The US is to focus on diplomacy and negotiations instead of further sanctions in its effort to mitigate any negative impact on the anticipated halt of Russian gas transits through neighbouring Ukraine once the controversial Nord Stream 2 export pipeline is complete.
Speaking on Monday at a hearing of the US House Foreign Affairs Committee, Secretary of State Anthony Blinken said sanctions on Nord Stream 2 would have created “no incentives for [ally] Germany to actually work with us to mitigate and correct some of the damage" that he claimed the project "will likely do”.
In May, Washington issued waivers from new sanctions for the project's eponymous Swiss-registered operator, Nord Stream 2, and its chief executive officer, Matthias Warnig.
The administration of President Joe Biden has reportedly refused to consider action against German ports and contractors involved in the Russian pipeline project — action that had been promised by the previous administration of Donald Trump.
Germany's importance
Blinken said it would be wrong for the US to oppose “our partner Germany", which he argued "has invested a large amount [of funds] and has been determined to see the completion” of the project.
He added that “Germany has come to the [negotiating] table and we are engaged with them to look on what can be and must be done” to eliminate the ability of Russia to “use gas as a coercive weapon against Ukraine or anyone else”.
Although the US last month placed 13 Russian support vessels working for Nord Stream 2 and their Russian owners under sanctions, its decision not to take any action against the operator surprised authorities in Kiev.
US commitment to Ukraine
Speaking to publication Axios, Ukraine’s President Volodymyr Zelensky expressed deep disappointment with the US walking back its efforts to halt the ongoing construction of remaining short segments of the Russian gas pipeline in the Danish and German sectors of the Baltic Sea.
However, the US was quick to respond by arranging a phone call between the two presidents.
Additionally, Washington has offered Zelensky the possibility to travel to Washington to meet Biden this summer, with officials in Kiev indicating this week that the meeting could take place as early as next month.
An aide to Zelensky said that the president intends to continue the discussion of Nord Stream 2 with Biden.
At the House hearing, Blinken reiterated Washington's “commitment to Ukraine, its sovereignty and territorial integrity”, adding that the US is “determined to defend the country against aggression in all forms coming from Russia”.
According to estimates from Ukraine's authorities, the potential halt of Russian gas transit flows across the country to Europe will deprive its budget of annual revenues of between $2 billion and $3 billion.
From a contractual point of view, Russian state-controlled monopoly Gazprom will be able to halt the flow of its gas across Ukraine after 31 December 2024 when the current transit agreement with oil and gas holding Naftohaz Ukrainy expires.
Until that date, Gazprom has committed to pumping at least 40 billion cubic metres per day of gas across Ukraine. The country is also guaranteed fixed payments under a so called “ship-or-pay” clause in the event Russian gas flows are less than the contracted volume.
Putin's attention
Speaking at the end of the last week in St Petersburg, Russian President Vladimir Putin announced the successful completion of laying of the first leg of Nord Stream 2 in German waters.
According to maritime traffic data, Russian pipelayer Akademik Chersky is currently laying the second line of Nord Stream 2 to the south of Bornholm island in Danish waters.
Putin said Gazprom chairman Alexei Miller “is reporting to him on the progress of [Nord Stream 2] subsea pipelay work on the daily basis”.
Earlier, the Kremlin accepted a US proposal for Putin and Biden to meet for talks in Geneva on 16 June.
When completed, Nord Stream 2 will be technically capable of delivering over 55 Bcm of Russian gas to Germany. However, Gazprom could only use half of that capacity under European gas market regulations, with another half to be allocated to other shippers.
