First U.S. sanctions imposed against Nord Stream 2 subcontractor

The U.S. government informed Germany on Jan. 18 that
sanctions would take effect the next day against the Russian pipe-laying ship
Fortuna and its owner KVT-RUS, which are participating in the construction of
the Nord Stream 2 pipeline that circumvents Ukraine and Slovakia. The sanctions
are the first imposed against a Nord Stream 2 subcontractor after the threat of
sanctions prompted a Swiss firm to pull out from the project in December.

The measures were based on the law on combating U.S.
adversaries by sanctions, which was recently bolstered by the U.S. Congress.
The Reuters news agency reported that Germany received the information with
disappointment, while a U.S. embassy spokesman said the hope is for Germany to
halt the project altogether. “We will continue to use all necessary and
appropriate measures to prevent Nord Stream 2,” said a spokesman for the U.S.
Embassy to Germany, as reported by the handelsblatt.com news site.

Also on Jan. 19, Bilfinger SE became the first German
company to withdraw from the Nord Stream 2 project owing to the threat of U.S.
sanctions, as reported by the bild.de news site. Bilfinger signed several
contracts, worth an estimated EUR 15 mln, to operate the pipeline, including
for the development, supply and launch of its security systems.

Gazprom decided to build Nord Stream 2 on its own
after the threat of U.S. sanctions halted the work of a Swiss pipe-laying subcontractor
in December. About 94% of the pipeline has been placed, or 2,300 out of 2,460
kilometers. Fortuna built 2.6 km of pipeline in December in waters exclusive to
Germany. If completed, the Nord Stream 2 pipeline might cost Ukrainian
companies about USD 2 bln in annual transiting revenue.

Zenon Zawada: Most
Western subcontractors are no longer interested in the Nord Stream 2 project as
a result of these sanctions. The question now is whether Russia can finish the
pipeline, which was planned for launch in June. While Russia says Fortuna will
continue its work, Gazprom acknowledged for the first time this week that the
pipeline is under risk of disruption. We expect the U.S. Congress under the
Biden administration will only intensify its measures to pressure Germany to
halt the project indefinitely.