The German government and the factions of the Bundestag coalition parties are considering four options for action in the situation around the Nord Stream 2 project – from a temporary halt in construction to the application of the so-called “shutdown mechanism” to the pipeline in the future, which would coordinate gas supplies to the EU with supplies to Ukraine. This is reported on Friday by the Handelsblat based its own sources.
The publication indicated that the “opponents of the pipeline are disappointed” that the US State Department has decided to waive additional sanctions against the firms involved in the project. Despite the fact that the new administration considers the construction of Nord Stream 2 a mistake, it is ready for a dialogue with Berlin about the future of the pipeline. The newspaper noted that in the United States they are talking about “high-level negotiations” with the government of the Federal Republic of Germany.
The German authorities are discussing how to satisfy the Americans and bring them to drop sanctions against the participating companies. One of the possible options is the application of a “shutdown mechanism” to the gas pipeline, that is, the termination of gas supplies through the Nord Stream 2 in case of the reduction of the volume of gas transported through Ukraine by Russia. However, this scenario raises many questions “from a legal and political point of view”, although in general it is positively assessed in the United States.
“Threatening to cut off your own supply is not a smart strategy,” as Handelsblat refers to Norbert Röttgen, chairman of the foreign policy committee of the Bundestag. Experts warn that Germany, by creating a “shutdown mechanism”, would essentially “shoot itself in the foot”: gas prices would soar in this case, and the companies involved in the project could demand multi-billion dollar damages.
The second option is to suspend construction for the period of negotiations with the United States. Creating of a commission, which would include representatives of the United States, a number of EU countries, including Eastern Europe, is being discussed.
The third scenario, which is being discussed by the government of Germany, provides for a significant increase in investments into the energy sector of Ukraine and strengthening of cooperation in the energy sector, investigation of the possibilities of supplying “green” hydrogen from there in the future.
The fourth option is completing the construction, despite all the threats and criticism of the project. But this would mean an inevitable deterioration in relations with the United States, Handelsblat noted. The publication reported that the German government is seeking to find a package solution that would allow reaching a compromise with all interested parties.
On the sanctions and on the project
The United States has previously adopted a number of laws that imply sanctions against companies involved in Nord Stream 2 construction. These include the Countering America’s Adversaries Through Sanctions Act (CAATSA) and Protect European Energy Security Act (PEESA).
Nord Stream 2 project involves the construction of two lines of a gas pipeline with a total capacity of 55 billion cubic meters a year from the coast of Russia across the Baltic Sea to Germany. Works were suspended in December 2019 after Switzerland’s Allseas abandoned pipelaying due to possible US sanctions. But in December 2020, Nord Stream 2 AG resumed laying the pipeline, building 2.6 km of the pipeline in the exclusive economic zone of Germany.
Gazprom reckons on the commissioning of Nord Stream 2 within a reasonable time. It is noted that Nord Stream 2 remains one of the holding’s priority investment projects in 2021.