Bash told Sullivan that President Joe Biden had “decided not to impose sanctions” over the pipeline. After quoting a Republican criticism of Biden’s handling of the issue, Bash asked, “Why are you giving in to Russia on this pipeline?”
Sullivan correctly replied that Biden “sanctioned several Russian units” on the pipeline; he said that Bash’s question contained a “misunderstanding”. But then Sullivan made a claim that was criticized by Republican lawmakers.
Sullivan said the only two companies or individuals the government has waived sanctions against – the pipeline company Nord Stream 2 AG and its CEO Matthias Warnig – are not Russians.
“We waived sanctions on only two sanctions, and they weren’t Russians. It was a German individual and a Swiss company,” said Sullivan.
Facts first: Sullivan’s claim that Nord Stream 2 AG is “not Russian” is misleading. Although the company is actually registered as a Swiss company, it is wholly owned by Gazprom – an energy company majority-owned by the Russian government.
In the context of the Biden administration’s approach to Russia, it is also important to note Warnig’s background. Warnig is German, but a long-time employee of Russian President Vladimir Putin – some media reports say it is a “friend” of Putin – and has extensive business experience in Russia and other countries. Both Putin and Warnig are former secret service agents: Warnig worked for the Stasi in the former communist state of East Germany, while Putin worked for the Soviet KGB.
A company controlled by Putin’s Kremlin
We cannot say that Nord Stream 2 AG is “Swiss”. An expert on the pipeline, Katja Yafimava, Senior Research Fellow at the Oxford Institute for Energy Studies, told us that Sullivan was “absolutely right” that Nord Stream 2 AG was “legally” a Swiss company.
Yafimava stated that Nord Stream 2 AG is considered to be Swiss in arbitration proceedings initiated by the company against the European Union. And she said she doubted Sullivan’s “malicious intent” not to mention owning the company.
Yafimava makes valid points about the law. But we still think that regardless of his intent, Sullivan went too far when he said, without further explanation, that the company was “not Russian” when in fact it is controlled by Putin’s Kremlin.
We are not alone.
“I think it is misleading to refer to Nord Stream 2 AG as a ‘Swiss company’,” said Margarita Balmaceda, expert on comparative energy policy of post-Soviet countries and professor at the School of Diplomacy and International Relations at Seton Hall University. Balmaceda said the company “can be called” Swiss “in a very narrow, technical” sense, “but” not in a real “sense.
Balmaceda added that the Swiss city of Zug, where Nord Stream 2 AG is based, has long served as the “official address” of many Russian and former Soviet companies because of its internationally recognized tax advantages.
Benjamin Schmitt, a former
European advisor on energy security The Foreign Ministry also called it “misleading” to refer to Nord Stream 2 AG as a “Swiss company” because “the crucial fact” is that “Kremlin-controlled Gazprom” is the sole owner.
Schmitt, who is now a Senior Fellow at the Think Tank Center for European Policy Analysis and a postdoc at Harvard University, said this situation is comparable to cases in which US companies are set up offshore in a tax haven like the Cayman Islands.
“You wouldn’t call these companies ‘Cayman’,†he said.
In fairness, senior Biden officials have described Nord Stream 2 as a harmful “Russian” project on several other occasions.
Persons who have received waivers
Sullivan said the Biden government has waived Nord Stream 2 sanctions against “only two” companies, a Swiss company and a German individual. However, the State Department explicitly stated in a public statement and in a May report to Congress that it had waived sanctions against additional Nord Stream 2 AG corporate boards.
These four corporate officers are Chief Financial Officer Paul Corcoran, Chief Project Officer Marco Casirati, Chief Commercial Officer Reinhard Ontyd and Chief Technical Officer Pavel Persidskii.
It was established that Warnig had personally committed criminal behavior so that he could face possible financial sanctions; the other four, as executives of the company, saw themselves as possible travel bans to the USA, but not face any financial sanctions.
We will not be too harsh on Sullivan’s claim that we waived “only two” sanctions – because the US government sometimes makes a distinction between “sanctions” and “visa restrictions”. Language aside, the important thing to note here is that Warnig wasn’t the only person connected to Nord Stream 2 who was granted some sort of waiver.
Pipeline policy
The Nord Stream 2 pipeline is expected to double the capacity of an existing Nord Stream pipeline route from
Russia to Germany. Critics of the project say, among other things, that the new pipeline will increase Europe’s dependence on Russia and weaken Ukraine. Supporters say it will increase the stability of Europe’s energy supply and connect Russia to the West.
The State Department stated in its May report that sanctioning Nord Stream 2 AG and its officers would damage the US’s critical relations with Germany, other European allies and the European Union in general. The
German government and some other European countries reject sanctions against people and companies involved in the project. (Large European companies fund a significant part of the project costs, while additional European companies have been involved in various other ways.)
In explaining the waiver, Biden also referred to US relations with Europe. He told reporters at the end of May that while these sanctions were against the Nord Stream 2 project from the start, “now they are counterproductive in terms of our European relations”.
Sullivan stressed in the CNN interview last Sunday – in which he also said that the Biden government was preparing another “sanctions package” against Russia for poisoning opposition leader Alexey Navalny – that the pipeline was 90% complete when Biden took office.
“So the question to us was, are we going to go straight to our sanctioning power, our European allies and friends? And there President Biden said,” I am not ready to do that. What I’m going to do is keep going. “Sanctions Russian companies involved in the construction of Nord Stream 2 every 90 days.” He did and will continue to do so, “Sullivan said.
