US, Germany near deal on Russia pipeline, upsetting Ukraine

US, Germany near deal on Russia pipeline, upsetting Ukraine

20 Jul    Finance News

WASHINGTON (AP) — The Biden administration has reached a preliminary agreement with Germany over a controversial Russia-to-Europe gas pipeline that is vehemently opposed by Ukraine and Poland as well as both Republicans and Democrats in Congress.

Congressional aides briefed on the outlines of the deal said it would allow the completion of the Nord Stream 2 pipeline without either Germany or Russia facing new U.S. sanctions. In return, the U.S. and Germany will make certain concessions to Ukraine and Poland, although it was not immediately clear if those would be welcomed.

Administration officials declined to comment on specifics of the matter pending an announcement that could come as early as Wednesday. The State Department said Monday that a senior diplomat would be visiting both Poland and Ukraine this week in part to discuss Nord Stream 2 in what are expected to be contentious talks.

The Nord Stream 2 project has posed a major foreign policy dilemma for the Biden administration. U.S. officials from both parties have long feared that it would give Russia too much power over European gas supplies, potentially shutting off gas to Russian adversaries Ukraine and Poland. But the pipeline is almost completed and the U.S. has been determined to rebuild ties with Germany that were damaged during the Trump administration.

President Joe Biden’s approach to Ukraine is also a sensitive political subject. Former President Donald Trump’s attempt to pressure Ukraine’s president to dig up dirt on Biden and his son led to Trump’s first impeachment. He was later acquitted by the Senate.

State Department spokesman Ned Price would not confirm on Tuesday that a deal had been done, but said “the Germans have put forward useful proposals and we have been able to make progress on steps to achieve that shared goal, again that shared goal being to ensure that Russia cannot weaponize energy flows.”

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Word of the impending agreement comes as Ukraine is eager to have the White House make good on an invitation to President Volodymyr Zelenskyy to visit Washington. The invitation was extended in principle for “later this summer” before Biden met with Russian President Vladimir Putin in Geneva last month.

Although Zelenskyy said at the time he expected to meet Biden in July, no date has been announced as the month draws to a close and Ukraine’s public reaction to the Nord Stream agreement may be muted as a result.

Nord Stream 2 has been a topic of intense debate between U.S. and German officials for some time and it was a major agenda item during Biden’s meeting with German Chancellor Angela Merkel last week. Merkel supports the pipeline and Biden has suggested that punishing Germany for that support would be counterproductive to broader U.S. interests.

But like the Trump administration before it, the Biden administration regards the Nord Stream 2 project as a threat to European energy security and has imposed sanctions on some of those involved in building it.

“We continue to oppose the Nord Stream 2 pipeline,” Price said. “We view it as a Kremlin geopolitical project that is intended to expand Russia’s influence over Europe’s energy resources and to circumvent Ukraine. We have made no bones about the fact that it is a bad deal for Germany, it is a bad deal for Ukraine and for Europe more broadly.”

Still, Biden earlier this year waived sanctions against the German company constructing the pipeline and its top executives, drawing angry responses from members of Congress and disappointment from Ukraine and Poland. State Department counselor Derek Chollet is visiting Kyiv and Warsaw on Tuesday and Wednesday to brief officials there on developments.

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Administration officials have defended the waivers, saying they can be rescinded at any time and that that threat actually gives the U.S. more leverage. That argument has been scoffed at by pipeline opponents, although Price said imposing the sanction would have been counter-productive.

“It did not make sense to sanction our allies over a project that was more than 90% complete on day one of this administration,” he said. “We did not believe that sanctions could stop the completion of the pipeline. And so we made the determination that it made more sense to address Russia’s use of energy potentially as a weapon and other malign activity.”

Poland, Ukraine and other eastern and central European countries bypassed by the pipeline are concerned that Russia will use gas supplies as a political weapon. Lawmakers from both sides of the aisle in Congress and some members of the administration are sympathetic to that position

Under the terms of the expected U.S.-Germany agreement, Ukraine would get $50 million in green energy technology credits, a guarantee of repayment for gas transit fees it will lose by being bypassed by the pipeline through 2024, and a pledge from both Germany and the U.S. that sanctions will be revisited should Russia use the gas as a political weapon, according to the congressional aides.

In a nod to Poland, Germany will also agree to sign onto the so-called “Three Seas Initiative,” an EU and U.S.-promoted scheme that aims to boost investment, infrastructure development and energy security among the countries bordering the Baltic, Black, and Adriatic seas, according to the aides.

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