Waiving Pipeline Sanctions, Biden Seeks to Parlay Political Capital with Germany

Bipartisanship is alive and well, at least when it comes to Russian pipelines. Last week Republicans and Democrats in Congress found common cause in criticizing the Biden administration’s decision to waive sanctions related to Nord Stream 2, a Russian pipeline that will export natural gas to Germany. When announcing the decision, Secretary of State Antony Blinken reiterated the longstanding American opposition to the pipeline as a project which will strengthen Russian geopolitical power in Europe. Nevertheless, waiving sanctions will serve the national interest of the United States according to Secretary Blinken.  

Senator Bob Menedez (D-NJ) the Chairman of the Senate Foreign Relations Committee issued a statement decrying the decision as one that would weaken Ukraine and other European allies. Ranking member Senator Jim Risch (R-Idaho) stated that the sanctions waiver “contradicts everything that President Biden and Secretary Blinken have previously said about Nord Stream 2’s malign influence, and is a gift to Putin…The administration is prioritizing perceived German and Russian interests over those of our allies in Central, Eastern, and Northern Europe.” Senator Risch and some Republicans also pilloried the decision as hypocrisy on climate policy since President Biden unilaterally cancelled the Keystone XL pipeline on his first day in office.  

These criticisms appear to be confined to the Beltway and ignore a simple truth: Nord Stream 2 is nearly complete and is scheduled to become operational later this year. German Chancellor Angela Merkel has repeatedly supported the pipeline in spite of American opposition and Russian aggression in Europe.  Additional sanctions at the 11th hour would not stop the pipeline. Nord Stream 2 has survived fallout from Russian election interference, the SolarWinds cyberattack, the Alexi Navalny poisoning, as well as consistent opposition from American policymakers in both parties since its inception. Further sanctions would only delay the ribbon cutting on a piece of infrastructure that the current German administration sees as critical to its energy policy.  

In addition to the geopolitical power that Nord Stream 2 would give Russia, the pipeline would also squeeze American natural gas producers. Energy consultancy Wood Mackenzie estimates that the additional supply of Nord Stream 2 could drop European prices for natural gas by as much as 25%. This price pressure comes at a time when the US shale industry is witnessing a significant growth in bankruptcies due to the cost intensive nature of fracking.  

From President Biden’s first day in office, the calculus for he and Secretary Blinken was not whether American sanction could impede the pipeline; they could not. Rather the real calculus is whether it was more valuable for the United States to extract the highest cost possible on Russia and Germany for completing the pipeline or to instead drop sanctions in order to collect political capital from Germany. 

What remains to be seen is how President Biden hopes to use that political capital. We likely will not have to wait long to find out the answer. September elections in Germany will determine who replaces Angela Merkel as Chancellor so any goodwill earned by the sanctions waiver could have a short shelf life. And if Germany’s environmentalist Green party wins in September, the Nord Stream 2 future could again be thrown into doubt.  

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