Should the U.S. Sanction the Companies & Corporate Officers Involved With the Russia-to-Germany ‘Nord Stream 2’ Gas Pipeline? (S. 3436)

What is S. 3436?

(Updated March 6, 2022)

This bill — known as the Protecting Europe's Energy Security Implementation Act — would impose sanctions on corporate officers and entities involved with the planning, construction, or operation of the Nord Stream 2 pipeline. The Nord Stream 2 natural gas pipeline from Russia-to-Germany via the Baltic Sea was completed recently and is expected to come online in the near future despite objections by NATO allies in Eastern Europe and Ukraine, where a substantial amount of Russian natural gas flows through pipelines en route to Central and Western Europe.

Argument in favor

The Nord Stream 2 pipeline strengthens Russia’s control over Europe’s energy supply, undermines the security of America’s NATO allies, and makes Russian aggression in Ukraine more likely by reducing the amount of natural gas that has to pass through Ukrainian pipelines. Congress should re-impose the sanctions on the company and corporate officers behind Nord Stream 2 after the Biden administration waived them.

Argument opposed

The Russia-to-Germany Nord Stream 2 pipeline is already completed and is expected to become operational soon regardless of what the U.S. does in terms of sanctions. It isn’t worth reimposing sanctions the Biden administration waived because it could weaken U.S.-Germany relations. Furthermore, America’s European allies could theoretically shut down the pipeline in the future if needed to check Russia.

Impact

Companies and corporate officers involved with the Nord Stream 2 pipeline; and U.S. federal agencies.

Cost of S. 3436

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Ted Cruz (R-TX) offered a statement on his proposal to impose sanctions on the companies and corporate officers involved in the Russia-to-Germany Nord Stream 2 pipeline after the Biden administration removed those sanctions, which read in part:

“There is still time to stop Nord Stream 2 from coming online. The pipeline is completed but months away from certification and activation. If President Biden implemented the law and imposed mandated sanctions on Nord Stream 2 AG — the company responsible for the planning, construction, and operation of the pipeline — it would send a signal that the U.S. is serious about preventing further progress on Nord Stream 2. It would especially underline that any entity participating in certifying the pipeline will face the full force of crippling American sanctions.”

The Biden administration waived sanctions on the company and its CEO after determining it would be “in the national interest” to do so and prevent a deterioration of U.S. relations with Germany. Additionally, they cited the fact that Nord Stream 2 was 95% complete when Biden took office, and Secretary of State Antony Blinken said that European allies could potentially cut off the flow of natural gas through the pipeline in the future to check Russia. The White House offered a statement of administration policy opposed to this bill, which explained in part:

"The Administration has been clear with our allies that Nord Stream 2 is a harmful Russian geopolitical project that is a bad deal for Ukraine and a bad deal for Europe. The Administration does not believe this bill is a genuine effort to counter Russian aggression or protect Ukraine. In fact, if passed, the legislation would only serve to undermine unity amongst our European allies at a crucial moment when we need to present a unified front in response to Russian threats against Ukraine. The Administration strongly believes any new sanctions authority should allow us to impose maximal costs on Russia if it further invades Ukraine, in a manner that would preserve Transatlantic unity, which this legislation does not do." 

Both the Obama and Trump administrations opposed the Nord Stream 2 pipeline and sought to block its completion. Congress has acted on several occasions on a bipartisan basis to impose sanctions on companies and corporate officers involved with the Nord Stream 2 pipeline, including through the Countering America’s Adversaries Through Sanctions Act of 2017 and the Protecting Europe’s Energy Security Act of 2019. Most recently, the House of Representatives approved Nord Stream 2 sanctions in the National Defense Authorization Act for FY2022, although that bill hasn’t become law.

Of Note: The Nord Stream 2 pipeline is an expansion of the existing Nord Stream pipeline, which is projected to more than double its annual capacity from 1.9 trillion cubic feet of natural gas to 3.9 trillion cubic feet. The pipeline brings natural gas from Russia through the Baltic Sea to Germany, where it can be routed through other pipelines that go to the Czech Republic and the Netherlands. 

Planning for Nord Stream 2 began as early as 2011 and an agreement to build it was reached in 2015, although there have been pauses during the process due to political opposition brought by the Obama and Trump administrations in concert with like-minded European nations.

Nord Stream 2 is seen as a geopolitical boon for Russia because it will increase its ability to send large volumes of natural gas to Western Europe, thereby increasing its sway with European Union nations by gaining leverage over their energy markets. It also reduces the importance of Ukraine and other Eastern European nations, including NATO members, to European energy markets and the competitiveness of liquefied natural gas exported from the U.S. to its European allies. Ukraine in particular would stand to lose royalties for Russian natural gas that flows through pipelines in Ukraine, and that change could reduce the risk of Russian aggression against Ukraine in the eyes of the Kremlin.

Secretary of State Antony Blinken released a statement explaining that the Biden administration believes “it is in the national interest” to waive sanctions on the company Nord Stream 2 AG, its CEO Matthias Warnig, and the company’s corporate officers. He also noted that the administration will impose sanctions on 13 vessels involved in the pipeline’s construction.

Nord Stream 2 AG is owned by Russian state energy company Gazprom, and Warnig is a former intelligence officer from communist East Germany who has reportedly known Putin for more than three decades.

Media:

• Sponsoring Sen. Ted Cruz (R-TX) Press Release
• White House Statement of Administration Policy (Opposed)
• Causes (Nord Stream 2 Context)
• Bill Text

Summary by Eric Revell

(Photo Credit: Kremlin via Global Panorama on Flickr / Creative Commons)