Biden readying new sanctions on Russia over Nord Stream 2 pipeline

The Biden administration is preparing additional sanctions on the controversial Russia-Germany gas pipeline Nord Stream 2, according to officials familiar with the internal deliberations, as lawmakers demand the pipeline project be derailed before it’s too late.

The administration is required by law to submit a report to Congress every 90 days naming entities involved in the pipeline’s construction that are eligible for sanctions. The process of identifying those new targets is underway now, the officials said, and could be completed before the next report is due in May.

A senior administration official declined to comment on the specifics of the sanctions package that is now moving through the interagency process. But the official said “we are continuing to look at entities that may be involved in sanctionable activities and will take necessary follow-on steps from there.” State Department spokesperson Ned Price echoed that, telling POLITICO that “we are always looking at pipeline activity that would be sanctionable, so if we see activity that meets that threshold we are prepared to follow the law.”

Lawmakers from both parties have noted that the pipeline would place Russian infrastructure inside NATO territory and thereby threaten its member states, and make some European countries more dependent on Russian energy. It would also deprive Ukraine of billions of dollars in revenue, allowing Russia to circumvent the country when transferring gas to Europe.

But the diplomatic situation is delicate, officials said. The administration wants to impede the project — Biden has called it “a bad deal for Europe” — but it also wants to strengthen the U.S. relationship with Germany, which has been lobbying for the pipeline’s construction to continue unabated.

“We’re between a rock and a hard place,” said a second senior administration official.

There’s also bipartisan political pressure on the Biden administration to act. Secretary of State Antony Blinken briefed members of the Senate Foreign Relations Committee on Thursday, but provided little clarity on what the administration plans to do, prompting immediate backlash.

Sen. Ted Cruz (R-Texas), who co-authored a provision in the annual defense bill requiring sanctions on entities supporting construction of the pipeline, has placed holds on several Biden nominees to pressure the president to act.

“If the Biden administration dithers, if they defy the law, they will have turned a major foreign policy victory for America into a major foreign policy loss and a gift of billions of dollars in perpetuity to Vladimir Putin,” said Cruz, who is delaying Senate confirmation of Biden’s nominees for CIA director and deputy secretary of state, among others.

“I told Secretary Blinken, I would be thrilled to lift the holds on the State Department nominees today if they would only follow the law and issue an interim report identifying all of the companies subject to mandatory sanctions,” Cruz added.

Can Germany come up with a compromise?

Analysts said the worst outcome for the Biden administration would be slapping tough sanctions on a project that is more than 90 percent complete only to see it finalized anyway. The German government, meanwhile, has floated several potential offers to get the U.S. to lay off the pipeline, said people familiar with the conversations, including trade deals and increased investment in green energy projects in Europe and Ukraine.

“The question is whether Germany can come up with a deal that [Biden] couldn’t refuse,” said one former ambassador who has been following the negotiations. “Biden could then go to Congress with that and say, ‘Look at what we’ve got.’”

A spokesperson for the German Ministry of Finance confirmed that the German government “is in contact with the US government regarding US sanctions and sanction threats regarding Nord Stream 2,” but said those conversations are confidential and wouldn’t comment further.

The first senior administration official similarly declined to divulge details of the administration’s diplomatic talks with Germany, but said they have made clear to Berlin that Biden views the pipeline “as a clear example of Russia’s aggressive action in the region, which provides Russia with the means to use a critical natural resource for political pressure and malign influence against Europe.”

Possible items that Germany could offer up would include partnering with the U.S. to invest in energy projects in Eastern and Central Europe and joining the Biden administration in taking a tougher stance against China, people who have been watching the pipeline issue said. Last year, the German Ministry of Finance offered to spend 1 billion euros to “massively increase its public support for the construction of LNG terminals along the German coastline” in exchange for “undhindered construction and operation of Nord Stream 2.” The offer went nowhere with the Trump administration.

One lobbyist involved in efforts to stop the project said that some inside the administration hope they can buy time until Germany’s federal elections in September, which could see the country’s Green party gain power and potentially pull out of the pipeline project. Lawsuits targeting the Danish permits for the pipeline will likely keep construction on pause at least until May, said Constantin Zerger, head of energy and climate change programs at Environmental Action Germany, the group leading the courtroom efforts.

But with the pipeline nearly complete already, members of Congress are getting increasingly anxious about it.

“What I would like to see is the administration act expeditiously to stop the remaining section of the pipeline,” said Sen. Jeanne Shaheen (D-N.H.).

A "full diplomatic push" on Russia

While it is still unclear which entities the administration will sanction next, they will likely include Russian vessels and companies involved in the project, said people familiar with the internal deliberations. Republican lawmakers sent a letter to Blinken last week naming more than a dozen such entities, including Russian offshore supply ships and insurance and inspection companies that were identified by open-source maritime vessel trackers.

Cruz said he handed Blinken a report on Thursday from one of those vessel trackers — the Danish Maritime Authority — that identified ships assisting in the construction of the pipeline, thereby subjecting them to sanctions.

The administration sent a report to Congress last month identifying two Russian vessels involved in the pipeline construction, but lawmakers saw that report as inadequate because those entities had already been sanctioned by President Donald Trump. The lawmakers had expected the State Department to list additional entities, which would further impede the construction.

Senators emerged from the classified briefing with Blinken on Thursday with no clear sense of what steps the Biden administration will take. Shaheen, who joined Cruz in the initial sanctions effort, said “it’s not clear yet” whether the administration will act quickly enough to prevent the pipeline from being completed.

Sen. Bob Menendez (D-N.J.), the chair of the Senate Foreign Relations Committee, said Blinken conveyed to lawmakers that the administration was “reviewing all of the possibilities,” adding: “The administration opposes it and is doing what is necessary to follow up on its opposition to it.” He said Biden was in the midst of a “full diplomatic push to stop Nord Stream 2.”

At the same time, the Biden administration is rolling out separate sanctions targeting Russia over a slew of malign activities, including the Solar Winds cyberattack and the Kremlin’s persecution of opposition leader Alexei Navalny.

But some senators have expressed concerns about exacerbating tensions with Germany by pursuing aggressive punishments over the pipeline, in particular after the Trump administration alienated the European ally on a host of issues.

“I think as long as we’re targeting Russian assets, we’re on safe ground,” Sen. Chris Murphy (D-Conn.) said. “This is not the moment to create any greater fissure with Europe than is absolutely necessary.”

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