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US, Germany Reach Deal on Nord Stream Pipeline as Congress Voices Opposition

FILE - The logo of the Nord Stream 2 gas pipeline project is seen on a pipe at the Chelyabinsk pipe rolling plant in Chelyabinsk, Russia, February 26, 2020.
FILE - The logo of the Nord Stream 2 gas pipeline project is seen on a pipe at the Chelyabinsk pipe rolling plant in Chelyabinsk, Russia, February 26, 2020.

The United States and Germany say they have reached an agreement to allow the completion of Nord Stream 2, the controversial Russian gas pipeline to Europe that opponents say undermines the energy security of Ukraine and other Eastern and Central European countries.

The Biden administration is expected to face strong pushback over the deal from Congress, which has twice passed sanctions legislation to stop the project with overwhelming bipartisan support.

In a joint statement on July 21, the United States and Germany said they have agreed on a package of measures, including the possible implementation of sanctions against Russia, that will aim to soften any impact on Ukraine's budget and national security from the completion of the Kremlin-backed project.

Nord Stream 2, which consists of two parallel pipelines stretching 1,230 kilometers each along the Baltic Sea, is designed to reroute Russian Arctic natural gas bound for Germany around Ukraine and Poland, potentially depriving Kyiv of $2 billion in annual transit fees.

Critics also say the project undermines Ukraine's national security, arguing that Russia could act more aggressively toward its smaller neighbor if it does not rely on the country for gas transit.

Russia in 2014 seized Ukraine's Crimean Peninsula and instigated fighting between Ukrainian armed forces and Moscow-backed separatists in the east that has killed more than 13,200 people.

Early this year, Russia amassed more than 100,000 troops near its border with Ukraine in what U.S. officials said was an act of intimidation.

"Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions, to limit Russian export capabilities to Europe in the energy sector, including gas, and/or in other economically relevant sectors," the statement said.

Germany will appoint a special envoy to negotiate a 10-year extension of Russia's current transit agreement with Ukraine, which expires at the end of 2024, the statement said.

Nord Stream 2 will have the capacity to transport 55 billion cubic meters of natural gas a year to Germany, completely offsetting the current volume bound for Europe that crosses Ukraine.

Outgoing German Chancellor Angela Merkel spoke with Russian President Vladimir Putin earlier in the day to discuss the deal.

U.S. lawmakers were quick to express opposition.

"Nord Stream 2 will strengthen Russia, undermine America's national interest, and threaten the security of Ukraine -- a key U.S. ally," Senator Rob Portman (Republican-Ohio) said in a tweet.

Representative Marcy Kaptur (Democrat-Ohio) said the day before amid rumors of a U.S.-German agreement that "Congress must reject any deals that fail to protect transatlantic security and Ukraine's sovereignty."

A House of Representatives panel earlier this month passed an amendment seeking to stop the Biden administration's ability to waive sanctions on the project that Congress calls mandatory.

It may not be the last attempt, says Dan Vajdich, the president of Washington-based lobby firm Yorktown Solutions, which advises Ukraine's energy industry.

"We are going to see more legislative initiatives from Capitol Hill that aim to prevent Nord Stream 2 from going operational despite this bilateral agreement between the Biden administration and an outgoing German government," he told RFE/RL.

The Biden administration simultaneously announced that Ukrainian President Volodymyr Zelenskiy will visit the White House on August 30 in his first official trip to the United States since taking power more than two years ago.

Congress will be in recess until early September, potentially depriving Zelenskiy of an opportunity to meet with lawmakers who oppose Nord Stream 2.

Zelenskiy last month expressed disappointment with the Biden administration after it issued two sanction waivers in May that essentially opened the door for Russia to complete the project.

The Ukrainian president said at the time it could "dampen the confidence" Ukrainians feel in the U.S.

Following the joint July 21 statement, Ukraine Foreign Minister Dmytro Kuleba said Kyiv had officially initiated consultations with the European Commission and Germany, claiming Nord Stream 2 violates the bloc's energy-diversification principle.

State Department Counselor Derek Chollet told RFE/RL's Ukrainian Service during a visit to Kyiv on July 21 that the Biden administration decided to cut a deal with Germany rather than push ahead with more sanctions because it feared the project would be completed anyway.

If that were the case, then there would have been "nothing for Ukraine and its energy security, and perhaps even worse, a transatlantic alliance in a partnership with Ukraine that was in turmoil," Chollet said.

"And so we have sought to try to avoid that scenario, working with German friends to ensure that there's a clear message sent to Russia about expectations for its behavior, that energy cannot be used as a weapon and laying out clear consequences if they were to use energy as a weapon," Chollet said.

The U.S.-German deal also calls for the creation of a $1 billion "green fund" to support both Ukraine and Poland's energy industry and security. Poland is also bypassed by the pipeline project. Germany will establish and administer the fund and immediately contribute $175 million.

The fund will seek to promote the use of renewable energy in Ukraine, facilitate the development of hydrogen, increase energy efficiency, and accelerate the transition from coal.

Ukraine currently imports about one-third of its natural gas needs even though it has significant reserves.

Energy industry experts say Ukraine could significantly cut its import needs through greater natural-gas and green-energy production as well as better efficiency.