By Brett Forrest
WASHINGTON -- Secretary of State Mike Pompeo said a sanctions
exemption will be removed for a Russian natural gas pipeline to
Germany, paving the way for new penalties to be imposed on the
contentious project.
Mr. Pompeo said Wednesday that the State Department will lift a
proviso that spared the pipeline, known as Nord Stream 2, from a
2017 sanctions measure.
The U.S. has been trying to stop the pipeline, which will
deliver natural gas to Germany and is nearing completion. While
German and Russian officials have characterized the pipeline as a
commercial venture, U.S. officials worry that Nord Stream 2 would
increase Moscow's economic and political sway across Europe.
Wednesday's measure allows the U.S. to deploy a wider range of
punishments against Nord Stream 2 as Washington tries to thwart the
project and the company behind it, owned by Russia's gas-export
monopoly Gazprom, races to finish it.
"It's a clear warning to companies aiding and abetting Russia's
malign-influence projects it will not be tolerated," Mr. Pompeo
said. "Get out now, or risk the consequences."
A previous sanctions measure that went into effect in December
halted construction of the pipeline in the Baltic Sea in Danish
waters about 93 miles shy of completion. Denmark this month
approved a petition that gave Nord Stream 2 AG, the company
building the pipeline, a technical workaround to those sanctions,
allowing construction to resume as early as next month.
"Dropping of the [sanctions] guidance puts additional pressure
on the pipeline, but it's not clear whether sanctions can kill the
pipeline at this stage," said Dan Fried, a fellow at the Atlantic
Council and a former coordinator for sanctions policy at the State
Department. "It's almost completed."
Mr. Fried cited the inconclusive nature of sanctions and a
potential Russian willingness "to set up cutout corporations that
would take the sanctions hit."
A spokesman for Nord Stream 2 AG declined to comment.
The pipeline would allow Gazprom to all but abandon the
Ukrainian pipeline system that has handled the bulk of Russian gas
deliveries to Europe for decades and diminish Ukraine's
geopolitical leverage with Russia. Germany is in the midst of
phasing out coal and nuclear energy, prioritizing natural-gas
supply for its own use and further sale.
Mr. Pompeo's announcement doesn't immediately result in
sanctions. It sets in motion discussion within the administration,
which has often debated sanctions for the past three years without
reaching consensus.
"Our expectation is that those who take part in the continued
project will be subject to review for potential consequences
related to that activity," Mr. Pompeo said
At issue is the 2017 bill, known as the Countering America's
Adversaries Through Sanctions Act, or CAATSA, that imposed
sanctions on Iran, North Korea and Russia. It targeted, among
various activities, Russian energy export pipeline projects.
These sanctions were intended to punish the Kremlin for military
intervention in Syria and Ukraine and election interference in the
U.S.
At the time, then-Secretary of State Rex Tillerson issued
guidance that exempted Russian energy export pipeline projects
under way before CAATSA's passage from some of the measure's
toughest sanctions.
This "Tillerson amendment," as it came to be called within the
administration, effectively grandfathered in Nord Stream 2, which
had begun collecting investment and making loan agreements a few
months before the bill's passage that August.
Wednesday's announcement potentially makes Nord Stream 2 subject
to CAATSA's section 232, which allows the U.S. to sanction
individuals who invest $1 million, or $5 million over one year, or
contribute technology, services and other support that "directly
and significantly" contributes to Russia's ability to construct
energy-export pipelines.
Sanctions tools include property seizures, visa restrictions and
exclusion from a broad range of banking and financial services.
December's sanction measure, passed by Congress and folded into
an annual military spending authorization act, targeted companies
supplying technical assistance to Nord Stream 2's construction. The
measure prompted a Swiss company that supplied the main pipe-laying
vessel to abandon the project, stalling construction.
Sen. Ted Cruz (R., Texas), who co-sponsored December's
legislation, released a statement calling Wednesday's move by Mr.
Pompeo a confirmation of governmental consensus "to ensure [Russian
President Vladimir] Putin's pipeline never comes online."
Congress is expected to pass an expansion of the December
measure later this year, targeting companies that provide
certification, port facilities, tethering services or insurance to
the project.
Write to Brett Forrest at brett.forrest@wsj.com
(END) Dow Jones Newswires
July 15, 2020 12:54 ET (16:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.