U.S. Senate and House committees have agreed to include a bill sanctioning Russia's new natural-gas pipeline to Europe into the National Defense Authorization Act (NDAA), putting up a potential roadblock to the project’s completion.
The House and Senate are expected to vote later this month on the NDAA, which often becomes a vehicle for a range of policy initiatives, as it's one of only a few pieces of major legislation that Congress approves each year.
The proposal attached to the bill that addresses Nord Stream 2 would impose U.S. sanctions on any companies helping Russia lay the $11 billion pipeline.
Lawmakers have expressed concerns that Russia is building the project to bypass Ukraine while helping strengthen its supply line to Europe.
The Nord Stream 2 pipeline will have the capacity to carry up to 55 billion cubic meters of natural gas annually from Russia to Germany along the Baltic Sea floor. The pipeline is more than 80 percent built and is expected to be completed early next year.
Republican Senator Ted Cruz, one of the co-sponsors of the bill, has said that only a few companies in the world have the technology to lay deep-sea pipelines and none of them are Russian, meaning the Kremlin could struggle to complete the project should the foreign companies obey the U.S. sanctions bill. Related: Two Bullish Factors Pushing Oil Prices Higher
Ukraine has lobbied Washington to pass the bill, as the pipeline would deprive the country of more than $2 billion in transit fees.
The United States has sought to stop pipelines designed to carry Russian energy to Europe in the past but failed each time.
The NDAA also includes the reauthorization of $300 million of funding for the Ukraine Security Assistance Initiative.
The release of military aid to Ukraine has been at the center of an impeachment inquiry into U.S. President Donald Trump.
His administration held up almost $400 million in security assistance to Kyiv last year, which some Democratic lawmakers allege was done to pressure newly elected President Volodymyr Zelenskiy into opening an investigation into former Vice President Joe Biden, a major rival of Trump's who is running to become the Democrats' presidential candidate for the 2020 election. Trump is expected to be the Republican candidate.
More Top Reads From Oilprice.com:
- Big Oil’s Wishlist: The Hottest Oil Auctions In 2020
- Canada's Oil Crisis Isn't As Bad As It Seems
- Chevron’s $11 Billion Write Down Is A Warning For The Oil Industry
The claim by Republican Senator Ted Cruz that Russia lacks the technology to lay deep-sea pipelines is false. A country that led space exploration and was the first to send a man to space is more than capable of completing a mundane job like laying deep-sea pipelines.
Nord Stream 2 and the Turk Stream will strengthen Russia’s position in the fast-growing EU gas market whilst the recently inaugurated Power of Siberia will enhance Russia’s share in the gas market in China.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London