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Royal Dutch Shell hit by US sanctions against Nord Steam 2

English translation of an article published today by the Dutch FT

Dutch companies hit by US sanctions against Nord Stream 2

Dutch FD: From our editor: 23 Dec 2019

In brief

  • President Trump has announced sanctions for the construction of the Russian gas pipe Nord Stream 2.
  • The measure affects the Dutch offshore group Allseas and Shell.
  • Furious reactions about internal affairs interference from Germany and Brussels.

US President Donald Trump announced sanctions from Friday to Saturday against the construction of Nord Stream 2, the gas pipeline that runs from Russia to Germany. The project should be operational by mid-2020. 2100 kilometers of the gas pipeline is already finished, about 300 kilometers of pipelines are still missing.

A variety of international companies are involved in the project and are likely to be affected. Also Dutch companies. For example, the sanctions appear to be aimed particularly against the Dutch-Swiss offshore company Allseas by the Dutchman Edward Heerema. That immediately stopped its work for Nord Stream 2 on Saturday.

Furious reactions

In Europe, American sanctions have been sharply refused. The German government sees the measures “as an interference with our internal affairs,” and complains that “the measures affect German and other European companies.” Finance Minister Olaf Scholz called the sanctions on the German TV channel ARD on Saturday “a serious intervention in German and European affairs.” The European Union is also angry. A spokesperson spoke of ‘imposing sanctions on European companies operating within the law’.

The owner of the Nord Stream project is the Russian energy giant Gazprom. The company is responsible for half the costs. Financing also comes from five Western companies. These are the German companies Uniper and Wintershall (two-thirds owned by BASF), the Austrian OMV, the French energy company Engie GDF and Shell. The Dutch dredgers Boskalis and Van Oord are also involved in the project.

VS mordicus against Nord Stream 2

The Americans have been crazy about Nord Stream for years; they fear greater influence of Russian president Vladimir Putin in Western Europe. This will allow Russia to supply gas to Germany outside of Poland and Ukraine (namely via the Baltic Sea). Trump therefore calls Germany a “prisoner of Russia.”

The Americans also say that with this project Ukraine is missing out on billions of euros in revenue for gas transport through the country. In the background, however, the main point is that the pipeline is a major competition from American imports of liquefied LNG gas into Europe.

Allseas hit hard

The Dutch-Swiss offshore company Allseas, which specializes in the construction of underwater pipelines, is being hit hard. It has a crucial role in construction. “In connection with the ratification of the National Defense Authorization Act (NDAA), Allseas has suspended its pipeline laying for Nord Stream 2,” the company writes in a brief statement to the press. It was announced on Friday that the company had been put under heavy pressure in a letter from senators Ted Cruz and Ron Johnson, the initiators of the sanctions.

Content of sanctions

The sanctions mean that European companies participating in Nord Stream 2 will be blacklisted, preventing them from doing business in the United States. Cruz mentioned in a letter about “devastating and potentially disastrous legal and economic sanctions.”

Senators Cruz and Johnson seem to have focused their arrows on Allseas. This is because their sanctions apply to companies (and individuals) who have ‘sold, leased or delivered’ ships that can lay pipelines at a depth of 100 feet (30 meters) or more ‘for the construction of the Nord Stream 2 pipeline’. Allseas is one of the few companies that can work at such a great depth at all.

Possible US measures for Allseas include blocking ships and assets including the company’s office in Houston, Texas. In addition, Allseas employees can be denied entry to the US for many years.

Shell is financing Nord Stream 2 substantially

Shell can also be hit hard. On Sunday, the group stated in a press statement that it was studying the implications for the group. Shell is one of the financiers of the project. The Anglo-Dutch oil and gas group has provided Nord Stream 2 with a credit facility of € 285 million and with another € 655 million for short and long-term financing and guarantees. At the beginning of October, Shell, through the head of Shell in Russia, already announced that any sanctions would “affect all companies involved in the project, including Shell.”

Shell emphasizes in a reaction on Sunday ‘always to comply with sanctions and trade measures’. It regards Nord Stream 2 as an important project for Europe to increase the import of natural gas as compensation for the decrease in European production. “At the same time, Shell is one of the largest buyers of American LNG (..) and we are investing heavily in LNG import infrastructure in Europe and elsewhere.”

Dredgers lay stone bed for pipeline

Dredging company Van Oord and Boskalis are also active in the project. They perform rock dumping work for Nord Stream 2. “For the construction of a ‘sea bed for the pipeline over the entire distance of the route,” Boskalis said earlier in a press release. The Papendrecht dredger was not available for comment on Sunday, but already said in mid-December that the possible American sanctions are aimed at activities other than those that Boskalis is involved with. That is also the opinion of Van Oord. A spokesperson said on Sunday that the new sanctions legislation is specifically about pipe construction. “Van Oord is of course closely following developments around Allseas.”


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