US threatens to impose sanctions on companies involved with Nord Stream 2 and Turkstream pipelines

The Trump administration on Wednesday hardened its efforts to prevent the completion of new German-Russian and Turkish-Russian natural gas pipelines by ending sanctions exemptions for companies involved in the projects and warning they'll be subject to US penalties unless they halt their work.

US Secretary of State Mike Pompeo announced the administration is ending grandfather clauses that had spared firms previously involved in the pipelines' construction from sanctions authorised by the Countering America's Adversaries Through Sanctions Act, a 2017 law aimed at punishing Russia, in particular, for interference in US elections and other matters.

The move opens the door for US economic and financial penalties to be imposed on any European and other foreign company over the Nord Stream 2 and TurkStream projects, including those that had been working on the pipelines before the passage of CAATSA and had been exempted from the penalties.

The Trump administration has lobbied Europe, particularly Germany, to abandon the pipelines, which it believes will increase the continent’s dependence on Russian energy. Wednesday’s step comes as congressional legislation that would mandate the imposition of sanctions that had been authorised by CAATSA is advancing.

The US has been an outspoken opponent of the Nord Stream 2 pipeline, which would transport natural gas about 750 miles (1,200 kilometres) under the Baltic Sea from Russia to Germany. Along with eastern European countries that also oppose the project, the US government argues that it will make Europe dangerously dependent on Russia.

Already the threat of US sanctions has led one company that had not been covered by the grandfather clause to suspend its work on the pipeline. Late last year, the Swiss firm Allseas, which operated ships laying sections of the undersea pipeline, said it was halting work in anticipation of sanctions.

Nord Stream 2 is owned by Russia’s Gazprom, with investment from several European companies. The German government has said it regrets the sanctions threat and considers them interference in the country’s domestic affairs. However, Chancellor Angela Merkel made it clear last week that Germany isn’t considering retaliation against the sanctions.

Russia has said it is, however, considering retaliatory measures. Mr Pompeo spoke to Russian foreign minister Sergey Lavrov on Monday, and President Donald Trump spoke to Turkey's president on Tuesday, but there was no indication that the pipelines had been discussed.

With TurkStream, Russian gas passes through the Black Sea to Turkey. Together, the two 578-mile (930 kilometre) TurkStream lines under the Black Sea, along with the Russian and Turkish onshore pipes, have the capacity to carry 31.5 billion cubic meters  of natural gas annually.