Back to December: Exposing Nord Stream 2 Spin

Benjamin Schmitt

The Kremlin seeks to present its energy infrastructure project as a done deal, a fait accompli that sanctions are powerless to halt. None of that is true.

Even in a year as uncertain and unprecedented as 2020, the holiday season got underway with many of the expected yearly traditions. Even in virtual, socially-distanced formats, Thanksgiving week kicked off the holiday season in the United States with parades and football – with or without some key position groups on the field.

Another now-annual tradition has also kicked off: a December public relations push by Kremlin-controlled Gazprom to release statements and take actions intended to undermine Transatlantic resolve to stop President Vladimir Putin’s marquee gas pipeline project – Nord Stream 2 – once and for all.

Take a moment to think back to December 2019. With physical construction of Nord Stream 2 just weeks away from completion, Gazprom and its allies were relentless in pushing the narrative that the project was inevitable. The hope among project supporters was to convince lawmakers on Capitol Hill to reconsider passing limited, technology-calibrated sanctions language as a part of the 2020 National Defense Authorization Act (NDAA) designed to stop the project in its tracks. After all, if the project really couldn’t be stopped, why bother passing the legislation to begin with?

Among the slew of spurious headlines from just before the NDAA came into force last year was the now-notorious “Dewey Defeats Truman”-esque Bloomberg headline “U.S. Concedes Defeat on Nord Stream 2, Officials Say.” Thankfully, U.S. lawmakers were not swayed by this flurry of dubious headlines, and just days later, the 2020 NDAA was passed, stopping Nord Stream 2’s construction in real-time. Europe’s energy security was immediately boosted, and it was a major step to push back on authoritarian influence projection. But perhaps most important, by ensuring the pipeline was stopped, a long-anticipated gas crisis was averted in early 2020. Without the completed Nord Stream 2 route through the Baltic sea, the Kremlin was unable to make good on its longstanding threats to use the project to end or significantly reduce gas transit via Ukraine.  Kyiv’s economic and strategic stability was thereby protected from further energy coercion by Moscow.

Now, nearly a full calendar year later, with virtually zero progress on the project made in that time, Gazprom and its supporters have dusted off their 2019 playbook. Once again, Moscow and company are working overtime to flood the zone with misleading claims of progress and plans for dubious legal workarounds. The goal, like last time, is to make the project seem unstoppable.

The push began the day before Thanksgiving, with a Bloomberg interview with Rainer Seele, the CEO of Nord Stream 2 project partner OMV and 2018 awardee of Russia’s “Order of Friendship” by President Vladimir Putin. The article featured comments from Seele and other Nord Stream 2 partner CEOs claiming that support among related project companies remained strong even in the face of the coming 2021 NDAA sanctions. Seele capped off his comments by repeating the false claim that “this pipeline is needed.” In fact, the pipeline is not aimed at bringing significant new gas to European markets, with only 9.9 billion cubic meters per year (bcma) of the 55 bcma project slated to be delivered to Germany and points west.

That article, and its headline “European Companies Stick to Nord Stream 2 Even Amid U.S. Furor,” aged just about as well as the aforementioned “U.S. Concedes Defeat…” variant. Just 24 hours later, on Thanksgiving day, Norway’s DNV GL announced it would “suspend Nord Stream 2 work over U.S. sanctions fear,” dealing the project a massive blow.

The cause for cold feet? The 2021 NDAA that has already been agreed to on a broadly bipartisan basis extends Nord Stream 2 sanctions to commercial providers of technical pipelaying activities, insurance, and certification. As I wrote in these pages last June, the inclusion of this sanctions clause in the 2021 NDAA would increase the likelihood that the Kremlin project would remain incomplete for the foreseeable future. Understanding the mechanism is important:

Nord Stream 2 AG has selected the same firm that provided the pre-commissioning certification work for Nord Stream 1: DNV GL. An internationally accredited registrar and classification firm headquartered in Norway, DNV GL provides an array of services, including certification of large-scale critical infrastructure. Like Switzerland-based Allseas, which exited the project in December 2019 following the passage of the 2020 NDAA sanctions given its own unwillingness to risk a sanctions designation, it is likely that DNV GL or any other Western certification firm would follow suit given portfolios that span multiple global jurisdictions. Without an internationally accredited certification provider, it is unlikely that Gazprom could adequately backfill this project development task with a Russian firm and still be accepted by the relevant European authorities as providing an independent third-party assessment. And without certification, the project can thus not come into operation.

Perhaps sensing the increasing public realization that the DNV GL announcement could spell the end of Nord Stream 2, Gazprom-controlled Nord Stream 2 AG abruptly announced just 48 hours later on 28 November that it would resume project construction. Once again, outlets (including Bloomberg) took the bait, releasing headlines like “The Energy Project Trump Can’t Stop Seeks Ways to Finish the Job.” Note the framing of opposition to the pipeline as a divisive “Trump issue” – a favorite tactic of Nord Stream 2 boosters. The truth, however, is that existing and planned sanctions to stop the project have enjoyed overwhelming bipartisan support. Indeed, the pipeline was originally opposed by the Obama administration. In 2016, then-Vice President and current President-Elect Joe Biden called the project “a fundamentally bad deal for Europe.”

Beyond the political spin about inevitability, the Kremlin was misleading on technical matters as well. While much of the press coverage trumpeted that Nord Stream 2 construction would resume, most stories omitted key facts about the scope of the announced pipelaying activity. With over 160 kilometers of pipeline left to be laid between German and Danish waters, Reuters reported that the announced construction restart would only cover a mere 2.6 kilometers within the German Exclusive Economic Zone.  Moreover, the shallow depth of the short route would be sanctionable under discretionary CAATSA sanctions, but isn’t targeted by the mandatory NDAA sanctions that Gazprom is focused at upending. And further driving home the fact that these announcements were just PR exercises is that as of today, one of the two pipelaying ships has already departed for its home waters of Kaliningrad, while the other remains moored motionless near Wismar, Germany, neither having even reached the construction site.

Beyond the political spin about inevitability, reports emerged last week of an alleged scheme by which the eastern German state of Mecklenburg-Vorpommern might set up a foundation with the stated purpose of combating climate change, but whose real objective would be to provide support solely to Nord Stream 2 related firms, somehow avoiding a sanctions designation in the process. This alleged plan mirrors a move earlier this year by which Gazprom transferred one of the presumed Russian pipelaying vessels, Akademik Cherskiy, to a non-Gazprom entity (the Samara Thermal Energy Property Fund), with the idea that if the Cherskiy were to engage in pipelaying activities and run afoul of sanctions, then Gazprom and its subsidiary owner of the vessel, Gazprom Flot, would be spared from a sanctions designation.

Both attempts are dead ends. The existing 2020 NDAA law takes such scenarios into account, stating that sanctions designations would include “foreign persons that have knowingly sold, leased, or provided the vessels for construction of [the] project or facilitated deceptive or structured transactions to provide such vessels.” Gazprom’s dubious legal fictions will not hold up under technical scrutiny, nor will any alleged attempt to support a Russian hydrocarbon project under the guise of a foundation set up to combat climate change.  Remember: data released by the European Space Agency earlier this year showed “huge plumes of the invisible planet-warming gas methane leaking from the Yamal pipeline that carries natural gas from Siberia to Europe.”

Like the passing of the seasons, the Kremlin’s playbook for malign energy activities comes around year after year. Whether it is using energy infrastructure proposals to export strategic corruption into the Transatlantic community, advancing schemes aimed at challenging Western legal norms, or engaging in disinformation campaigns to undermine Transatlantic consensus, Putin’s energy strategy is nothing if not consistently damaging.

But the Transatlantic community has also demonstrated its ability to understand the policy patterns of Putin’s Russia. Stay tuned for announcements from Capitol Hill showing that an overwhelming majority of bipartisan lawmakers are ready to pass the 2021 NDAA before the end of the year.

Dr. Benjamin L. Schmitt is a postdoctoral fellow at Harvard University, a senior fellow at the Center for European Policy Analysis, and a former European Energy Security advisor at the US Department of State. You can follow Benjamin on Twitter at @BLSchmitt.

(c) CEPA

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