My interviews: Tagesspiegel & Frankfurter Allgemeine (FAZ). Nord Stream 2 won’t avoid US sanctions using a phony “environmental foundation.”

These two interviews critique the new “environmental foundation” founded by a local German state, and paid for 99% by Russia’s Gazrpom, as a self-described “clever loophole” to circumvent US sanctions. The publicly admitted scheme is to have the foundation purchase materials and equipment from the specialty companies able to supply them, and have the foundation later supply these materials directly to Gazprom, enabling Gazprom to finish building the pipeline beneath the Baltic Sea. The foundation” is telling firms this will protect them from being sanctioned for selling directly to Gazprom. However, the US sanctions specifically target “circumvention” of sanctions, and I explain that German firms are ill-advised or naïve to cooperate, risking ruinous sanctions.

  1. Tagesspiegel BackgroundNur Naive verkaufen an die Nord-Stream-2-Stiftung” by Jakob Schlandt, 8 January 2020. [“Only Naive (businesses) will sell to the Nord Stream 2 Foundation” Free registration required)
  2. Frankfurter Allegemine Zeitung (FAZ). “Umstrittene Gas Pipeline: Wird Nord Stream 2 am Freitag weitergebaut? By Katharina Wagner and Niklas Záboji, 13 January.2021.
    • Or, English via Google Translate:

CONTROVERSIAL GAS PIPELINE:Will Nord Stream 2 continue to be built on Friday?

The permit from Denmark has been received and new pipes for Nord Stream 2 could soon be laid. However, it is more questionable than ever whether the American sanctions threats can be circumvented.

The completion of Nord Stream 2 remains uncertain. 94 percent of the Baltic Sea gas pipeline has been laid, but the last few meters are still stuck. After the departure of the Dutch-Swiss laying vessels in December 2019, progress was only brief when 2.6 kilometers were erected a few weeks ago . It was not a breakthrough: the pipeline consists of two parallel strands with a total length of around 2,460 kilometers. 30 kilometers are still missing in German, 120 kilometers in Danish waters.

Theoretically, things could continue this week on Friday for the construction consortium Nord Stream 2 AG, a subsidiary of the Russian state group Gazprom. From January 15th it has a permit from the Danish Maritime Administration, and the Russian ship Fortuna is authorized for the work. But according to reports, only preliminary work is planned.

Use of Russian “letter box companies”?

The background: At the beginning of the year, the internationally largest ship certification company Det Norske Veritas (DNV) GL withdrew completely from the project, since Washington has also introduced penalties for companies that participate in the insurance or certification of the project since the beginning of the year. And to prevent environmental damage and accidents, both the work and the completed pipeline must be checked and certified by specialized companies such as DNV GL – the procedure is repeated once a year after commissioning.

In an interview with the FAZ, Thomas O’Donnell, who teaches energy and international relations at the Hertie School of Governance in Berlin, said it would be “very difficult for Nord Stream 2 AG to find a replacement for DNV GL”. Because there are only a few companies that meet the high requirements – and they are all globally active and therefore particularly susceptible to sanctions. O’Donnell assumes that Gazprom and its European partners will try to use Russian “letterbox companies” with disguised ownership structures.

But even these would have to work with large certifiers in order to obtain the necessary knowledge at all. It also depends on whether the regulators in Germany and Denmark accept this. According to O’Donnell, dozens of German companies, large and small, have been contacted by American government agencies in the past few months and warned that they could face sanctions for participating in the construction of Nord Stream 2. According to the Reuters news agency, Washington will soon publish a kind of black list of companies at risk.

The situation remains unfortunate for the construction consortium. When asked, it emphasizes that all ships have the necessary certification. But even if it were possible to tackle the remaining work with the laying ship Fortuna, according to observers, completion would take many months.

The reason is the low capacity of the Fortuna; the previous laying vessels would presumably have completed the remaining 150 kilometers in two and a half weeks. It is therefore conceivable to use the larger Russian laying ship Akademik Tscherskij, which is currently still in Kaliningrad. Officially, nothing is known about this.

In any case, the hopes of those involved rests on the “Environmental Foundation” established by Mecklenburg-Western Pomerania to help with the completion of Nord Stream 2 . Prime Minister Manuela Schwesig (SPD) and the building consortium are betting that the foundation, as a “state entity”, will be exempt from the sanctions. From the foundation environment it is said that the temporary business operation under a foundation roof is “the forced reaction to sanction laws and harsh threats of the current American administration”. ~~~~ END ~~~

For more details on these issues see previous posts here at GlobalBarrel.com o the pipeline controversy. Two I recommend:

  1. Nord Stream 2: Berlin-Washington Mutual Intransigence Shows Transatlantic Divide on Russia | My AICGS Analysis | The Global Barrel
  2. Neue Neue Ostpolitik – Berlin Policy Journal – (of DGAP – German Council on Foreign Relations)

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