The construction of Nord Stream 2 (NS2) has been a rollercoaster of a project with many ups and downs for both its proponents and opponents. On Friday, Trump approved sanctions on companies involved in the construction of the project. The move by Washington has been strongly condemned by both Germany and Russia, who see the sanctions as evidence of the Trump administration interfering with their internal affairs.
The sanctions mean that the visas of employees can be revoked and assets can be frozen. Allseas, a Dutch-Swiss private company, is going to be significantly affected because it owns considerable assets in the U.S. and the specialized nature of its operations makes it essential for the project.
While the sanctions may delay the completion of Nord Stream 2 by a few months, this will not affect Russian natural gas supplies to the European Union (EU). Russia could continue its gas shipments to the EU through Ukraine particularly after the recent agreement between between them regarding the amount of Russian gas that will pass through Ukraine on its way to the EU and the transit fees that Ukraine will earn.
The rush by Allseas, a Dutch-Swiss private company involved in the construction of Nord Stream 2 to suspend its activities in fear of US sanctions may delay the project for a few months but will never scupper it.
Still the United States’ projected LNG exports to the EU could be seriously affected. Germany was building LNG terminals to receive LNG including US LNG shipments as part of its energy shift from coal and nuclear energy to gas. However, Germany along with Russia and the EU trade commissioner condemned the new sanctions with German Foreign Minister Heiko Maas, accusing the Trump administration of interference in European affairs.
Russia’s balance sheet vis-à-vis Nord Stream 2 and US sanctions is positive. The construction of the gas pipeline will be completed whether the United States likes it or not. Meanwhile, Russia will reap geostrategic and political benefits from driving a wedge between the EU particularly Germany and the United States.
The United States should have learnt a hard lesson from its defeat in the trade war it waged against China. It will not fare better in another trade war with the EU.
Moreover, previous US sanctions against Russia have proven a failure. Russia’s GDP has achieved a 2.2% growth during the third quarter of this year and Russia's foreign-exchange and gold reserves have climbed by nearly one-fifth over the past year to almost $550 billion. Furthermore, the Rouble was also the world’s best-performing currency against the US dollar in November.
The new sanctions will not fare better and the United States will end up being the loser as it failed against both Iran and Venezuela.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Earlier this month, the company received a strongly worded letter penned by a group of GOP lawmakers led by Senator Ted Cruz, threatening the firm with hell on earth and effectively browbeating it into abandoning the project.
The letter said that if Allseas continues to do the work “for even a single day” after Trump signs the bill, it would be exposed “to crushing and potentially fatal legal and economic sanctions.
But you are right about Russia being the biggest winner in this outcome.