German Chancellor Olaf Scholz announced Tuesday that the certification process for the Nord Stream 2 pipeline will be halted, saying that "the situation has fundamentally changed" after the Kremlin ordered troops into eastern Ukraine.
Why it matters: It's a stunning turn of events for the $11 billion, Russia-to-Germany natural gas pipeline, which Scholz had long resisted naming as a potential sanctions target if Russia invaded Ukraine.
Between the lines: Ukraine views the Putin-backed project as an existential threat to its security, as it would deprive the country of billions of dollars in gas-transit fees and allow Russia to deliver gas directly to the heart of Europe.
- The U.S. has long held the position that Nord Stream 2 is a malign Kremlin geopolitical influence project that would increase Europe's reliance on Russian gas, but President Biden allowed construction to proceed last year in order to repair relations with Germany.
- Germany's economy is highly reliant on Russian gas, which had raised questions about Berlin's willingness to stand up to Moscow with the harsh sanctions that the U.S. and other European allies had promised.
Behind the scenes: A senior U.S. official told reporters that the decision to suspend certification of Nord Stream 2 came after "overnight consultations" between the German government and the Biden administration.
- "That's an $11 billion investment in a prized gas pipeline, controlled by Russia, that will now go to waste. And it sacrifices would have been a cash cow for Russia's financial coffers," the official said.
- "But it's not just about the money. This decision will relieve Russia's geostrategic chokehold over Europe through supply of natural gas, and it's a major turning point in the world's energy independence from Russia," they added.
What they're saying: "I welcome Germany’s move to suspend the certification of Nord Stream 2. This is a morally, politically and practically correct step in the current circumstances. True leadership means tough decisions in difficult times. Germany’s move proves just that," Ukraine's foreign minister Dmytro Kuleba tweeted.
- Dmitry Medvedev, Russia's former president and prime minister who now serves on the Kremlin's Security Council, tweeted: "Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!"
The big picture: Russian President Vladimir Putin announced Monday that he would recognize two pro-Russian separatist "republics" in eastern Ukraine and ordered Russian "peacekeepers" into the territory where Kremlin proxies have been waging a rebellion against the Ukrainian government since 2014.
- The move drew widespread international condemnation, but questions arose over whether it would trigger the "massive" sanctions that the U.S. and its allies had pledged in response to a full-scale invasion.
- Biden said at a press conference with Scholz earlier this month that "there will no longer be a Nord Stream 2" if Russian troops cross Ukraine's border, but the German chancellor declined to affirmatively make that commitment.
- A senior U.S. official also hesitated on Monday night to characterize Putin's actions as a "new step," noting that Russian forces had been in eastern Ukraine covertly for the past eight years.
What to watch: The U.S., U.K. and European Union have said more sanctions are forthcoming. But halting Nord Stream 2 as an initial step is by far the toughest action the West has taken against Russia thus far.
