Energy & Environment

Biden’s Gift to Putin

Tthe Nord Stream 2 gas pipeline project logo on a pipe at the Chelyabinsk pipe rolling plant in Chelyabinsk, Russia, February 26, 2020. (Maxim Shemetov/Reuters)

President Biden promised to unite the world’s democracies against global authoritarianism, but the administration’s new Nord Stream 2 bargain placates the Kremlin’s Western cronies and German business interests at the expense of U.S. allies in Russian crosshairs.

The 760-mile pipeline is a geopolitical weapon, which Kyiv fears Vladimir Putin will use to deprive it of transit revenues from the gas pipelines that currently cross its territory. Nord Stream 2 will double the capacity of an existing pipeline under the Baltic Sea, and thus would either remove or substantially reduce any economic costs that Russia might incur if it steps up its harassment of Ukraine. As recently as this month, Putin has suggested that he’d like to do just that, calling Russians and Ukrainians “one people” in an article on the conflict in Ukraine’s Donbas region, where Russia is backing separatist forces.

Despite recognizing Nord Stream 2’s role as a malign Russian influence project, the administration announced a deal this week crafted to resolve Washington’s long-running dispute with Berlin over the pipeline, ensuring that it will be finished. The move all but dashes hopes that Washington would use sanctions in a last-ditch effort to kill the Gazprom-backed project.

Under the agreement, Germany makes some concessions to U.S. concerns about Ukraine’s security, including by pledging to retaliate against Russia for any attempts to weaponize its energy flows and to appoint a special envoy to help Kyiv negotiate a deal that would continue Moscow’s current gas flows through the country. It also commits to helping (and funding) Ukraine’s transition to renewable energy sources and creating a 60-million-euro energy resilience package, among other things. The idea that EUR 60m would make any difference one way or another is so ludicrous as to be insulting.

All of this is supposed to assuage Ukraine’s concerns, but the German pledge to impose sanctions on Russia in the event of a coercion campaign is vague, and it’s uncertain what leverage it would have in negotiations over Ukraine’s energy contract after 2024, the final year of the current contract.

U.S. officials grasp the undesirable quality of this compromise, but they claim their choice is the most pragmatic among bad options. “While we remain opposed to this pipeline, we reached the judgment that sanctions would not stop its construction and risked undermining a critical alliance with Germany, as well as with the EU and other European allies,” said a senior administration official this week, announcing the deal. 

Other “European allies” rather closer to the Russian border might disagree. It has escaped no one’s notice in Warsaw, Tallinn, Vilnius, or Riga that the Baltic pipelines run directly from Russia to Germany. Memories of the Molotov-Ribbentrop Pact have not faded in that part of the world.

No one doubts that full implementation of the sanctions packages that Congress passed in 2017, 2019, and 2020 would have aggravated Germany and perhaps other European countries, as these measures targeted European — and German — companies. Chancellor Angela Merkel has claimed that the Russian pipeline is a purely commercial project, one that plays a significant role in Germany’s energy transition, and called potential U.S. sanctions on German entities an illegal infringement of her country’s sovereignty. Which is why in May the administration designated several ships and companies involved in the project but waived sanctions targeting the Nord Stream 2 corporate entity and its CEO Matthias Warnig, a former Stasi officer.

By then, Secretary of State Antony Blinken’s team had already lost the argument within the administration over pushing for full implementation of the U.S. sanctions targeting any individuals and entities working on the pipeline, the Washington Post has reported. Biden, Jake Sullivan, and other NSC officials favored a softer touch. If the pipeline was certain to be completed, they didn’t also want to alienate Germany.

In the weeks since, Blinken has publicly toed the administration’s line, calling the pipeline a fait accompli, even though he and others privately thought otherwise. That question is now definitively settled — the agreement does make Nord Stream 2 a fait accompli.

Now it will face a bipartisan, bicameral assault on Capitol Hill. Although outraged lawmakers don’t get any say over the agreement’s enactment, they might attempt to sabotage it and limit the fallout by passing robust new assistance packages for Ukraine.

For all of its deficiencies, the deal serves an important clarifying purpose, showing that German officials, who have long denied it, actually do understand how Nord Stream 2 will be used as a political project. It reveals the bankruptcy of Merkel’s mercantilist defense of the project. And it demonstrates proof of concept for Putin’s efforts to buy influential European politicians, such as Gerhard Schröder, chairman of the Nord Stream 2 board and a former German chancellor.

With Nord Stream 2, Moscow has effectively deepened the divisions between the U.S. and some of its allies. This episode has made Ukraine and other Eastern European pipeline opponents question Washington’s determination to confront the Russian threat. On Wednesday afternoon, Ukrainian foreign minister Dmytro Kuleba and Polish foreign minister Zbigniew Rau released a joint statement ripping the deal.

Maybe Washington can afford to hold Ukraine, an imperfect and certainly flawed democracy, at arm’s length and give preferential treatment to Germany, which has shown itself to have a soft spot for doing business with Beijing and Moscow. And perhaps Kyiv has no other choice but to take what it can get. But the White House’s talk of defending embattled democracy sounds tinnier after this deal. 


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