Report: US opposition to N Stream hangs over Putin-Merkel meeting

WASHINGTON/MOSCOW, Aug 20 (PRIME) -- As President Vladimir Putin met with Chancellor Angela Merkel near Berlin on August 18 to try to safeguard a controversial Russian-German gas pipeline, the U.S. wasn’t present but it could have a big say in the outcome, the Wall Street Journal reported.

The U.S. has in hand a package of sanctions that could be used to try to stop completion of the Nord Stream 2 pipeline, which is already in its advanced stages, by targeting companies, and potentially financial firms, involved in its construction. Current and former U.S. officials said such sanctions had been discussed and could be mobilized in a matter of weeks, though they added that no action was imminent.

The pipeline, a key issue in the two leader’s talks, would channel natural gas from Russia to Germany via the Baltic Sea. The project is being developed by Russian state-controlled gas-exporting monopoly Gazprom, along with European companies Royal Dutch Shell PLC, Wintershall AG, Uniper SE, OMV AG and Engie SA .

“Together with German partners we are working on the new natural gas pipeline Nord Stream 2, which will complete the European gas transport system, minimize the transit risks, and secure the growing consumption in Europe,” Putin said at a joint press statement with Merkel before the start of the meeting.

But consecutive U.S. administrations have long opposed the pipeline, which would run alongside an existing one, over concerns that it would increase Europe’s already-high dependence on Russian natural gas and give the Kremlin political leverage and substantial revenues.

U.S. opposition to the project escalated after Russia was accused of interfering in the 2016 election and as the Trump administration grew increasingly skeptical that internal resistance within Europe would stop the plan, officials said.

In August 2017, Congress gave President Donald Trump power to impose sanctions on companies and individuals working on the pipeline following revelations of Russian interference in the U.S. election, a power several U.S. officials told The Wall Street Journal would now be used to try to block the project.

One U.S. official said work on the measures was being finalized between the White House and the State, Commerce and Energy Departments.

The official said the only decision left before enforcing the sanctions was whether to levy them only on the companies that would lay the pipes in the Baltic Sea, or to extend them to banks and other firms involved in financing the pipeline. Washington would give the E.U. advanced warning before enforcing the sanctions, this person added.

German officials have countered that Western countries had been buying Russian natural gas at the height of the Cold War. One aide to Merkel said the U.S. push was motivated by Trump’s desire to sell more U.S. liquefied natural gas, or LNG, to Europe.

The E.U. in late July pledged to ramp up U.S. LNG purchases as part of an effort to de-escalate trans-Atlantic trade tensions, triggered by Trump’s steel and aluminum tariffs on European producers.

A spokesman for Merkel declined to comment on the possibility of U.S. sanctions against the pipeline. A Nord Stream 2 representative also declined to comment, saying the company wasn’t informed about the Trump administration plans.

A White House spokesman didn’t respond to a request for comment.

“We have been clear that firms working in the Russian energy export-pipeline sector are engaging in a line of business that carries sanctions risk,” said Richard Grenell, U.S. ambassador to Germany. U.S. and German officials said Grenell has raised the issue repeatedly since arriving in Berlin in May.

Trump himself has been scathing in public about the project and brought it up in his bilateral meetings with Merkel, according to officials on both sides.

One concern about the pipeline is that it could make it easier for Russia to stop delivering natural gas via Ukraine after Gazprom’s transit contract expires at the end of 2019. The country, which has been locked in a bitter conflict with Moscow since Russian troops seized part of its territory in 2014, currently acts as a transit country for Russian natural-gas exports to the E.U. and levies a fee on this trade.

Merkel had hoped that assurances by Putin to continue channeling a substantial amount through Ukraine even after Nord Stream 2 comes online would placate the U.S.

“In my view Ukraine must retain its role in the transit of gas,” Merkel said on Saturday.

Putin reiterated his pledge but emphasized that the transit volume would need to suit economic demand. Ukrainian officials have complained that once Nord Stream 2 is built, demand for transit via their country would drop.

A U.S. official said Washington was chiefly concerned with curbing Europe’s dependency on Russian natural gas, which the Kremlin has used in the past as a means to pressure recipient nations.

“Russian influence will flow through that pipeline right into Europe, and that is what we are going to prevent,” the U.S. official said.

The original Nord Stream pipeline came online in 2011 with a capacity to deliver 55 billion cubic meters of natural gas a year through its German terminal on the Baltic Sea coast. It delivered a record 51 billion cubic meters last year. Nord Stream 2, set to go online next year, would double this capacity.

A European energy executive familiar with the discussions said company representatives had told John McCarrick, deputy assistant secretary in the State Department’s Bureau of Energy Resources, that the five European companies and Gazprom had already provided 5.5 billion euros (U.S. $6.3 billion) in financing and the project wouldn’t be stopped even if the U.S. were to impose sanctions.

Other issues the two leaders said they would discuss included Iran, Ukraine and the situation in Syria. Putin, whose country is involved in the conflict on the side of President Bashar al Assad, said that it was important to provide economic support for the rebuilding of Syria.

Germany hosts hundreds of thousands of Syrian refugees, but Berlin officials said that they were wary of providing economic support for Assad’s regime without a political agreement on the country’s future.

Putin arrived at the meeting at the government‘s guest house in Meseberg after attending the wedding of Austrian Foreign Minister Karin Kneissl at a countryside estate in the province of Styria, where he was pictured dancing with the bride. He also brought a Cossack choir.

REACTION

Vladimir Dzabarov, the first deputy chairman of the foreign affairs committee of the Russian parliament’s upper house Federation Council, said that Russia was ready to new sanctions against participants of the Nord Stream-2 project.

“Russia will be ready to these sanctions, which are inevitable as I think. I don’t’ rule out the possibility that the leaders of Russia and Germany discussed the sanctions and how to overcome them at yesterday’s (August 18) meeting,” he said, adding that the U.S. shouldn’t think that it could stop the project or make any company leave it.

Merkel and Putin stressed that the Nord Stream-2 project is purely economic. “That is why any American sanctions against the project…would demonstrate the U.S. will to use them as distraction to squeeze out competitors…from the market, and that they are engaging in an unfair competition,” he said.

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