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Germany Rejects U.S. Legislation That Would Penalize Firms Laying Russia's Nord Stream 2 Pipeline

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A construction site of the Nord Stream 2 pipeline in Lubmin, Germany, in March

WASHINGTON -- Germany has denounced new U.S. legislation that would impose sanctions on companies helping lay the Nord Stream 2 pipeline from Russia to Europe.

A provision outlining the punitive measures was included in the 2020 National Defense Authorization Act (NDAA) signed into law by U.S. President Donald Trump on December 20.

The provision requires vessels laying the Russian pipeline to wind down their work “immediately” or face sanctions, including asset freezes.

German Finance Minister and Vice Chancellor Olaf Scholz on December 21 said that Berlin "firmly rejects" the legislation, calling such sanctions "serious interference in the internal affairs of Germany and Europe and their sovereignty."

The European Commission on December 21 said it was examining how EU companies involved in the construction of the controversial pipeline might be affected by the new legislation, adding that it was against sanctions against companies "conducting legitimate business."

The $11 billion Nord Stream 2 project is just weeks away from completion and analysts have been divided on whether the imposition of sanctions at such a late stage will be able to halt the project.

Allseas Group, the Swiss-based company that is laying the last segments of the 1,230-kilometer pipeline, announced it has suspended its activities in anticipation of the enactment.

"Allseas will proceed, consistent with the legislation’s wind-down provision, and expect guidance comprising of the necessary regulatory, technical, and environmental clarifications from the relevant U.S. authority," the company said in a statement.

Senators Ted Cruz (Republican-Texas) and Ron Johnson (Republican-Wisconsin), both members of the Senate Foreign Relations Committee, sent a letter to Allseas on December 19 warning it to stop its work on Nord Stream 2 immediately upon the NDAA becoming law or face sanctions.

Their letter followed a Bloomberg News report that Allseas could possibly finish laying the pipeline within the 30-day wind-down period stipulated by the legislation. Cruz and Johnson said that the monthlong window is only valid if the company shows a "good faith effort" to halt operations.

"Rushing to finish the Nord Stream 2 project over that time would foreclose the possibility of that certification," the letter said.

Cruz, the author of the sanctions legislation, said in September that he targeted the vessels because Russia doesn't have the technology to lay deep-sea pipes. Allseas, which has worked extensively in the Gulf of Mexico, possesses some of the most advanced offshore, pipe-laying vessels in the world.

Despite Berlin's opposition to the legislation, a German government official said on December 21 that Berlin would not respond to the U.S. sanctions with countermeasures.

Peter Beyer, the German government's transatlantic coordinator, said the sanctions targeted private companies, not Germany.

"That is why Germany will not take any countermeasures. If so, this would have to happen at European level anyway, but that won't happen either," Beyer told the dpa news agency.

Beyer said the sanctions did not represent a turning point in German-American relations since the punitive measures had been expected for a year.

"The transatlantic friendship is strong -- and we have weathered completely different situations together," Beyer said.

Russian Foreign Minister Sergei Lavrov said during a trip to Washington earlier this month that U.S. sanctions would not stop Moscow from completing the project. ​

Doubling Germany's Imports

Nord Stream 2 has the capacity to deliver 55 billion cubic meters of gas annually to Germany, doubling the nation’s imports of Russian gas.

The United States has been opposed to the project, claiming it will deepen Europe’s dependence on Russian energy and give the Kremlin greater leverage over the nations of Eastern Europe while also boosting its coffers.

Nord Stream 2 would reroute Russian gas bound for Western Europe along the floor of the Baltic Sea.

The launch of Nord Stream 2 and TurkStream, which will carry gas from Russia to Southeastern Europe via an underwater pipeline to Turkey, would essentially end the Kremlin's need to ship natural gas through Ukraine, depriving the country of as much as $3 billion in transit fees.

The United States and Europe have warned Russia against ending transit through Ukraine.

Russia has been seeking to reduce its dependence on Ukraine as a transit state for its natural gas exports amid tense relations with Kyiv over its political reorientation toward the West. Russia twice cut off gas to Ukraine amid disputes over pricing.

Just hours before Trump signed the NDAA, Russia and Ukraine announced they had finally reached a new gas-transit agreement that will cover the next five years. The existing transit contract was set to expire on January 1, raising concerns of another gas cutoff.

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