A day after Germany halted its certification process for the Nord Stream 2 pipeline, the US sanctioned the project in a move that could impact LNG carrier rates.
TradeWinds reporters across the globe are covering the shipping implications on the Russia-Ukraine crisis.
Following a spate of sanctions levied on Tuesday in response to Russian troops entering eastern Ukraine, the US Treasury Department announced on Wednesday that it blacklisted the company behind the Russia-to-Germany gas line and its chief executive, Matthais Warnig.
Last year, the US sanctioned 13 vessels involved in the pipeline's construction in a symbolic move opposing it, arguing it would threaten Europe's energy security.
The move from Germany to stop the now-completed pipeline’s certification process came as a surprise to many, as the country received 57% of its gas from Russia in 2021, according to Rystad Energy.
The pipeline was expected to be operational in the second half of the year.
Rystad’s head of gas markets research, Sindre Knutsson, said in a note that Nord Stream 2 was expected to be essential to curb Germany’s reliance on nuclear and coal energy generation. He said German officials have maintained the suspended certification would pose no threat to the country’s energy supply.
Knutsson said further escalation of the Ukraine conflict by Russia would likely lead to less Russian gas entering European markets, which would use buyers to look elsewhere for their LNG with storage levels at a five-year low.
“Europe will have to compete with global buyers for additional LNG cargoes, which will drive prices up significantly,” he said.
Avance Gas has already claimed the conflict had lifted gas demand and VLGC rates while reports circulate that Russia has already begun curbing its LNG supply amid fears energy prices could spike in Europe.
Evercore analyst Sean Morgan said this week that Russia and Europe are locked in an “unamicable embrace” over their LNG imports.
He did not expect Russia to cut off gas exports to Russia as the country depends on sales to Europe and that there was little LNG left to export due to contractual obligations from producers.
Warnig has been identified in press reports as a close ally of Russian President Vladimir Putin and a former East German Stasi agent turned banker who is active in Russian business circles.
The US sanctions lists addresses in Zug, Switzerland; Moscow and St Petersburg in Russia; and Leipzig, Germany.
