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Why isn’t U.S. defence budget approved? Again because of Nord Stream 2

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There is a fascinating process going on in the U.S. Congress right now. For a long time and behind closed doors, Congress members have been unable to approve the Pentagon’s defence budget of $770 billion. The stumbling block, like last year, was the construction of the Nord Stream 2 gas pipeline from Russia to Germany, which runs along the bottom of the Baltic and North Seas.

Disagreements between representatives in the White House and members of Congress are about the need to impose sanctions against project participants, including a few European and Russian companies. President Joe Biden lifted congressional sanctions on the project last May that would have halted the project. As a result, the House of Representatives amended the National Defense Authorization Act to impose sanctions on Nord Stream 2 without presidential powers, making the sanctions bulletproof. For the administration, this placed a premium on stopping the amendment in the Senate, and Secretary of State Antony Blinken spent lots of time lobbying Senate Democrats to do just that.

Since the congressmen did not approve the defence budget, it is clear that the Pentagon cannot order new weapons. Who would have thought that Nord Stream 2 could make such a significant contribution to reducing arms purchases?

The U.S. and Germany are at odds over the new pipeline. Given that the German government is actively supporting its construction, the Biden administration is trying to soften the U.S. Congress’s position, which so far takes a clear hawkish position. Under its pressure on November 23, the U.S. Treasury Department imposed sanctions against the Russian-linked Transadria Ltd. and its Marlin vessel related to the gas pipeline construction.

But in Germany, even most active opponents of the pipeline construction, including the German Greens party, a member of the Bundestag, recognized the inadmissibility of U.S. sanctions against Nord Stream 2. “The new U.S. sanctions are unacceptable even for the opponents of Nord Stream 2,” Omid Nuripur, an expert on the foreign policy of the Greens, told on November 23. “What kind of friendship do they strive for if they impose sanctions against friends when they do business with a third party, “he said. This is noteworthy the first time that the Greens have made such statements.

Americans are struggling to avoid further confrontation with the Germans. “We continue to work with Germany and other allies and partners to reduce the risks posed by the pipeline,” Blinken said in a statement on November 22.

The Nord Stream 2 gas receiving station in Lubmin, Germany, November 12, 2021. /Getty

Meanwhile, putting the gas pipeline into operation is deferred. On November 16, the German grid regulator suspended the approval process for the Nord Stream 2 project. Since Gazprom’s subsidiary is not a local company, the regulator has postponed its certification until the operator creates the necessary legal framework. The operator – Nord Stream 2 A.G., is based in Zug, Switzerland. As a result, the postponement of approval depends on how quickly Gazprom can transfer its legal entity to Germany.

With winter approaching, now all the attention of gas consumers in Europe is associated with the observance of guaranteed gas supplies. Unpleasant news for consumers was the skyrocketing prices for natural gas, which began in the run-up to cold weather. Natural gas prices have risen eightfold since the start of the pandemic as competition from buyers in Asia has led to global gas shortages around the world. In response to rising gas demand in late October, Gazprom said it had increased production by almost 17 percent from a year earlier.

Considering the tense situation in the European energy market and lengthy bureaucratic procedures, experts are considering another scenario for additional gas supplies to Europe. Under certain circumstances, the Nord Stream 2 gas pipeline can start operating without waiting for the regulator’s certification procedure to be completed. Under certain circumstances, the Nord Stream 2 gas pipeline can begin working without waiting for the regulator’s certification procedure to be completed. The article’s authors published in the newspaper Handelsblatt conducted such an analysis. They recalled that similar situations had already happened in the past when operators put pipelines into operation before they were certified. We are talking about the German energy projects NEL and EGL 401. The authors state that the operators will have to pay a fine. However, according to the German Federal Network Agency (BNA) estimates, the amount does not exceed 1 million euros ($1.1 million).

Thus the certification process will likely be completed only in late spring-early summer since the European Commission will still evaluate after the German regulator. However, Gazprom can even derive additional benefits from this. Due to the high gas prices, the Russian monopoly receives an additional $500 from every thousand cubic meters of gas sold. If such prices persist until the summer of 2022, then the extra profit of the Russian company could amount to up to $5 billion. Anka Feldhusen, Ambassador of Germany in Kiev, also spoke about a similar deadline for completing the certification process. According to her, the commissioning of the Nord Stream 2 pipeline will not take place in the next six months.

Unfortunately, in the modern world, the interference of purely political elements in economic activity is becoming more widespread. After all, as often happens in history, ordinary citizens become victims of unfair political games.

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