Russia’s Nord Stream 2 Natural Gas Pipeline to Germany Halted

Russia’s Nord Stream 2 Natural Gas Pipeline to Germany Halted

Updated March 10, 2022
Russia’s Nord Stream 2 Natural Gas Pipeline to Germany
Halted
In connection with Russia’s invasion of Ukraine, the
the time, analysts expected certification could be completed
German government has suspended certification of the
in the second half of 2022.
Nord Stream 2 natural gas pipeline. The pipeline—which
has been constructed but has not become operational—
Although the European Union (EU) has articulated an
would increase Russia’s natural gas export capacity directly
ambitious energy diversification strategy, some European
to Germany, bypassing Ukraine, Poland, and other transit
governments have not reduced dependence on Russian gas,
states. Successive Congresses and U.S. Administrations
which accounted for about 40% of EU natural gas imports
have opposed Nord Stream 2, reflecting concerns about
in 2021. Factors behind reliance on Russian supply include
European dependence on Russian energy and Russian
diminishing European gas supplies, commitments to reduce
aggression in Ukraine. Previously, German officials
coal use, Russian investments in European infrastructure,
portrayed the pipeline as an important natural gas corridor
and prior perceptions of Russia as a reliable supplier.
as Germany is ending nuclear energy production and
Russia’s invasion of Ukraine has prompted the EU and its
reducing coal use.
member states to redouble energy diversification efforts. In
early March 2022, the European Commission (the EU’s
On February 22, 2022, German Chancellor Olaf Scholz
executive agency) proposed plans to cut EU dependence on
directed his economics ministry to withdraw a binding
Russian gas by two-thirds in 2022 and end EU reliance on
opinion issued in October 2021 stating that Nord Stream 2
Russian energy resources “well before 2030.”
did not pose a threat to supply security. The opinion was a
Figure 1. Nord Stream Gas Pipeline System
precondition for the pipeline certification process to begin.
Without the opinion, the certification process cannot
continue, and without certification, the pipeline cannot
become operational.
On February 23, the Biden Administration announced
economic sanctions on Nord Stream 2 AG, the pipeline’s
Russian-owned, Swiss-based parent company, and its chief
executive officer (CEO), a German national. The
Administration also imposed visa bans on the company’s
corporate officers. News reports in early March 2022
indicated that Nord Stream 2 AG was considering filing for
insolvency.
Background

Source: Gazprom, edited by CRS.
Nord Stream 2 lies alongside the Nord Stream 1 pipeline, in
operation since 2011. Nord Stream 2 (consisting of two
Previous supporters of Nord Stream 2, including the
lines) would double the total capacity of the Nord Stream
German and Austrian governments, maintained that the
system from 55 billion cubic meters (BCM) to 110 BCM
pipeline would enhance EU energy security by increasing
per year. The pipeline is owned by the Russian state-owned
the capacity of a direct and secure supply route. German
energy company Gazprom. About half the cost was
officials said they supported the development of
reportedly financed by five European companies: Engie,
infrastructure to ensure that gas can be transported across
OMV, Shell, Uniper, and Wintershall.
Europe once it reaches Germany. They stressed that
Germany supports broader European energy supply
Pipeline construction was initially suspended in December
diversification efforts, including construction of new
2019, after the passage of U.S. legislation establishing new
liquefied natural gas terminals in northern Germany.
sanctions related to the pipeline, but resumed one year later.
Despite subsequent U.S. sanctions on 25 Russian-related
Opponents of the pipeline argued that it would give Russia
entities and vessels, Gazprom announced in September
greater political and economic leverage over Germany and
2021 that it had completed pipeline construction. Additional
other countries that are dependent on Russian gas, leave
steps, including certification by German authorities, are
some countries more vulnerable to supply cutoffs or price
required before the pipeline can transport gas. In November
manipulation by Russia, and increase Ukraine’s
2021, Germany’s energy regulator announced it was
vulnerability to Russian aggression. They pointed, for
suspending the certification process pending establishment
example, to Russia’s reluctance in late 2021 to increase gas
of a subsidiary to run the pipeline on German territory. At
flows to Europe amid renewed demand and rising prices.
https://crsreports.congress.gov

Russia’s Nord Stream 2 Natural Gas Pipeline to Germany Halted
Impact on Ukraine
Administration waived the application of new sanctions on
In recent years, Russia has sought to reduce the amount of
Nord Stream 2 AG, its CEO, and other corporate officers.
natural gas it transits through Ukraine. Before Nord Stream
Many Members of Congress urged the Administration to
1 opened in 2011, about 80% of Russia’s natural gas
terminate the waiver and impose additional sanctions to
exports to Europe transited Ukraine. In 2019, about 45% of
attempt to prevent the pipeline from becoming operational.
these exports transited Ukraine.
The Administration terminated the waiver and imposed
In December 2019, after the United States established new
sanctions on February 23, 2022, the day before Russia
sanctions related to Nord Stream 2, Gazprom and the
launched its military attack.
Ukrainian state-owned energy company Naftogaz renewed
a contract for the transit of Russian natural gas to Europe
Evolving U.S. and German Policy
from 2020 to 2024. The contract provided for transit of at
The Biden Administration has called Nord Stream 2 a “bad
least 65 BCM in 2020 and 40 BCM a year from 2021 to
deal” and said U.S. opposition to the pipeline is
2024. In 2020, Russia shipped about 56 BCM to Europe via
“unwavering.” Nevertheless, prior to Germany’s suspension
Ukraine, although Ukraine reportedly received the full
of the certification process, U.S. officials suggested the
contracted amount of $2.1 billion in transit revenues.
Administration’s ability to prevent the pipeline from
becoming operational was limited, even with additional
If Nord Stream 2 became operational, observers expected
sanctions. They also expressed concern that additional U.S.
Russia to further reduce gas transit through Ukraine. This
sanctions could have jeopardized U.S.-German and U.S.-
would not necessarily increase Ukraine’s vulnerability to
European cooperation in other areas, including countering
energy supply cutoffs; Ukraine stopped importing natural
Russian aggression. Accordingly, the Administration’s
gas directly from Russia in 2016. It would lead to declines
diplomatic efforts focused on helping Ukraine maintain its
in transit revenues, however. Before Russia’s new invasion
leverage as a gas transit country.
of Ukraine, some observers also expressed concern that
Nord Stream 2 would increase Ukraine’s strategic
Germany’s decision to prevent Nord Stream 2 from
vulnerability vis-à-vis Russia.
becoming operational followed a July 2021 joint U.S.-
German statement on energy security in which Germany
U.S. Sanctions
committed to take action against Russia (including possible
Successive Congresses and U.S. Administrations have
sanctions) if Russia used its energy resources as a weapon
opposed Nord Stream 2 since the pipeline’s inception.
or committed further aggression toward Ukraine, to push
Congressional efforts to block the pipeline have focused on
for an extension of Ukraine’s gas transit agreement with
sanctions, including through progressively more stringent
Russia, and to invest in energy projects in Ukraine. At the
sanctions legislation enacted in 2017, 2019, and 2020.
time, critics of the agreement questioned whether Germany
had the ability or political will to fulfill these commitments.
Section 232 of the Countering Russian Influence in Europe
and Eurasia Act of 2017 (P.L. 115-44, Title II) authorizes
Prior to suspending Nord Stream 2’s certification process,
sanctions on those who invest at least $1 million (or $5
German officials did not say explicitly they would cancel
million over 12 months) or provide goods, services, or
the pipeline project. They did say, however, that they would
support valued at the same amount for the construction of
uphold the pledge made in the July 2021 joint statement “to
Russian energy export pipelines (22 U.S.C. §9526). On
limit Russian export capabilities to Europe in the energy
January 19, 2021, the Trump Administration imposed
sector, including gas, and/or in other economically relevant
sanctions on the Russian vessel Fortuna, which Gazprom
sectors” should Russia “commit further aggressive acts
used to complete construction of Nord Stream 2, and its
against Ukraine.”
corporate owner KVT-RUS, pursuant to Section 232.
On February 7, 2022, at a joint press conference with
Additionally, the Protecting Europe’s Energy Security Act
Chancellor Scholz, President Biden said in the event of
of 2019, as amended in 2020 (PEESA; 22 U.S.C. §9526
another Russian invasion, “there will [no longer be] a Nord
note; P.L. 116-283, §1242), establishes sanctions on foreign
Stream 2. We will bring an end to it.” Chancellor Scholz
persons whom the President determines have sold, leased,
said, “You can be sure that there won’t be any measures in
provided, or facilitated the provision of vessels for the
which we have a differing approach. We will act together
purpose of subsea pipe-laying activities related to the
jointly.”
construction of Nord Stream 2 and TurkStream (another
Russian pipeline that supplies natural gas to Europe) or any
For related products, see CRS Report R42405, European
successor pipeline. As amended, PEESA also targets those
Energy Security: Options for EU Natural Gas
who provide underwriting services or insurance or who
Diversification; and CRS In Focus IF11177, TurkStream:
provide certain upgrades or installation services. Sanctions
Russia’s Southern Pipeline to Europe.
do not apply to nonbusiness entities of the EU, member
states, or a few other non-EU governments.
Paul Belkin, Analyst in European Affairs
Michael Ratner, Specialist in Energy Policy
On February 22, 2021, the Biden Administration identified
Cory Welt, Specialist in Russian and European Affairs
Fortuna and KVT-RUS as also subject to sanctions under
PEESA. Subsequently, the Administration designated
IF11138
another 16 vessels and seven entities under PEESA or
related Executive Order 14039. At the same time, the
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Russia’s Nord Stream 2 Natural Gas Pipeline to Germany Halted

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https://crsreports.congress.gov | IF11138 · VERSION 19 · UPDATED