Faced with the dilemma of what to do about Nord Stream 2, the controversial Russian gas pipeline to Europe, the Biden administration has essentially punted, allowing the project to continue for the time being without leveling any new sanctions on companies involved.
In a new report submitted to Congress, obtained by Foreign Policy, the State Department identified a Russian vessel, Fortuna, and its owner, KVT-Rus, as violating prohibitions on working on the project, paving the way for further sanctions. But the congressionally mandated report did not cite other Russian-flagged ships that have been cited in past media reports as working on Nord Stream 2. Nor does the report single out any German or other European firms involved in the construction of the pipeline. The report also named 18 companies that had already left the project or were planning to leave following the threat of sanctions.
The Biden administration’s response to the $11 billion project, which would ship Russian gas to Germany while bypassing Ukraine, represents an early test for the new administration as it tries to balance mending ties with Berlin and standing up to Russia’s geopolitical power plays in Europe. It also poses a fresh challenge for the new administration’s relationship with Congress on foreign policy.
State Department spokesperson Ned Price said the Biden administration still opposes the project. “We continue to examine entities involved in potentially sanctionable activity. We have been clear that companies risk sanctions if they are involved in Nord Stream 2,” Price told reporters in a press briefing on Monday.
“We have the same position that the previous administration had. It is a bad deal, it is a bad deal for Europe, it is in contravention of Europe’s own stated energy goals,” he added.
The State Department report drew swift backlash from several Republican lawmakers who accused the administration of handing Moscow an early win.
Rep. Michael McCaul, the top Republican on the House Foreign Affairs Committee, called the report “wholly inadequate” in a statement, saying it did not meet bipartisan congressional intent of stopping the Nord Stream 2 pipeline’s completion. McCaul noted that the Fortuna and KVT-Rus had already been sanctioned during the Trump administration under different authorities. The ranking member on the Senate Foreign Relations Committee offered a similar criticism.
“This report is a gift to the Russians and their ongoing efforts to undermine European energy security, destabilize Ukraine, and facilitate corruption and malign influence throughout Europe,” Sen. James Risch said.
Democratic Sen. Jeanne Shaheen, another critic of the pipeline project and important ally on Capitol Hill for the Biden administration, said in a statement she was “encouraged to see new potential sanctions designations, but I look forward to being briefed by the Biden administration on additional steps they can take to stop the threat posed by the completion of the Nord Stream 2 pipeline.”
The State Department did not respond to a request for comment.
The Nord Stream 2 pipeline, first formally announced in 2015, is one of the most controversial energy projects in Europe, given tensions between the West and Moscow following Russia’s illegal annexation of Crimea in 2014 and invasion of eastern Ukraine. The German government supports the project, insisting it is a purely commercial venture, while other European governments, including many in Eastern Europe, view the project as a way for Russia to gain undue influence and geopolitical leverage over Europe through its energy exports—and financially kneecap Kyiv in the process.
Pressure has increased on the Biden administration to take a harder line on Nord Stream 2 in the wake of the poisoning of the Russian opposition leader Alexei Navalny, which investigative reports have linked to the Russian security services, as well as the SolarWinds hack of the U.S. government, which has also been attributed to Moscow. But experts and U.S. officials said President Joe Biden is trying to thread a needle between getting tough on Russia and mending fences with Europe—especially Germany.
Opting to sanction the same entity again “sends a pretty clear signal that Biden may have been politically forced to act, but it was a de minimis choice that he took when it was time to act,” said Kevin Book, managing director of ClearView Energy Partners, an energy consultancy.
Others saw less of a stand-down, but rather signs that the administration is still assessing its options. “It seems to me that the administration is leaving itself the option to escalate, but not closing off doors,” said Daniel Fried, who served as assistant secretary of state for European affairs in the George W. Bush administration. Fried, who spent 40 years in the foreign service, added that the move kept the door open to see whether Germany was “willing to offer serious ideas, proposals, to mitigate the risks of Nord Stream 2” to countries in Central and Eastern Europe.
In January, lawmakers in the European Parliament voted overwhelmingly for a resolution calling for the project to be stopped, although German Chancellor Angela Merkel has said that her support for the pipeline remains unchanged despite the attack on Navalny. The European Union’s chief diplomat, Josep Borrell, has cast U.S. efforts to halt the project as an affront on European sovereignty.
Poland’s and Ukraine’s foreign ministers wrote that the Nord Stream project was “designed to sabotage Europe’s energy security” in a joint op-ed for Politico Europe on Monday. Both the Trump administration and Biden administration have come out in opposition to the project’s completion, with Biden’s White House calling it a “bad deal” for Europe.
The Nord Stream 2 consortium has repeatedly insisted it is a purely commercial project aimed at meeting Europe’s energy demands. “[T]he EU needs reliable, affordable and sustainable new gas supplies,” the company says on its website.
Some experts predict that the German government’s position on the pipeline project could change after its upcoming federal elections in September. Members of Germany’s Green party, which could stand to gain in the elections, have come out against the project on environmental grounds and in response to opposition from other European countries.
The project is over 90 percent complete. The Trump administration signed laws in 2019 and 2020 with bipartisan congressional support that targeted companies involved with the project with sanctions, delaying the construction of the pipeline. With under 100 miles of pipeline left to lay, the project could be completed between six months and one year without further delays or sanctions. Some experts believe that in the end, not even sanctions could be enough to thwart the project.
“The history of Russian export pipelines is they get built,” Book said. “The ability to stop the physical construction of infrastructure in another country without using military intervention is pretty limited.”
