US, Germany seek deal on Nord Stream 2 pipeline

Bloomberg

The US and Germany want to conclude a deal by August to blunt Moscow’s geopolitical gains once the controversial Nord Stream 2 gas pipeline is finished, with the two sides exploring ways to shore up Ukraine’s energy sector and deter Russian aggression through the threat of sanctions.
The agreement, which some officials hope to have ready for Chancellor Angela Merkel’s visit to Washington next month, could see the countries commit to bolstering Ukrainian infrastructure and compensating it for transit fees that will be lost because the pipeline bypasses the country. Germany may also commit to supporting the “Three Seas” plan to boost Eastern European cooperation on energy and transportation.
Possible options for a deal were spelled out by several people familiar with the negotiations, all of whom asked not to be identified detailing private discussions. Even if the elements hold, the outcry from members of the US Congress could be fierce because such an agreement would be similar to proposals that have failed to deter Russia in the past.
Opponents of Nord Stream 2 argue that by sending Russian gas directly to Germany, the pipeline will give Moscow greater leverage over European national security. After initially suggesting it would try to halt construction of the pipeline, the Biden administration shifted tack in recent weeks, saying that doing so would be a long shot because it’s already 90% complete. Instead, officials said, they would work with Germany and other allies to reduce the pipeline’s impact.

Discussions about a deal are going on between the State Department and Germany’s foreign ministry, with National Security Advisor Jake Sullivan and Merkel’s foreign and security adviser, Jan Hecker, deeply involved.
Sullivan and Hecker met when experts from both sides discussed the risks Nord Stream 2 “poses to Ukraine and European energy security,” US National Security Council spokeswoman Emily Horne said in a statement at the time.
In Berlin, Secretary of State Antony Blinken confirmed the two sides were talking about ways to “ensure that Russia cannot use energy as a coercive tool directed at Ukraine or anyone else.”
“We’re determined to see if we can make something positive out of a difficult situation that we inherited,” Blinken said, adding that the US wants to “do what we can to make sure that the end result is that Europe’s energy security is not undermined – in fact, it’s strengthened; that Ukraine’s position is not weakened, that it’s actually reinforced.”
Among ideas the two sides have discussed are investment to help Ukraine build its own power plants and plans to boost the sale of synthetic, or green, gas from Ukraine. Germany has also signaled its willingness to enter talks with Russia on extending transit quotas for Ukraine, which would lengthen the time Russian gas would be contractually required to flow through the eastern European nation.
One contentious idea is creating a “snapback” mechanism to halt the flow of gas through Nord Stream 2 if Russia seeks to coerce Ukraine.
German officials oppose the idea, saying they don’t want to use Nord Stream 2 as a “political weapon.” Even US officials aren’t clear such an idea is feasible technically if Russia keeps pumping gas into the pipeline.
Instead, if Russia looks to cut gas supplies to Ukraine, the US could also impose sanctions on Russia using authorities from an executive order President Joe Biden signed earlier this year.
The people familiar with the matter disagreed on just how close the US and Germany are to reaching a deal. Some said the two sides had a draft proposal with all the elements, but one person described the talks as not nearly so advanced.
Biden made the calculation that it was more important to maintain good relations with Nato ally Germany, which wants to proceed with the pipeline, than punish it as the Trump administration threatened to do. So the Biden administration held off sanctioning Nord Stream 2 AG, the Zug, Switzerland-based company overseeing the pipeline’s construction, and its German chief executive, Matthias Warnig, despite strong objections from members of Congress from both parties.
One possibility is to have a tentative deal when Merkel visits Washington in mid-July, and seek the blessing of Ukraine’s leader, Volodymyr Zelenskiy, who has been invited to visit weeks later.
“The visit of the federal chancellor in Washington would be a suitable timeline, but of course, we cannot make it contingent only on this particular matter,” German Foreign Minister Heiko Maas told reporters alongside Blinken in Berlin.
The two sides are also eager for a deal because of another timeline: In August the State Department has to issue a new report to Congress on Nord Stream 2 and the entities and people who are involved in its construction. Blinken has suggested the US could remove the waiver and punish Warnig and Nord Stream 2 AG if it doesn’t get the concessions it seeks.