Germany and U.S. strike deal on Nord Stream 2

Germany and the United States have announced a deal to allow the completion of a controversial Russian gas pipeline to Europe without the imposition of further U.S. sanctions.

The agreement on Nord Stream 2, announced on Wednesday, says Germany and the U.S. commit to countering any future Russian attempt to use the pipeline as a political tool.

The two states also agreed to support Ukraine and Poland, which construe the project as a security threat, by funding alternative energy and development projects.

In a joint statement, the two governments said they were “united in their determination to hold Russia to account for aggression and malign activities by imposing costs via sanctions and other tools” – referring largely to Russian support for separatists in Ukraine.

There are long-held concerns that Nord Stream 2 could give Russia too much power over European gas supplies, or allow gas to be shut off to Russia’s adversaries.

But the pipeline is almost completed and has had the staunch support of German Chancellor Angela Merkel throughout the process.

What has Germany signed up to?

The joint statement says that “should Russia attempt to use energy as a weapon, or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions.”

Germany and the U.S. have both committed to supporting a $1 billion fund for Ukraine to diversify its energy sources, of which Germany will provide an initial $175 million.

Germany has also guaranteed it will reimburse Ukraine for gas transit fees it will lose from being bypassed by Nord Stream 2 until 2024, with a possible 10-year extension.

It has also committed to continue offering Ukraine support to transition away from coal, including by appointing a new “special envoy” with dedicated funding of $70 million.

In a nod to Poland, Germany has also agreed to sign the ‘Three Seas Initiative’, an EU and U.S.-promoted scheme that aims to boost energy security among countries bordering the Baltic, Black, and Adriatic seas.

The German government, the statement said, will help to contribute up to $1.7 billion of European Union funding to the initiative up until 2027.

Opposition to Nord Stream 2 still widespread

The U.S. waived sanctions on the Russian companies overseeing Nord Stream 2 in May this year. But the Biden administration still opposes the pipeline in principle.

The deal has already attracted condemnation from Ukraine and Poland. In a joint statement issued on Wednesday night, the countries’ two foreign ministers, Dmytro Kuleba and Zbigniew Rau called the deal struck “insufficient”.

“The decision to build Nord Stream 2 made in 2015 mere months after Russia’s invasion and illegal annexation of Ukrainian territory, created a security, credibility and political crisis in Europe,” they said. “Currently, this crisis is significantly deepened by the resignation from attempts to stop the launch of the NS2 gas pipeline.

“Unfortunately, the proposals to cover the resulting security deficit cannot be considered sufficient to limit the threats created by NS2. We call on the United States and Germany to adequately address the security crisis in our region, that Russia is the only beneficiary to. Ukraine and Poland will work together with their and partners to oppose NS2 until solutions are developed.”

U.S. politicians of all stripes also lined up to criticise the move on Wednesday. The top Republican on the House Foreign Affairs Committee, Rep. Michael McCaul of Texas, said he had no doubt Russia would still “use the Nord Stream 2 pipeline as a weapon of coercion against Ukraine and transatlantic energy security as soon as it is operational.

“Promises to invest in future Ukrainian energy projects and ambiguous threats of consequences won’t change that reality.”

The State Department said its officials are due to visit both Kyiv and Warsaw this week to inform them in person of the deal.

Ukrainian President Volodymyr Zelenskyy is also now due to visit Biden on August 30. An invitation for “later this summer” had been announced in June, before Biden met Russian President Vladimir Putin in Geneva, but a date was not set until Wednesday.

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