President Biden said Wednesday he will reverse last year's decision to waive sanctions on the entity and corporate officers behind the Nord Stream 2 pipeline, a day after Germany froze certification of the Kremlin-backed project.
Why it matters: It's an escalation in the U.S. sanctions response to what the administration has called the "the beginning of a Russian invasion" of Ukraine, and delivers a fresh blow to an $11 billion pipeline that has proven to be a massive headache for President Biden ever since he waived sanctions last May.
- Construction of the Russia-to-Germany pipeline was nearly completed by that point, and Biden believed allowing it to proceed would help repair U.S. relations with Berlin damaged under former President Trump.
- On Tuesday, German Chancellor Olaf Scholz surprised critics by suspending its certification and declaring that "the situation has fundamentally changed" due to Russia's aggression — though some suspected that the process could be revived down the line.
What they're saying: "Yesterday, after further close consultations between our two governments, Germany announced that it would halt certification of the pipeline. Today, I have directed my administration to impose sanctions on Nord Stream 2 AG and its corporate officers," Biden said in a statement.
- "These steps are another piece of our initial tranche of sanctions in response to Russia’s actions in Ukraine. As I have made clear, we will not hesitate to take further steps if Russia continues to escalate."
Zoom in: Nord Stream 2 AG, the operator of the pipeline, is a wholly owned subsidiary of Russia's state-owned energy giant Gazprom. The company's CEO, Matthias Warning, is a close Putin ally and former German Stasi officer.
The big picture: Consecutive U.S. administrations have opposed Nord Stream 2 because it would increase Europe's reliance on Russian gas, which President Vladimir Putin has in the past exploited as a geopolitical weapon.
- Ukraine also views the pipeline as an "existential threat" in part because it would deprive the country of billions of dollars in gas-transit fees, and has intensely lobbied the U.S. and Germany to put a stop to it.
- Both the U.S. and German governments have faced significant pressure to end the pipeline as punishment for a Russian invasion of Ukraine, which Biden publicly committed to doing at a press conference with Scholz earlier this month.
Between the lines: Sen. Ted Cruz (R-Texas) led a blockade against dozens of Biden's State Department nominees for six months in protest of the decision to waive sanctions.
- Sanctions on Nord Stream 2 had previously garnered overwhelming bipartisan support, but the Biden administration repeatedly lobbied Democrats to vote against them for the sake of preserving "trans-Atlantic unity."
- On Wednesday, Cruz announced he would lift his holds: "President Biden made the right decision today. Allowing Putin's Nord Stream 2 to come online would have created multiple, cascading, and acute security crises for the United States and our European allies for generations to come," he said.
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