May 18, 2021
The Biden administration will waive sanctions on the corporate entity and CEO overseeing the construction of Russia’s Nord Stream 2 pipeline into Germany, according to two sources briefed on the decision.
Why it matters: The decision indicates the Biden administration is not willing to compromise its relationship with Germany over this pipeline, and it underscores the difficulties President Biden faces in matching actions to rhetoric on a tougher approach to Russia.
Driving the news: The State Department will imminently send its mandatory 90-day report to Congress listing entities involved in Nord Stream 2 that deserve sanctions. Sources familiar with the drafting of the report tell Axios the State Department plans to call for sanctions against a handful of Russian ships.
The State Department will also acknowledge that the corporate entity in charge of the project (Nord Stream 2 AG) and its CEO (Putin crony and former East German intelligence officer Matthias Warnig) are engaged in sanctionable activities.
However, the State Department will waive the applications of those sanctions, citing U.S. national interests.
This planned move seems at odds with Secretary of State Antony Blinken’s statement, made during his confirmation hearing: “I am determined to do whatever we can to prevent the completion” of Nord Stream 2.
Between the lines: This planned move also sets up a bizarre situation in which the Biden administration will be sanctioning ships involved in the building of Nord Stream 2 but refusing to sanction the actual company in charge of the project.
Sources close to the situation say that top Biden officials have determined that the only way to potentially stop the project — which is 95% complete — is to sanction the German end users of the gas.
And the Biden administration is not willing to rupture its relationship with Germany over Nord Stream 2.
The big picture: As Axios has previously reported, the completion of Nord Stream 2 would be a huge geopolitical win for Putin and give him substantial new leverage in Europe.
Russian gas currently has to pass through Ukraine on its way to Europe. Bypassing Ukraine with a direct pipeline to Germany is an opportunity for Russia to advance its goal of isolating its former client state, now a fledgling democracy, from Western Europe.
Russia has a long track record of cutting critical supplies to its neighbors during disputes, including cutting off gas to Ukraine.
The pipeline could be finished by the summer without a major intervention to stop it.
A State Department spokesperson told Axios the Biden administration had made clear that companies participating in Nord Stream 2 could face sanctions and would “continue to underscore U.S. strong, bipartisan opposition to this Russian malign influence project.”
“The Biden administration has been clear that the Nord Stream 2 pipeline is a Russian geopolitical project that threatens European energy security and that of Ukraine and eastern flank NATO allies and partners,” the spokesperson said.
The State Department spokesperson would not confirm the waivers or any details about the imminent report.
Administration sources contend any waivers applied to sanctions could be removed at any time.
They also argue the act of sanctioning and then waiving an entity establishes leverage over it, given the company would know that at any moment, the U.S. could reinstate the sanction.
They also add that the Biden administration’s goal remains to see that the pipeline doesn’t go into use.