The Switzerland-registered owner of the Nord Stream 2 natural gas pipeline project could file for insolvency in a Swiss court as soon as this week, following the U.S. sanctions over the Russian invasion of Ukraine, Reuters reported on Tuesday, citing two sources with knowledge of the matter.
Nord Stream 2, led by Russian gas giant Gazprom, was a project to carry natural gas from Russia to Germany via the Baltic Sea. Until last week, the pipeline construction was complete, and Nord Stream 2 was awaiting full regulatory clearance from Germany and a review by the European Union over its compliance with EU energy regulations.
However, after Russian President Vladimir Putin recognized two separatist regions in eastern Ukraine and deployed troops there, Germany suspended the Russia-led project, and the United States slapped sanctions on Nord Stream 2 AG.
After the crisis escalated into a full-blown war that Putin now leads in Ukraine, the Western partners tightened the screw with severe sanctions on Russia and Putin's ability to use Russian banks and the central bank for payments.
Nord Stream 2 has also terminated contracts with employees due to the sanctions.
"Following the recent geopolitical developments leading to the imposition of U.S. sanctions on Nord Stream 2 AG, the company had to terminate contracts with employees. We very much regret this development," Nord Stream 2 AG said in an emailed statement to Reuters.
Gazprom had European partners in the Nord Stream 2 venture, including Shell, Uniper, Wintershall Dea, Engie, and OMV.
Shell already said earlier this week that it will exit all partnerships with Gazprom and also intends to end its involvement in the Nord Stream 2 pipeline project due to Putin's war in Ukraine.
"We cannot - and we will not - stand by," Shell's chief executive officer Ben van Beurden said in a statement.
By Tsvetana Paraskova for Oilprice.com
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Comments
Last week, Germany announced a suspension of the certification of Nord Stream 2. But this was nothing but a cosmetic move since the gas pipeline has been sitting idle waiting for certification since its completion in September 2021.
Moreover, Germany’s decision doesn't mean stopping Nord Stream 2 altogether since this would sink more than 150 German companies who contributed more than half of the costs of construction estimated at $11 bn. Germany is dependent on Russian oil and gas for 65% of its needs.
Even if Nord Stream 2 files for insolvency, it can easily be resurrected once the Ukraine crisis is over. Many companies in the world have filed before for insolvency and then recovered to see another day. Nord Stream 2 is no exception. It is crucial for Germany’s and the EU’s future energy security. It will eventually receive certification.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London