Included in Wednesday's just passed mammoth 2020 National Defense Authorization Act (NDAA) — which increases the Pentagon budget by $22 billion (to a whopping $738 billion) — were long-threatened sanctions on Russia's Nord Stream 2 underwater natural gas pipeline.
In the House bill, expected to be approved by the Senate sometime next week before Trump signs it into law, are measures which specifically target companies assembling the pipeline, a last ditch US effort to block the controversial 760-mile project that would allow Russia to export natural gas directly to Germany, depriving Ukraine of badly needed gas transit fees along the current route for Russian supplies.
The $10.5 billion Nord Stream 2, which runs parallel to the existing Nord Stream pipeline, has been spearheaded by Gazprom and five European energy companies, and is reportedly nearing completion. It's expected to double Russian gas shipments to the EU's biggest economy Germany. Washington fears it will give Moscow significant geopolitical leverage over Europe while also punishing Ukraine.
Over the past months projected completion has been consistently named as "by year's end", hence the Congressional scramble to 'act now' on sanctions, but reports say it's still months away from completion.
Regardless, Gazprom head Alexei Miller has for months said it's “past the point of no return” and that nothing would derail it. “We are working from the idea that Nord Stream 2 will be realized strictly in accordance with the planned timetable,” he previously told shareholders.
Trump has long charged Germany with essentially giving "billions" of dollars to Russia. Earlier this year a France-led effort in the European Union attempted to halt the project, however, Germany came out on top.
And now Berlin is hitting back over the new sanctions effort, charging Washington with "interference" and meddling in European energy policy. Related: Is This The Only Way To Make Nuclear Energy Work?
Angela Merkel’s top diplomat, Foreign Minister Heiko Maas, told Bloomberg:
“European energy policy must be decided in Europe, not the U.S.” And added, “We fundamentally reject outside intervention and sanctions with extraterritorial effect.”list of must-read stories.
Completion is still months away, though it was expected to be operational by end of 2019. No doubt US sanctions could complicate its completion further.
Germany has expected such punitive actions, which have bipartisan support in Congress. The measures additionally target executives of companies operating vessels laying the pipeline.
French electricity and gas firm Engie SA and Royal Dutch shell are among other major companies alongside Gazprom which are major players in the controversial project.
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One thing the US Congress and the Trump administration have not reckoned with is that they are dealing with President Putin who is a great master of strategy.
Unfortunately for the Americans, they are also dealing with the only man among the leaders of the European Union (EU): Angela Merkel. Despite threats of sanctions against Germany by President Trump, she defied him and went ahead with Nord Stream 2 telling him that European energy policy must be decided in Europe, not the US. Germany came out on top.
Through history, Russia always absorbed the shock of attacks by its enemies drawing them inside its great territory before smashing them. Russia absorbed the huge Nazi Germany’s attack against its territory before smashing its way into Berlin.
President Putin used the same tested and proven strategy against the intrusive US sanctions against his country and smashed them. As a result, Russia’s GDP has been expanding achieving a 2.2% growth during the third quarter of this year. Moreover, Russia’s debt-to-GDP ratio is just around 20% compared with the United States’ 106.64%. Furthermore, the Rouble was also the world’s best-performing currency against the US dollar in November. The fate of any new sanctions by the US Congress against Nord Stream 2 will not fare better.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London