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Why Oil Will Keep Rising In 2021

Why Oil Will Keep Rising In 2021

While new lockdowns around the…

U.S. Sanctions On Nord Stream 2 Upset European Lawmakers

The hostile U.S. position on the Gazprom-led Nord Stream 2 pipeline project is a breach of international law, according to the majority of EU members, German daily Die Welt reported today.

According to the report, the European Union communicated a sharp note of protest against U.S. interference in the construction of the pipeline to Washington. The note was supported by 24 of the EU's 27 members, Reuters reported, citing Die Welt.

Reuters also quoted a statement it received from the U.S. embassy in Germany, which said, "The United States must act to address the threat to our national security and foreign policy interests," noting, however, that Washington would like to continue cooperating with the EU rather than resort to sanctions to enforce these interests.

However, the EU's communication to Washington stated that "We are highly concerned about the increasing use of sanctions by the U.S. against European companies and interests," and that "The EU considers the extraterritorial use of sanctions as a breach of international law."

The United States last month warned the companies helping Russia to complete the Nord Stream 2 and the TurkStream 2 natural gas pipelines that they should 'get out now' or face the consequences, as the Trump Administration steps up efforts to stop the construction of the controversial Russia-led pipelines in Europe.

The U.S. Department of State is updating its sanctions guidance under the Countering America's Adversaries Through Sanctions Act, CAATSA, to include Nord Stream 2 and the second line of TurkStream 2, U.S. Secretary of State Mike Pompeo said in mid-July.

Five European companies are working on Nord Stream 2 with Gazprom, including Shell, OMV, Engie, Wintershall DEA, and Uniper. Each of these is funding the project by some $1.12 billion, the total equal to half its cost estimated at $11.2 billion.

The twin pipe of Nord Stream will carry an additional 55 billion cubic meters of Russian gas to Europe and, more specifically, Germany, whose gas hunger is growing as it shuts down coal and nuclear power plants.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on August 14 2020 said:
    The United States efforts to derail Russian gas pipelines to Europe have failed since the 1960s. Nord Stream 2 will be no exception.

    Nord Stream 2 is unstoppable for three major reasons. The first is that it is almost 93% complete. The second reason is that the European Union’s countries (with the exception of Poland, Latvia and Estonia) consider US sanctions as a breach of international law. The third reason is that the United States has to reckon with President Putin’s determination and stubbornness and that of the Iron Chancellor Angela Merkel.

    President Trump’s administration will not fare better that both John F. Kennedy and Ronald Reagan who failed to derail USSR-backed energy-export pipelines such as the Friendship (Druzhba) oil pipeline in the 1960s and the Brotherhood (Bratstvo) gas pipeline in the 1980s respectively.

    Those previous attempts not only failed, they raised the hackles of European leaders who accused the United States of interfering in their internal affairs. Some analysts say the US effort to block Nord Stream 2 is headed down that same path.

    It is about European sovereignty and that is not understood in Washington. Nord Stream 2 can be delayed and made more expensive, but it can't be stopped. The train is gone. Russia is hoping to complete the project by the end of the year.

    Moreover, there is no sign yet that European companies are stepping back from Nord Stream 2. Shell, OMV, and Wintershall are among European companies financing the project, which is owned by state-controlled Russian giant Gazprom.

    More than 1,000 companies from 25 countries work on it and are fully committed to seeing the project completed.

    Scraps over Soviet pipelines were a feature of the Cold War. In the early 1960s, Kennedy sought to halt the Druzhba oil pipeline leading from the Tatarstan region to Europe by pushing West Germany to cancel steel-pipe contracts with Moscow. But this drove the Soviet Union, which completed the project, to become self-sufficient in wide-diameter pipe production, hurting Western manufacturers.

    About two decades later, Reagan used a similar tactic in a bid to block the more than 4,000-kilometer-long Bratstvo pipeline, which was being built to bring natural gas from Siberia to Western Europe. He failed.

    Meanwhile, the view that Nord Stream 2 threatens European energy security isn't based in reality. Europe's gas markets have changed significantly over the past decade due to the growth of LNG, development of non-Russian export pipelines, and greater connectivity between European states.

    The Trans-Adriatic Pipeline (TAP) will soon begin transporting natural gas from the Azerbaijani section of the Caspian Sea to Europe via Turkey for the first time.

    The discovery of major gas fields off the coasts of Egypt, Cyprus, and Israel potentially increases the number of European suppliers in the coming years. Furthermore, US LNG supplies are already reaching the EU market.

    The claim that US sanctions aim to protect Europe from Russian energy blackmail is based on an obsolete understanding of energy markets.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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