German Foreign Minister Sigmar Gabriel met for the third time with his counterpart Rex Tillerson on August 29, reportedly reiterating to the US Secretary of State EU concerns that US sanctions could lead to unintended consequences for Europe’s economy. However, Gabriel thanked US President Donald Trump for having stated that he will discuss any measures with America’s European allies.
The US passed fresh sanctions against Russia earlier this summer, including sanctions on foreign companies investing in or helping Russian energy exploration. The legislation also cut the period for which US-based entities can provide finance to Russian energy firms from 90 to 60 days.
Vladimir Tikhomirov, chief economist at BCS Global Markets in Moscow, told New Europe on August 29 that the European Union reacted negatively to the fresh US sanctions against Russia, concerned that they could impact European companies working on energy projects, including the Nord Stream-2 pipeline from Russia to Germany.
“My understanding is that, thus far, the effect of the new proposed sanctions was limited only to political area, not economics,” Tikhomirov said. “The reason is simple. Firstly, these new sanctions are yet to be introduced and this could happen if State Department, NSA and US Treasury come up with a report in which they argue that this is required. The bill gives 180 days for such report to be submitted so at the current stage what we have is a potential threat of new sanctions only,” he said.
“Secondly, for such sanctions to be effective EU should join the US but the initial reaction on this bill from Europe was clearly negative. So even if the US decides to go alone on these sanctions, their effect could be minor and immaterial for the Russian economy,” Tikhomirov said.
“Overall, we still have to wait and see what happens – in the US and in the EU,” the chief economist at BCS Global Markets said. “As of now, there has been no economic effect – construction of Nord Stream-2 continues and even accelerated, European companies participate in this project while Gazprom sets new records every month in its gas exports to Europe,” he added.
Nord Stream 2 AG is the developer of a new natural gas pipeline through the Baltic Sea to supply Russian gas to Germany and other European countries.
Earlier this year Germany’s Uniper, Germany’s Wintershall, Royal Dutch Shell, Austria’s OMV and France’s Engie agreed to each loan 10% of the cost of the 55-billion-cubic-metre pipeline. Russian gas monopoly Gazprom is the sole shareholder in Nord Stream-2, undertaking 50% of the cost of the pipeline.
Nord Stream 2 AG received funds from five European companies totaling €324 million in July 2017, Gazprom said in its IFRS report on August 29, cited by TASS.
Meanwhile, Reuters quoted Gazprom official Alexander Ivannikov, as telling a conference call on August 30 that Nord Stream 2 will be implemented regardless of how new US sanctions are interpreted. “According to preliminary estimates, this does not diminish a possibility for Gazprom to borrow abroad,” the news agency quoted him as saying, adding that Gazprom and its partners were trying to obtain clarification about the sanctions. “Even if there are risks … the Nord Stream-2 project will be implemented regardless of lawyers and (US Treasury) explanations,” he said.