known as Nord Stream II, is in the crosshairs of a bipartisan congress yet again. This time, a bill hopes to stop the pipeline from being laid under the Baltic Sea by going after its insurers.

It’s unlikely to stop it, in reality, because they have come this far already and it’s almost complete. But here is the latest in the U.S. vs Russia energy war.

Yesterday, U.S. House Representatives Adam Kinzinger (R-IL), Denny Heck (D-WA), Mike Turner (R-OH), and Ruben Gallego (D-AZ) filed a House companion bill of the U.S. Senate’s Protecting Europe’s Energy Security Clarification Act, which will impose additional sanctions on Nord Stream II.

The news traveled fast to Kiev, where Gazprom’s former partner in Ukraine, Naftogaz, treated it with revelry.

Naftogaz and Gazprom have since settled most of their legal disputes, but the Nord Stream II line is seen as a problem for the Ukrainian gas company. It means more Russian gas going into Europe via Germany and less Russian gas going into Europe via Ukraine. Some estimated that the loss in gas transit revenue is equal to around 10% of Ukraine’s GDP, a GDP that is going nowhere fast.

Both houses of congress passed the Protecting Europe’s Energy Security Act (PEESA) last year and have now introduced the PEESA Clarification Act in both the U.S. House of Representatives and the U.S. Senate.

This new legislation follows last year’s successful passage of PEESA in the annual U.S. defense budget bill, which sanctioned companies working on the pipeline that were laying deep-sea pipes in the Baltic Sea.

That basically takes European companies out of the project for the remainder of its construction as insurance firms now face the risk of being fined by Treasury.

The same goes for engineering inspection firms, putting the onus on Russia, and potentially forcing Gazprom’s European partners to just go along with whatever the Russian inspectors say about the pipeline.

There is no date yet for voting on the PEESA Clarification Act. It will probably pass. How Europe reacts will be interesting.

Nord Stream II is based in Zug, Switzerland and majority owned by Gazprom, the largest natural gas exporter in the world and one of the largest producers. Gazprom accounts for nearly 15% of the world’s natural gas output. It’s a beast.

Nord Stream II is a consortium of companies made up of France’s Engie, Austria’s OMV, U.K.’s Shell, and Germany’s Uniper and Wintershall. All of them have money on the line in the project.

Nord Stream II is part of a number of Russian pipeline projects that came to fruition around 2014. At the time, Russia and Ukraine were going through a bitter divorce. The Ukrainian government collapsed. A pro-Western one was installed, and Kiev pulled farther away from Moscow’s sphere of influence. Russia took over Crimea, then an autonomous state in Ukraine, and now they own it.

Seeing how the relationship between the two countries had been severed, Russia moved quickly to create alternative gas transit routes rather than relying on Ukrainian pipelines, many of which have been there since the days when Ukraine was the most important state in the Soviet Union.

Gazprom tried building South Stream with the Italians, but the Italians, either out of money or not wanting to choose sides between Ukraine and Russia, backed out. Turkey backed in and the Turkish Stream took its place.

But the mother lode of them all was definitely Nord Stream II, a pipeline that could not have happened without the Germans. It sits right along side the original Nord Stream, which led Naftogaz to believe that it was being built as an end-around Ukraine.

Washington has since viewed that pipeline in the same light.

Moscow believes that the U.S. is concerned that Nord Stream would cut it out of the lucrative European energy markets, and for this reason, Nord Stream has been targeted in Russian sanctions laws since 2017.



The original article can be found on the Forbes website here.

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