Lay that pipe: Work on Gazprom’s Russia-German gas line will resume

From January 15, two gas pipelines for Nord Stream 2 will be laid and trenched by the pipe-laying vessel Fortuna, assisted by the construction vessels Baltic Explorer and Murman and other supply vessels, the Danish Maritime Authority (DMA) said on its website on December 22.

Work on the Gazprom-led pipeline from Russia to Germany was halted almost a year ago due to the threat of US sanctions against pipe-layers. The original Protecting Europe’s Energy Security Act of 2019 (PEESA) targeted providers of pipe laying vessels for the construction of Russian energy export pipelines involved in the construction of Nord Stream 2, TurkStream or any project that is a successor to either. The measures apply to pipe laying at depths of 100 feet or more. That forced the Swiss-Dutch company Allseas Group to immediately suspend its on pipeline in December 2019 and to exit the project.

Gazprom, which has sought to complete the remaining sector of the pipeline in Danish waters on its own, plans to use vessels with anchors — such as the Fortuna — or those with dynamic positioning capabilities to complete the pipe-laying.

“We are not in a position to deliver construction details,” a spokesperson of Nord Stream 2 told New Europe on December 23. “We refer to the notice to mariners by the Danish Maritime Authority (DMA) on the website http://nautiskinformation.soefartsstyrelsen.dk/#/messages/table under NM-896-20. All construction works are implemented in full compliance with existing permits,” the spokesperson added.

Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies, told New Europe on December 23 this means that Nord Stream 2 intends to use Fortuna for pipe-laying at least in some part of the Danish Exclusive Economic Zones (EEZ), perhaps in shallower waters. “This would be in line with the amended Danish Nord Stream 2 permit, which allows the usage of a vessel with anchors like Fortuna ‘either independently or in combination’ with another vessel, which could be a vessel equipped with a DP system. Thus, it could not be ruled out that another vessel could be added at a later stage,” Yafimava said, adding that this also suggests that Nord Stream 2 has taken out insurance for pipe-laying works in the Danish EEZ as this is required by the Danish permit.

At his annual media conference, Russian President Vladimir Putin reminded that there are around 165 kilometres left to complete Nord Stream 2. “That’s it, it is almost completed. I think we will finish the work,” he said.

But US Senator Ted Cruz, who is co-sponsor of the National Defense Authorization Act (NDAA) amendment, said a pipeline that is 95% complete is a pipeline that is 0% complete. “Right now, it’s just a piece of metal on the bottom of the ocean,” he said.

The sponsors of the PEES Act aimed at blocking the completion of Nord Stream 2, added an amendment to the NDAA that will make it harder for Russian gas monopoly Gazprom to complete the project. The NDAA, amendment included, has been approved by both the House and the Senate and awaits President Donald J. Trump’s signature to become law.

Chris Weafer, co-founder of Macro-Advisory in Moscow, said the NDAA amendment would add time and cost but not block the project. “Even though the new sanctions are more restrictive, it is still more likely that they are not enough to prevent it,” he said.

According to Weafer, despite some claims that the NDAA amendment is strong enough to finally kill off the Nord Stream 2 project, the reality is that the wording is weaker than had been feared. “Gazprom has had enough time to put in place the technical equipment it needs and to prepare alternatives for insurance, certification, etc. Even assuming that the NDAA is not vetoed and that remains a question mark the amendment should not prevent the completion of the pipeline,” Weafer said.

A very important point is what is not in the NDAA amendment, the Moscow-based expert stressed. “It does not include direct sanctions against companies involved in the construction of the pipelines and it requires the US government to consult with ‘allies’ – the EU, Switzerland, Norway – before taking a major action. This ‘National Security Waiver’ is not exceptional as it is standard in all legislation,” Weafer said, noting it should mean that President-elect Joe Biden may wait until he meets with EU leaders, especially in Germany and France, to decide how aggressively he wants to push this. “By then, the pipeline will be finished, and the new US Administration would be faced with having to support new sanctions – very likely to be introduced by the original sponsors of the PEES Act – that would target the gas users, i.e., Germany in particular,” he said.

There is evidence that Germany is pushing back harder. According to Weafer, ministers in Berlin are reportedly coordinating a response to the US threat with Brussels and other EU nations. German lawmakers joined industry groups in complaining that American officials are overstepping their authority. Germany’s BDI industry lobby has complained at US intervention, saying it “will not only cause considerable economic damage, but will also undermine the sovereignty of Germany and the European Union.”

Also, the German state of Mecklenburg-Vorpommern, where the pipeline ends, is reported to have decided to create a public trust under the control of the state premier’s office to protect companies working on Nord Stream 2 from US sanctions.

As far as US sanctions legislation is concerned, there is no reliable timeline as to when/if sanctions could be imposed, Yafimava said. “NDAA 2021 requires a list of sanctioned entities to be prepared no later than 60 days after the NDAA’s enactment – it has not been enacted yet but could by the end of 2020 – and also mandates its revision every 90 days thereafter; but NDAA also requires a consultation to be held with the EU member states, Norway, Switzerland, and the UK before sanctions are imposed,” she said, adding that it is possible that as a result of such consultation the US may decide not to impose sanctions if it finds the European arguments against sanctions sufficiently persuasive and consequences of disregarding them sufficiently serious.

“Thus, I don’t really view the resumption of pipe-laying work in the German EEZ and the upcoming work in the Danish EEZ as ‘the race against time’ as far as sanctions are concerned, but rather as a concerted effort to finalise construction by all means available irrespectively of whether or not sanctions will be imposed, thus suggesting that even if sanctions were to be imposed, the work will continue until completed,” Yafimava told New Europe, noting that completion timeline depends on many factors – some of which are unknown but it would be possible to finish construction in summer 2021 and start flowing gas over winter 2021-22.