Biden administration decides not to sanction company building controversial Russian gas pipeline

The Biden administration has decided against sanctioning the company in charge of building Russia’s Nord Stream 2 gas pipeline, despite strongly opposing the project, according to two sources familiar with the decision, signaling that it is prioritizing unity with allies over concerns about a potential geopolitical threat.

Instead the administration will sanction some of the smaller entities involved in the project, including some Russian companies and ships that have been helping in the construction. But the administration has decided to issue a national security waiver for the major company involved in the construction of the pipeline– Nord Stream 2 AG, which is a registered Swiss firm whose parent company is the Russian gas giant Gazprom.

There was an intense back-and-forth over the decision and during the process the State Department prepared an assessment of what action would have been required to stop the pipeline, though the administration decided not to pursue that course, according to one source familiar with the process. It decided that stopping the pipeline was not worth blowing up the relationship with Germany given the many national security issues the two countries work on together, the source explained. The second source familiar with the situation said the decision was ultimately the White House’s call.

A State Department spokesperson, when asked about the decision, which will be shared with Congress in a report this week, reiterated opposition to the pipeline.

“The Biden Administration has been clear that the Nord Stream 2 pipeline is a Russian geopolitical project that threatens European energy security and that of Ukraine and eastern flank NATO Allies and partners. We continue to examine entities involved in potentially sanctionable activity and have made it clear that companies risk sanctions if they are involved in Nord Stream 2,” the spokesperson said. “We will continue to underscore US strong, bipartisan opposition to this Russian malign influence project.”

The move to let the pipeline proceed unimpeded could also increase strain between the White House and Democratic lawmakers, many of whom oppose Nord Stream 2 and are already frustrated with the Biden administration for its refusal to push Israel to do more to end violence with Palestinians.

Despite the decision, US Secretary of State Antony Blinken spoke with German Foreign Minister Heiko Maas on Tuesday and reiterated US opposition to the pipeline that will carry gas from Russian fields to Germany via the Baltic Sea, according to a statement from State Department spokesman Ned Price.

“Secretary Blinken underscored the US commitment to work with Allies and partners to counter Russian efforts to undermine our collective security, and in that vein, emphasized US opposition to the Nord Stream 2 pipeline,” Price said.

The administration’s decision, first reported by Axios, serves as a win for Russian President Vladimir Putin, who many in Congress fear will now have greater leverage over Eastern Europe. It will also infuriate Kiev –the pipeline will allow Russia to bypass Ukraine in shipping gas to the European Union through the Baltic Sea, depriving the Ukrainians of crucial revenue.

The move comes as Blinken prepares to meet Russian Foreign Minister Sergey Lavrov in Iceland on Wednesday evening, on the margins of an Arctic Council meeting where the two will discuss the possibility that Biden and Putin will hold their first summit in the coming months. It also comes the same week that US Climate Envoy John Kerry visited Berlin to discuss climate action.

Blinken has repeatedly and publicly spoken of US opposition to the project, including as recently as Tuesday, and he has warned that European allies were risking US sanctions as a result of their involvement in the pipeline’s construction.

But when asked last month about additional sanctions for the pipeline he did not make any firm commitments.

“I wish we didn’t find ourselves in this situation with a pipeline that’s virtually complete,” Blinken said during congressional testimony.

‘A Russian strategic project’

Even as the White House made the decision to waive sanctions, the administration has continued to signal its distrust of the project. On Sunday a senior administration official traveling with Blinken told reporters that the pipeline is “a Russian strategic project that undermines European security, European energy security.”

The pipeline is expected to be finished this summer and is intended to provide Europe with a sustainable gas supply while giving Russia more direct access to the European market.

But resistance to the pipeline has hardened in the US as tensions between Russia and the West have risen due to Moscow’s election interference in Europe and the US, its cyberattacks, attacks on pro-democracy activists, the ongoing occupation of Crimea and a tit-for-tat spat with the US over diplomats, with both sides expelling the others’ representatives.

Lawmakers and administration officials see the pipeline as a potential threat to Europe because Russia has used its control over energy supplies to pressure countries in Eastern Europe, including Ukraine, by shutting off those supplies, even in winter months. Ukrainian anti-corruption activists have urged the administration not to allow the project to go forward in recent weeks, sources told CNN.

Concern in Congress about the pipeline is acute enough that lawmakers passed legislation with significant bipartisan majorities in 2019, then expanded it in 2020, requiring sanctions against Nord Stream 2. The administration can get around this by waiving the sanctions on national security grounds.

The White House decision to waive sanctions flies in the face of repeated declarations from administration officials about the pipeline and against the administration’s attempt to draw a tough line on Russia and Putin, in part by issuing a slew of sanctions.

“President Biden has been very clear for a long time in his view that Nord Stream 2 is a bad idea,” Blinken said in March during a trip to Europe, adding that he shared that view with Maas, the German foreign minister. “I also made clear that firms engaged in pipeline construction risked US sanctions.”

State Department officials have also stressed that any entity involved in the Russia-Germany natural gas pipeline risks US sanctions and should immediately abandon work on the project.

But the Biden administration has built its foreign policy around reaffirming US alliances and Washington’s work with multilateral institutions to tackle problems that range from China’s increasing assertiveness to the existential challenge of climate change.

“We see our alliances not as burdens but as a way to get help from others in shaping a world that reflects our interests and our values,” Blinken said during that trip to Europe in March.

Even as he stressed the importance of alliances, Blinken’s repeated warning on that trip that the US would consider sanctions if work on the pipeline were completed and certified was the sole note of discord in an extended display of unity with European allies and NATO states.

“The pipeline divides Europe, it exposes Ukraine and central Europe to Russian manipulation and coercion, it goes against Europe’s own stated energy security goals, so what I said was that we will continue to monitor activity to complete and certify the pipeline, and if that activity takes place, we’ll make a determination on the applicability of sanctions,” Blinken said at the time.