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Pompeo threatens Russian pipeline project with sanctions

U.S. Secretary of State Mike Pompeo on Wednesday warned investors in two Russian natural gas pipeline projects that they could face sanctions as the Trump administration seeks to curb the Kremlin’s economic leverage over Europe and Turkey.

Pompeo told a news conference that European investors in the Nord Stream 2 and a branch of the Turkstream pipelines could be “put at risk” of U.S. sanctions under the Countering America’s Adversaries Through Sanctions Act of 2017. The pipelines will carry gas from Russia to Europe and Turkey.

“It’s a clear warning to companies aiding and abetting Russia’s malign influence projects will not be tolerated. Get out now, or risk, the consequences,” Pompeo said.

The United States, which has a glut of natural gas, is trying to export liquefied natural gas, or LNG, to Europe. It has also supported efforts by Europe to diversify its imports of LNG from other sources, including Norway.

Russia’s foreign ministry spokeswoman Maria Zakharova said sanctions on the two pipelines equated to political pressure, TASS news agency reported.

“This is the use of political pressure for unfair competition,” Zakharova said. “It is an indicator of the weakness of the American system. Apart from forceful methods, there are no effective tools.”

Nord Stream 2 suspended construction last December after Swiss-Dutch company Allseas, which specializes in subsea construction, pulled out following U.S. President Donald Trump’s signing of a defense policy bill that contained other sanctions on the project.

Two Russian-owned pipe-laying vessels may finish the remaining 100 miles (160 km) of the project, led by Russia state-run company Gazprom. Gazprom is financing half of the project worth about 9.5 billion euros ($10.5 billion).

Gazprom did not immediately reply to a request for comment.

Last month, a bipartisan group of U.S. senators led by Jeanne Shaheen, a Democrat, and Ted Cruz, a Republican, introduced a sanctions bill on Nord Stream 2. The measures, which only become law after being passed by Congress and signed by Trump, would expand existing sanctions to include penalties on parties providing underwriting services, insurance or reinsurance, and pipe-laying activities.

Nord Stream 2, which would take 55 billion cubic meters of gas per year to Germany under the Baltic Sea, bypassing Ukraine and depriving it of potentially billions of dollars in transit fees, aims to double the Nord Stream route’s existing capacity.

Nord Stream 2 chafed at the U.S. move.

Efforts to obstruct the project “reflect a clear disregard for the interests of European households and industries, who will pay billions more for gas if this pipeline is not built,” said spokesperson Steffen Hartmann.

Other partners in Nord Stream 2 are Austria’s OMV, German firms Uniper and Wintershall [WINT.UL], Anglo-Dutch energy major Royal Dutch Shell Plc and France’s Engie.

The sanctions are opposed by Germany, Europe’s largest economy, which needs cheap gas as it weans itself off of coal and nuclear power plants.

Analysts pointed out that the sanctions remain optional.

“In short, we would describe today’s change as loading and aiming of the sanctions weapon without cocking or firing it,” said analysts at ClearView Energy Partners, LLC in a note to clients.

Source: Reuters

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