THE SHELL LEAKS FILES — 23 OCTOBER 2026
SLF-2007-096
The Sakhalin Papers LXXXVI: The Grandfathering Gamble — How Washington Changed the Rules for Nord Stream 2’s European Financiers
On 15 July 2020, the United States removed a crucial protection previously afforded to financing agreements signed before August 2017. Shell and four European energy companies had entered their Nord Stream 2 agreements in April 2017. The original American guidance had appeared to place those agreements outside the intended sanctions regime. Three years later, Washington changed its approach. The authenticated US government notice, Shell’s financial disclosures, Uniper’s contemporary warnings and a revealing statement from Wintershall Dea show how a major international financing arrangement became entangled in an escalating dispute between Washington and Europe.
Archive reference: SLF-2007-096
Publication date: 23 October 2026
Collection: The Sakhalin Papers — Shell, Gazprom and Russia
Previous instalment: SLF-2007-095, The Sakhalin Papers LXXXV, 22 October 2026
Principal sources: Royal Dutch Shell’s April 2017 financing announcement; the Countering America’s Adversaries Through Sanctions Act of 2017; US Department of State guidance effective 15 July 2020 and published in the Federal Register on 23 July 2020; Uniper’s 2020 Half-Year Interim Report; Wintershall Dea’s 2020 Annual Report; Shell’s 2022 financial disclosures; contemporaneous Reuters reporting; the European External Action Service’s statement of 17 July 2020; and the European General Court’s judgment of 27 November 2024.
Evidence classification: Authenticated corporate documents, US statutory and administrative records, official European statements, contemporaneous reporting, judicial findings and separately identified editorial commentary.
INTRODUCTION: THE AGREEMENT WAS OLD. THE SANCTIONS THREAT WAS NEW.
On 15 July 2020, US Secretary of State Mike Pompeo delivered a warning to companies involved in two Russian gas pipeline projects.
The projects were Nord Stream 2 and the second line of TurkStream.
The message was unmistakable.
Companies continuing certain activities could face American sanctions.
The warning was accompanied by a change in official guidance under Section 232 of the Countering America’s Adversaries Through Sanctions Act, commonly known as CAATSA.
The change received comparatively little public attention beyond the energy industry and international sanctions specialists.
Yet its implications were considerable.
For almost three years, American guidance had included language protecting investments and loan agreements entered into before 2 August 2017.
That date was important to Shell.
On 24 April 2017, Royal Dutch Shell and four European companies had signed financing agreements with Nord Stream 2 AG.
Their agreements preceded the American cutoff date.
The original guidance therefore appeared to offer substantial protection against sanctions under Section 232.
In July 2020, the US State Department deleted that protection from its published implementation policy.
Washington expressly identified financing partners among the categories of participants whose subsequent activities could attract sanctions.
But there was an important qualification.
The change did not retrospectively punish transactions lawfully completed under the earlier guidance.
Nor did it automatically sanction Shell or the other lenders.
Instead, the revised policy created a potentially serious problem for companies maintaining their participation after 15 July 2020.
The distinction is fundamental.
It also explains why the timing of Shell’s final loan payments matters.
Shell subsequently disclosed that its final Nord Stream 2 loan instalments were made during the second quarter of 2020.
That quarter ended on 30 June.
The final instalments therefore preceded Washington’s change in guidance.
This does not resolve every question about Shell’s financing arrangements.
But it substantially clarifies the historical record.
The central question is not whether Washington retrospectively prohibited Shell’s completed payments.
The evidence indicates that it did not.
The more revealing question is how the change affected the remaining commercial relationships, contractual obligations and future activities of companies that had helped finance the pipeline.
The answer begins with the original American legislation.
1. APRIL 2017: SHELL’S FINANCING AGREEMENT
On 24 April 2017, Royal Dutch Shell issued an official announcement concerning Nord Stream 2.
The announcement survives in Shell’s authenticated collection of corporate press releases for that year.
It appears on page 40.
Shell confirmed that it had signed financing agreements alongside ENGIE, OMV, Uniper and Wintershall.
Nord Stream 2 AG was responsible for developing the proposed pipeline.
Gazprom remained its sole shareholder.
Each European company agreed to provide financing and guarantees covering up to 10% of the project’s estimated €9.5 billion cost.
The maximum indicated commitment per company was therefore approximately €950 million.
Shell’s announcement divided the arrangement into two components.
The first was a long-term funding facility of €285 million, expected to be drawn down in 2017.
The second comprised up to €665 million in additional short- and long-term funding and guarantees.
The utilisation of that additional financing depended upon subsequent decisions concerning the project’s funding requirements.
The arrangement therefore involved both contractual commitments and the possibility of later financial disbursements.
That distinction would become important.
A company might enter a financing agreement on one date while transferring money under that agreement several years later.
For the purposes of international sanctions, the timing and nature of individual transactions can matter as much as the original agreement date.
Shell’s April 2017 announcement establishes that the financing arrangements preceded the enactment of CAATSA.
It does not disclose the complete contractual terms or the precise dates of all subsequent payments.
Primary document: Shell — Corporate Press Releases 2017, page 40. Shell
2. AUGUST 2017: CONGRESS CREATES A NEW SANCTIONS POWER
On 2 August 2017, President Donald Trump signed CAATSA into law.
Section 232 concerned investments and other activities connected with Russian energy export pipelines.
The legislation authorised the President, acting in coordination with US allies, to impose sanctions upon persons knowingly undertaking specified activities.
The relevant activities included investments contributing directly and significantly to Russia’s ability to construct energy export pipelines.
It also addressed the provision of goods, services, technology, information and other forms of support meeting statutory conditions.
The legislation established monetary thresholds involving individual transactions worth at least $1 million or transactions totalling at least $5 million during a twelve-month period.
These figures were statutory thresholds relevant to determining whether certain activities could fall within the sanctions authority.
They were not evidence that a particular Shell transaction breached the legislation.
Most importantly, the power was discretionary.
The legislation authorised sanctions under specified circumstances.
It did not automatically impose sanctions on every company participating in a Russian energy project.
Nor was a transaction automatically unlawful merely because it met a monetary threshold.
The US government would need to assess the relevant statutory requirements and determine whether sanctions were appropriate.
The distinction matters because descriptions of the 2020 developments sometimes imply that Shell and its financing partners were suddenly declared to be in violation of American law.
That is not what the primary documents establish.
CAATSA created a sanctions authority.
The State Department subsequently published guidance explaining how it intended to exercise that authority.
Statutory source: 22 USC §9526 — CAATSA Section 232. Legal Information Institute
3. THE ORIGINAL PROTECTION: AGREEMENTS SIGNED BEFORE 2 AUGUST 2017
The original State Department guidance significantly narrowed the intended implementation of Section 232.
It focused upon Russian energy export pipeline projects initiated on or after 2 August 2017.
For this purpose, project initiation was connected to the signing of a project contract.
The guidance also indicated that investments and loan agreements made before that date would not be subject to sanctions under Section 232.
For Shell and the other Nord Stream 2 financiers, the implications were obvious.
Their financing agreements had been signed on 24 April 2017.
The agreements therefore fell before the date used in the original implementation policy.
This is the basis of the protection commonly described as grandfathering.
The term refers to arrangements under which existing agreements or activities continue to receive protection despite subsequent changes in the applicable rules or policy.
But the precise legal status of this protection must be understood.
It was contained in US government implementation guidance.
It was not an irrevocable contractual guarantee issued to Shell.
Nor was it necessarily a statutory exemption that Congress had made incapable of subsequent modification.
The State Department retained authority to change its implementation policy within the limits of the legislation.
That distinction would prove decisive.
A company could reasonably regard published government guidance as relevant to its legal-risk assessment.
But reliance upon an administrative policy does not necessarily prevent the issuing authority from changing its approach to future conduct.
The original guidance therefore provided meaningful reassurance.
It did not guarantee that Washington’s position would remain unchanged indefinitely.
Contemporaneous sanctions-law specialists later identified this distinction as central to the July 2020 revision.
Legal analysis: Steptoe — US Clarifies Secondary Sanctions on Nord Stream 2, 20 July 2020. Steptoe
4. DECEMBER 2019: THE SANCTIONS THREAT BECOMES OPERATIONAL
Before examining the July 2020 change, another development deserves attention.
On 21 December 2019, offshore construction contractor Allseas suspended its Nord Stream 2 pipe-laying activities.
The decision followed American legislation targeting certain vessels involved in pipeline construction.
The immediate sanctions regime was associated with the Protecting Europe’s Energy Security Act of 2019.
This legislation was distinct from CAATSA Section 232.
The two measures formed part of the broader American effort to constrain completion of Nord Stream 2, but they had different legal provisions and areas of application.
The Allseas suspension demonstrated that sanctions pressure could have operational consequences even before an entire pipeline project was abandoned.
Construction was interrupted.
Alternative arrangements would be required.
The pipeline’s completion schedule became increasingly uncertain.
For the European financiers, this raised two related problems.
First, the interruption threatened the commercial assumptions underlying the financing.
Second, the expanding American sanctions campaign created uncertainty about which activities could safely continue.
A financing agreement might remain valid under its governing contract law while performance of particular obligations created potential exposure under American sanctions policy.
This was the difficult legal environment in which Shell and the other financiers operated during 2020.
It is important not to confuse the different sanctions measures.
The December 2019 interruption did not establish that Shell had violated CAATSA Section 232.
It demonstrated the practical effectiveness of a separate American sanctions initiative targeting pipeline construction.
5. 15 JULY 2020: WASHINGTON REMOVES THE GRANDFATHERING LANGUAGE
The decisive primary document is preserved in the United States Federal Register.
Its title is:
Notice of Department of State Update to the Public Guidance for Section 232 of the Countering America’s Adversaries Through Sanctions Act of 2017.
The notice carries Public Notice number 11163.
It was published on 23 July 2020.
The revised guidance became effective on 15 July 2020.
Those two dates should not be confused.
The earlier date determines when the revised implementation policy took effect.
The later date records its formal publication in the Federal Register.
The document appears at pages 44561–44563 of Volume 85, Number 142.
It is an authenticated US government record.
The notice explicitly confirmed the deletion of the earlier provisions limiting implementation to projects whose contracts were signed on or after 2 August 2017.
It also confirmed the deletion of the earlier language protecting investments and loan agreements concluded before that date.
The result was a significant change in policy.
Nord Stream 2 and the second line of TurkStream were now expressly within the State Department’s intended implementation focus.
Washington’s stated reasoning concerned American national security and foreign policy.
The Department argued that Russian pipeline infrastructure could reinforce Europe’s dependence upon Russian gas supplies.
It also expressed concern about the consequences for Ukraine, particularly the possibility of reduced gas-transit revenues.
These were explanations offered by the American government.
They should not be presented as judicial findings concerning Shell’s conduct.
But they explain why Washington considered the pipeline projects sufficiently important to justify a more aggressive sanctions policy.
The change was real, formal and expressly documented.
It was not merely a warning issued during a political speech.
Primary document: US Federal Register, 23 July 2020, pages 44561–44563. GovInfo
6. THE CRUCIAL QUALIFICATION: PAST TRANSACTIONS WERE NOT RETROSPECTIVELY SANCTIONED
The Federal Register notice contains a series of frequently asked questions.
These are particularly important for understanding the implications for Shell.
Question 3 addresses investments and other activities undertaken before 15 July 2020.
It asks whether the Department would impose sanctions upon persons whose previous activities were outside the implementation focus of the earlier guidance but within the scope of the revised policy.
The Department answered no.
It explained that Section 232 sanctions would not be imposed on activities undertaken before 15 July 2020 that were consistent with the guidance then in effect.
This was an important safeguard.
The State Department was changing its approach to future conduct.
It was not announcing that every earlier transaction protected by the previous guidance would now become sanctionable retrospectively.
That distinction matters enormously for the historical interpretation of Shell’s financing.
Shell’s own subsequent disclosures establish that the company’s final Nord Stream 2 loan instalments were made in the second quarter of 2020.
The quarter ended on 30 June.
The revised guidance took effect fifteen days later.
On the available evidence, therefore, Shell’s final loan instalments preceded the change.
That does not establish every aspect of Shell’s sanctions compliance.
Nor does it determine whether the company engaged in any other relevant activities after 15 July.
But it means that the revised guidance cannot be used as evidence that Shell unlawfully made those earlier loan payments.
The timing supports the opposite conclusion: the final disclosed disbursements occurred before the new implementation policy took effect.
This is a central documentary finding.
It is also an example of why precise dates matter more than dramatic generalisations.
Official source: Federal Register — CAATSA Section 232 Guidance, FAQ 3. regulations.justia.com
7. A LIMITED ESCAPE ROUTE: THE WIND-DOWN PROVISION
The revised guidance did not simply require every participant to abandon all contractual relationships immediately.
Question 4 addressed activities necessary to wind down existing operations, contracts or other agreements.
The State Department indicated that qualifying wind-down activity would not be subject to sanctions under Section 232 if specified conditions were satisfied.
The activity had to be consistent with the previous guidance.
It had to arise under an agreement entered into before 15 July 2020.
And the person concerned had to take reasonable steps to wind down the relevant arrangements as soon as possible.
This created a limited means of terminating exposure.
It was not a general authorisation to continue performing every aspect of an existing contract indefinitely.
Question 5 made that limitation explicit.
The Department stated that sanctions could be imposed upon persons engaging in covered investments or activities on or after 15 July 2020.
It identified several categories of participants.
They included financing partners, pipe-laying vessel operators and related engineering service providers.
This is the provision most directly relevant to Shell’s financing group.
Washington was not merely targeting the vessels physically laying the pipeline.
It was extending the intended sanctions focus to include forms of commercial participation that could help maintain the project.
A financing contract signed in April 2017 was therefore no longer sufficient, by itself, to remove all potential Section 232 exposure.
The decisive questions concerned the activities undertaken after 15 July 2020 and whether those activities fell within the statutory requirements or the wind-down protection.
A company merely holding an existing receivable could occupy a different position from a company making additional covered investments.
The precise characterisation would depend upon the facts.
Primary evidence: US Federal Register — Section 232 FAQs 4 and 5.
8. THE DETAIL THAT MATTERS TO BANKS: EXISTING CREDIT FACILITIES
Another provision deserves close attention.
Question 7 explains how the State Department would interpret the term investment.
The Department adopted a broad interpretation covering contributions of funds, loans and other extensions of credit.
Its examples included various financial transactions ordinarily encountered in commercial banking.
Among them were guarantees, refinancing arrangements, certain debt transactions, letters of credit and drawdowns under existing credit facilities.
This was potentially important for the European financing companies.
Their original Nord Stream 2 arrangements were not limited to a single immediate payment.
They contemplated subsequent funding under contractual facilities.
Shell’s April 2017 announcement had expressly described a long-term facility and further potential funding arrangements.
The State Department’s broad interpretation therefore raised a significant question about any future payments or extensions of credit.
A pre-existing financing agreement did not automatically protect every subsequent drawdown from scrutiny under the revised guidance.
However, this must not be overstated.
The fact that a transaction fell within the State Department’s broad concept of investment did not automatically establish that it satisfied every statutory condition for sanctions.
Nor did it establish that the transaction had occurred after the effective date.
Both matters were essential.
For Shell, the disclosed completion of its loan instalments during the preceding quarter is therefore highly relevant.
For any financier contemplating further payments after 15 July 2020, the revised guidance could present a materially different problem.
The original contract date was no longer the end of the legal analysis.
Primary source: Federal Register — Section 232 FAQ 7, Interpretation of Investment.
9. A REVEALING WINTERSHALL DEA DISCLOSURE: €730 MILLION ADVANCED BEFORE THE CHANGE
The historical record contains a particularly useful disclosure from another of Shell’s financing partners.
Wintershall Dea’s 2020 Annual Report, published in February 2021, addressed its participation in Nord Stream 2.
The company reported that its loan payments amounted to approximately €730 million.
It also stated that those payments had been completed before the July 2020 revision of the State Department’s Section 232 guidance.
Wintershall Dea disclosed that further disbursements were not planned.
This is a significant piece of corporate evidence.
The company was expressly connecting the timing of its financing payments with the change in American sanctions policy.
It was identifying a distinction between the money already advanced and any additional funding that might otherwise have been contemplated.
The reported amount was also below the original €950 million maximum financing commitment.
That illustrates another important point.
A maximum commitment announced in 2017 did not necessarily translate into an identical amount of cash actually advanced by every participating company.
The subsequent financing arrangements and the project’s funding requirements determined the actual exposures.
Contemporaneous reporting by S&P Global on 26 February 2021 confirmed Wintershall Dea’s position.
The report also recorded Nord Stream 2 AG’s response that it considered the project fully funded.
These were the positions of the respective companies.
The disclosures do not establish the precise contractual reasons why further Wintershall Dea payments were not planned.
Nor do they prove that every participant had identical funding obligations.
Nevertheless, they provide unusually clear evidence that at least one financing company was expressly distinguishing completed payments from future disbursements in the context of the revised sanctions guidance.
Corporate source: Wintershall Dea — Annual Report 2020. Contemporaneous corroboration: S&P Global, 26 February 2021 — Wintershall Dea Loan Decision. S&P Global
10. UNIPER’S AUGUST 2020 REPORT: THE WORD GRANDFATHERING APPEARS
The next document comes from Uniper.
Its Half-Year Interim Report, published on 11 August 2020, is especially valuable because it discusses the updated American guidance directly.
The relevant section appears on printed page 28.
Its heading is Nord Stream 2: Project Failure Risk.
Uniper acknowledged that intensifying US sanctions pressure increased the probability of construction delays or non-completion.
It also explained that the company was monitoring the situation and taking steps intended to ensure compliance with applicable rules.
Most significantly, Uniper explicitly referred to discussions with relevant stakeholders about the revised grandfathering guidance under CAATSA.
The terminology is important.
This was not an interpretation added by commentators years later.
A participating financier itself identified the change in grandfathering arrangements as a matter requiring active attention.
Uniper’s report also warned that failure to complete the project might require impairment of its loan and loss of expected interest income.
Those financial risks were examined in yesterday’s instalment.
Today’s significance is different.
Uniper’s report demonstrates that the American guidance change had become an identified issue within the company’s published risk assessment.
It does not establish that Uniper was sanctioned.
It does not establish that its executives had concluded the company was violating American law.
It shows that the revised policy was being assessed as part of an evolving risk environment.
The report’s wording also demonstrates that sanctions exposure and project-failure risk were interconnected.
Measures targeting contractors could delay construction.
Construction delays could undermine the project’s commercial viability.
Commercial failure could impair lenders’ receivables.
The possible financial consequences therefore extended beyond the immediate legal position of any individual financier.
Authenticated document: Uniper Half-Year Interim Report 2020, page 28. Uniper
11. CONTEMPORANEOUS REPORTING: THE WARNING WAS PUBLIC
The significance of the July change was recognised immediately.
On 15 July 2020, Reuters reported Secretary Pompeo’s announcement.
The report explained that the State Department was changing its guidance in a manner that could place investors in Nord Stream 2 and TurkStream at risk of sanctions.
This was contemporaneous journalism.
It was not a retrospective reconstruction after the pipeline’s failure.
American law firms specialising in sanctions also published immediate analyses.
On 15 July, Kelley Drye explained that the revised guidance brought Nord Stream 2 within the intended scope of Section 232.
The firm’s analysis distinguished between potential sanctions exposure and actual sanctions enforcement.
On 20 July, Steptoe published a further examination.
It identified the removal of grandfathering provisions and explained the limited protection afforded to qualifying wind-down activities.
On 24 July, Cleary Gottlieb’s trade and sanctions specialists published their assessment.
They highlighted the potential implications for lenders and other parties involved in financing the project.
The significance of these contemporary analyses is that the legal issues were being examined while companies were deciding how to respond.
They confirm that the revised guidance was understood as a consequential change in the sanctions environment.
But the lawyers did not establish that Shell had committed a violation.
Their analyses concerned possible exposure, the interpretation of official guidance and the conditions under which sanctions might be imposed.
Those distinctions remain essential.
Contemporaneous sources: Reuters — Investors in Russian Pipeline Projects at Risk of US Sanctions, 15 July 2020; Kelley Drye — US Secondary Sanctions Guidance, 15 July 2020; Steptoe — Sanctions Analysis, 20 July 2020; Cleary Gottlieb — Updated Guidance Published, 24 July 2020. Yahoo Finance
12. 17 JULY 2020: EUROPE PUSHES BACK
The American decision also provoked a formal European response.
On 17 July 2020, Josep Borrell, the European Union’s High Representative for Foreign Affairs and Security Policy, issued an official statement.
He expressed concern about the increasing use or threatened use of American sanctions against European companies and interests.
His statement expressly referred to Nord Stream 2 and TurkStream.
Borrell argued that the European Union opposed the application of third-country sanctions to European companies conducting legitimate business.
He also stated the EU position that extraterritorial sanctions conflicted with international law.
This was a political and legal position advanced by the European Union’s foreign-policy representative.
It was not a judgment delivered by an international court.
Nevertheless, the statement demonstrates the seriousness of the diplomatic disagreement.
For Washington, the pipeline raised concerns about Russian geopolitical influence and European energy dependence.
For Brussels, an additional question concerned the ability of European companies to conduct lawful business without being subjected to American sanctions for activities occurring outside the United States.
These positions were not necessarily mutually exclusive in every respect.
European institutions themselves had concerns about Nord Stream 2 and required compliance with EU gas-market legislation.
Opposition to extraterritorial American sanctions did not automatically amount to endorsement of the pipeline’s commercial or geopolitical objectives.
The distinction is important.
The European Union could oppose American sanctions policy while maintaining separate objections concerning the regulation of Nord Stream 2.
For the participating companies, however, the immediate problem was practical.
They faced contractual obligations and commercial expectations developed under European arrangements, alongside a changing American sanctions policy.
Official source: European External Action Service — Josep Borrell Statement, 17 July 2020. Agence Europe
13. THE COURT RECORD: A SEPARATE EUROPEAN LEGAL BATTLE
A judicial record provides additional context, although it must not be confused with a determination of the American sanctions questions.
On 27 November 2024, the European General Court delivered its judgment in Case T-526/19 RENV, Nord Stream 2 v Parliament and Council.
The proceedings concerned the application of European gas-market rules to pipelines entering the European Union from third countries.
Nord Stream 2 AG challenged the amended Gas Directive.
The General Court dismissed its challenge.
Among its findings was the conclusion that the pipeline company could foresee the possibility of European institutions extending the applicable regulatory requirements.
This judgment was examined in the instalment of 21 October 2026.
It remains relevant here because it demonstrates that Nord Stream 2 faced two different categories of legal difficulty.
The first concerned European regulation of the pipeline’s operation.
The second concerned American sanctions targeting certain activities associated with construction and financing.
The European court judgment addressed the first category.
It did not determine whether the July 2020 American guidance was lawful under US law.
It did not determine the legality of American secondary sanctions under international law.
It did not find that Shell had violated CAATSA.
And it did not decide whether Shell’s financing contracts could lawfully have been terminated.
The judgment therefore provides historical and regulatory context.
It cannot substitute for a sanctions-specific judicial determination.
Official judicial source: Court of Justice of the European Union — Press Release 195/24, 27 November 2024. The official summary concerns Case T-526/19 RENV and should be read alongside the judgment itself. iLaw
14. WHAT THE NEW GUIDANCE MEANT FOR SHELL
We can now return to the question that matters most to Shell shareholders.
What did Washington’s July 2020 change mean for Shell?
The answer requires separating three periods.
Before 2 August 2017
Shell had signed its financing agreement in April 2017.
The agreement preceded CAATSA’s enactment and the cutoff date subsequently used in the State Department’s original guidance.
The old guidance indicated that qualifying earlier financing arrangements were outside the intended implementation focus of Section 232.
Between 2 August 2017 and 14 July 2020
The financing arrangements continued.
Shell subsequently confirmed that its final loan instalments were made during the second quarter of 2020.
Those instalments therefore preceded the July revision.
The State Department’s updated guidance expressly preserved protection against Section 232 sanctions for activities undertaken before 15 July 2020 that had been consistent with the previous policy.
From 15 July 2020
The new guidance included Nord Stream 2 within the Department’s sanctions implementation focus.
Financing partners were expressly identified among the potentially affected categories.
Future covered activity could therefore require a different sanctions assessment.
Qualifying wind-down activity remained protected subject to the specified conditions.
This chronology does not establish that Shell was sanctioned.
Nor does it establish that Shell undertook sanctionable conduct after 15 July 2020.
It does establish that the company’s completed disbursements and any continuing commercial obligations must be considered separately.
Shell’s contractual relationship with Nord Stream 2 AG did not necessarily disappear when the final loan payment was made.
A lender may continue to possess repayment rights, security interests, contractual protections and administrative responsibilities after completing its financing.
Whether any particular subsequent activity created sanctions exposure would depend upon its legal character and the applicable rules.
The public documents examined do not provide sufficient detail to determine all such questions.
But they establish the appropriate framework for investigating them.
15. THE LATER FINANCIAL CONSEQUENCES
The financial outcome is now familiar.
Following Russia’s full-scale invasion of Ukraine in February 2022, Shell announced its intention to end its involvement in Nord Stream 2 and withdraw from Russian ventures.
The company subsequently recorded a full write-down of its Nord Stream 2 loan.
The amount was $1.126 billion.
Wintershall Dea also announced in March 2022 that it was writing off approximately €1 billion in Nord Stream 2 financing.
Uniper separately recognised a substantial impairment of its outstanding receivable.
These accounting outcomes demonstrate the scale of the financial consequences ultimately experienced by the European lenders.
But they do not establish that the July 2020 revision caused those losses.
The circumstances of 2022 were materially different from those prevailing during the earlier sanctions dispute.
The Russian invasion, the suspension of German certification and the changed commercial environment created consequences extending well beyond the specific application of CAATSA Section 232.
The July 2020 guidance was one chapter in a developing sanctions and regulatory crisis.
It should not be treated as the sole cause of the pipeline’s eventual failure.
Nor should the write-downs be presented as American sanctions penalties imposed upon Shell and its partners.
They were accounting consequences arising from reassessment of the recoverability of their financial exposures.
Authenticated corporate sources: Shell — 2022 Financial Statements and Nord Stream 2 Disclosure; Wintershall Dea — Write-Off Announcement, 2 March 2022. Shell
DOCUMENTARY FINDINGS
ESTABLISHED FACTS
Shell, ENGIE, OMV, Uniper and Wintershall signed Nord Stream 2 financing agreements on 24 April 2017.
The original agreements preceded the enactment of CAATSA on 2 August 2017.
Section 232 authorised discretionary sanctions concerning specified investments and other activities associated with Russian energy export pipelines.
The original State Department implementation guidance contained protections for qualifying investments and loan agreements entered into before 2 August 2017.
On 15 July 2020, the State Department revised that guidance.
The revision removed the earlier implementation-policy language excluding pre-August-2017 contracts and financing agreements.
It expressly included Nord Stream 2 and the second line of TurkStream within the intended sanctions focus.
The revised guidance was published in the Federal Register on 23 July 2020.
The Department expressly stated that it would not impose Section 232 sanctions on qualifying activities completed before 15 July 2020 in accordance with the earlier guidance.
It also provided limited protection for qualifying wind-down activities under pre-existing agreements.
Financing partners were expressly identified among the categories potentially affected by sanctions on subsequent covered activities.
Shell’s final Nord Stream 2 loan instalments were made during the second quarter of 2020.
Wintershall Dea reported that its €730 million in loan payments had been completed before the revision and that further disbursements were not planned.
Uniper’s August 2020 interim report expressly referred to discussions concerning the updated CAATSA grandfathering guidance.
On 17 July 2020, Josep Borrell issued an official statement opposing the extraterritorial application of American sanctions to European companies conducting legitimate business.
Shell subsequently recorded a full $1.126 billion write-down of its Nord Stream 2 loan in the first quarter of 2022.
CONTEMPORANEOUS POSITIONS AND INTERPRETATIONS
The United States maintained that Nord Stream 2 posed risks to European energy security and increased Russian geopolitical influence.
The European Union opposed the use of extraterritorial American sanctions against European companies engaged in lawful commercial activities.
These were official positions advanced by the respective authorities.
American sanctions specialists considered the July 2020 guidance a significant expansion of potential secondary-sanctions exposure.
Uniper treated the revised grandfathering arrangements as an issue requiring monitoring and discussion with relevant stakeholders.
Wintershall Dea publicly connected the completion of its financing payments with the timing of the revised guidance.
These positions are documented.
They do not constitute judicial findings concerning the conduct of Shell or the other financing companies.
MATTERS NOT ESTABLISHED
The examined evidence does not establish that Shell violated CAATSA Section 232.
It does not establish that Shell was designated or sanctioned under that provision.
It does not establish that the July 2020 revision retrospectively rendered Shell’s completed loan instalments unlawful.
It does not establish that Shell made additional sanctionable loan disbursements after 15 July 2020.
It does not establish that Shell’s financing agreements contained contractual protections identical to those of Uniper or Wintershall Dea.
It does not establish that Shell could have withdrawn from every remaining contractual obligation without financial or legal consequences.
It does not establish that the American sanctions guidance caused Shell’s subsequent $1.126 billion write-down.
It does not establish that Shell’s directors concealed sanctions risks or deliberately violated applicable law.
And it does not establish that any court determined the legality of the July 2020 guidance in proceedings brought by Shell.
These distinctions are essential to the documentary integrity of the archive.
EDITORIAL COMMENTARY: WHEN A CONTRACT OUTLIVES THE ASSUMPTIONS ON WHICH IT WAS SIGNED
There is an important distinction between a commercial agreement being legally binding and the regulatory environment surrounding that agreement remaining unchanged.
Shell and its European financing partners signed their agreements in April 2017.
Their commercial obligations were intended to support a major infrastructure project extending over several years.
The companies could not control every subsequent decision taken by governments.
Nor could they guarantee that legislation and sanctions policies would remain unchanged throughout the life of their financing arrangements.
That is a familiar problem in international investment.
Long-term agreements depend upon assumptions about future legal and political conditions.
Those assumptions may prove correct.
They may prove inaccurate.
Or they may be overtaken by events that fundamentally change the prospects of the investment.
The Nord Stream 2 financing story illustrates the problem with particular clarity.
The April 2017 financing agreements were signed before CAATSA became law.
The State Department subsequently issued implementation guidance that appeared to protect earlier agreements.
For several years, that protection formed part of the relevant American sanctions environment.
Then Washington revised the guidance.
The revised policy did not retroactively punish qualifying completed transactions.
But it could affect future activities undertaken under agreements signed years earlier.
For the financing companies, this created an obvious difficulty.
The contractual commitments remained part of their commercial arrangements.
Yet the sanctions consequences of continuing particular activities could change.
The legal solution was not necessarily as simple as terminating the original contract.
Contract termination might involve its own obligations, rights and financial consequences.
The appropriate course depended upon the agreements, the nature of the remaining activities and the applicable law.
This is why the Wintershall Dea disclosure is so valuable.
It records the company’s position that its loan payments had been completed before the American guidance changed.
Shell’s own disclosures establish a similar chronological point concerning its final loan instalments.
Uniper’s report, meanwhile, shows that the new grandfathering arrangements were being actively considered within the financing group.
These documents permit a more precise historical assessment than the general proposition that Washington suddenly threatened every European company connected with Nord Stream 2.
The threat was real.
But its application depended upon the timing and character of the activity concerned.
The most important lesson may concern the difference between financial commitment and continuing operational involvement.
Money advanced before a sanctions change occupies a different position from new financing supplied afterwards.
A lender’s outstanding receivable is not necessarily equivalent to a new disbursement.
And a company that has completed its financing may still possess contractual rights requiring ongoing management.
Such distinctions are easily lost in political controversy.
They are indispensable to accurate legal and financial analysis.
For Shell shareholders, the July 2020 episode also illustrates a broader issue.
International investment risk does not end when a financing agreement is signed.
Nor does it necessarily end when the money has been advanced.
The investment may remain exposed to commercial failure, regulatory change, sanctions, litigation and geopolitical developments long after the initial decision.
Shell’s $1.126 billion write-down demonstrates the eventual financial consequence of one such exposure.
But the history leading to that loss must be reconstructed carefully.
The July 2020 guidance change was not proof that Shell acted unlawfully.
It was evidence that the commercial and legal environment surrounding an already substantial investment had become increasingly complicated.
And that, in itself, is an important part of the historical record.
The central documentary lesson is not that Shell ignored an American prohibition. It is that a financing arrangement signed under one regulatory understanding continued to exist while governments changed the conditions under which associated activities might be undertaken.
For a long-term energy investor, that is a serious and potentially expensive risk.
For an independent archive, it is a distinction worth preserving.
SOURCE RECORD AND DOCUMENTARY PROVENANCE
The following sources support the principal findings in this instalment. Original documents and official records are prioritised.
1. Royal Dutch Shell plc — 24 April 2017
Official corporate announcement confirming the Nord Stream 2 financing agreements, participating companies, maximum commitments and Gazprom’s ownership. Reproduced on page 40 of Shell’s 2017 corporate press release compilation.
Shell — 2017 Corporate Press Releases
2. United States Congress — 2 August 2017
Countering America’s Adversaries Through Sanctions Act, Section 232, codified at 22 USC §9526. Establishes the statutory authority concerning specified investments and other activities associated with Russian energy export pipelines.
3. United States Department of State — 15 July 2020
Official announcement of revised implementation guidance under CAATSA Section 232, identifying Nord Stream 2 and the second line of TurkStream.
US State Department — Updated Public Guidance Announcement
4. United States Federal Register — 23 July 2020
The principal authenticated government document examined in this instalment. Public Notice 11163, Volume 85, pages 44561–44563. Contains the revised guidance, explanations of the policy change, protection for qualifying completed activities, wind-down conditions and the interpretation of investments.
Federal Register — Original Three-Page Government Notice
5. Reuters — 15 July 2020
Contemporaneous reporting of Secretary of State Mike Pompeo’s announcement and the potential exposure of investors involved in Nord Stream 2 and TurkStream.
Reuters — Investors in Russian Pipeline Projects at Risk of US Sanctions
6. Kelley Drye & Warren — 15 July 2020
Contemporary legal analysis explaining that Nord Stream 2 was now within the intended scope of Section 232 implementation and distinguishing potential secondary-sanctions exposure from automatic sanctions.
Kelley Drye — US Secondary Sanctions Guidance
7. European External Action Service — 17 July 2020
Official statement by Josep Borrell concerning the threatened use of US sanctions against European companies and the EU’s opposition to extraterritorial sanctions.
European External Action Service — Borrell Statement
8. Steptoe — 20 July 2020
Contemporaneous sanctions-law analysis identifying the removal of the pre-August-2017 protection and explaining the limited wind-down provisions.
Steptoe — US Clarifies Secondary Sanctions on Nord Stream 2
9. Cleary Gottlieb — 24 July 2020
Legal analysis of the Federal Register publication, the treatment of financing partners, the broad definition of investment and the distinction between completed and future activities.
Cleary Gottlieb — Updated CAATSA Guidance Published
10. Uniper — 11 August 2020
Authenticated Half-Year Interim Report. Printed page 28 expressly refers to the revised grandfathering guidance under CAATSA and the possibility of project failure, loan impairment and lost interest income.
Uniper Half-Year Interim Report 2020
11. Wintershall Dea — 2020 Annual Report, published February 2021
Corporate reporting concerning approximately €730 million in completed Nord Stream 2 loan payments and the decision not to plan further disbursements. The company’s disclosure was independently reported by S&P Global on 26 February 2021.
Wintershall Dea Annual Report 2020
S&P Global — Wintershall Dea Financing Decision, 26 February 2021
12. European General Court — 27 November 2024
Case T-526/19 RENV, Nord Stream 2 v Parliament and Council. Judicial record concerning EU gas-market regulation. Included to distinguish the European regulatory dispute from the separate American sanctions regime.
Official Court Press Release 195/24
13. Shell plc — 2022 Financial Disclosures
Authenticated company reporting confirming completion of the Nord Stream 2 loan instalments during the second quarter of 2020 and the subsequent $1.126 billion write-down recognised in the first quarter of 2022.
Shell — Form 20-F 2022 and Financial Statements
Documentary disclaimer: This instalment is based upon authenticated corporate disclosures, official American government records, statutory provisions, European institutional statements, contemporaneous reporting and judicial material. Descriptions of potential sanctions exposure are not allegations that Shell or any other named financier committed a sanctions violation. The July 2020 change concerned US implementation guidance and did not retrospectively prohibit qualifying activities completed under the earlier policy. The European General Court judgment discussed here concerned separate EU gas-market legislation and did not determine the legality of the American sanctions measures or Shell’s conduct. No allegation is made that Shell’s executives deliberately breached the law, concealed relevant information or could have terminated financing obligations without contractual consequences. Further documents, factual corrections and responses from Shell and the other parties concerned remain welcome.
The website’s general disclaimer also applies.
NEXT IN THE SHELL LEAKS FILES
SLF-2007-097 — The Sakhalin Papers LXXXVII: The Port Under Threat — Washington’s Warning of Crushing Sanctions Against a German Harbour
The next instalment will follow the American sanctions campaign beyond the financing companies.
In August 2020, three US senators sent an extraordinary warning to a German port operator.
The recipient was Fährhafen Sassnitz GmbH, operator of Mukran Port on the Baltic Sea island of Rügen.
The port was providing services associated with vessels involved in completing Nord Stream 2.
The senators warned that continued assistance could expose the company and associated individuals to severe legal and financial sanctions.
The correspondence was issued against the background of the expanding American campaign to prevent completion of the pipeline.
Unlike the broader State Department guidance examined today, this warning was directed at an identifiable German business.
The next investigation will examine the original senatorial correspondence, contemporary German and international reporting, the applicable American legislation and the reactions of German political authorities.
It will distinguish the senators’ threatened consequences from sanctions actually imposed.
The documents also raise a broader question.
What happens when a local business providing ordinary port services becomes involved in an international confrontation between major powers?
The episode illustrates how the Nord Stream 2 dispute extended beyond the companies financing the pipeline.
Port operators, vessel owners, insurers, engineering contractors and their employees could all find themselves drawn into the controversy.
The next instalment will examine that expansion of sanctions pressure through authenticated documents and contemporary reporting.
The financing agreements had been signed years earlier.
Washington had changed its approach to those agreements.
Now the pressure was moving towards the businesses and workers needed to finish the pipeline.
The Sakhalin Papers continue.
*This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net, and shellwikipedia.com, are owned by John Donovan - more information here. There is also a Wikipedia segment, the Shell DPA Files, "Shell and the Spies", the Shell Leaks files, the Independent Shell Archive, as well as books written and published by John Donovan - Kindle eBooks. Timeline of the Donovan Shell Feud. Toxic History of Royal Dutch Shell Group. Shell and the Donovans: The Full Media Record — 550+ Articles, 110 Books, 40 Years. *All conjured up by internet wizz, Nick Gill.
