US Senate proposes tougher sanctions on Russia, threatening projects

The US Senate has overwhelmingly adopted a legislation strengthening economic sanctions on Russia. The draft remains to be adopted by the House of Representatives and to be signed into law by the President. Then, it would turn executive orders by the previous administration on US sanctions against Russian energy projects into law, and would extend sanctions to other sectors (mining, metals, shipping and railway). In addition, it would require the President to receive the approval of the Congress before taking any action to ease, suspend or lift any sanctions on Russia.



The previous provisions against Russia focused on high-tech future energy projects, such as Arctic offshore, deepwater and shale projects, denying Russian companies the opportunity to obtain expertise in advanced drilling techniques from Western partners. The proposed sanctions would sanction Western companies investing in these projects without US companies (so-called "backfilling" practice) or investing in Russian export pipeline projects to Europe.



This new sanction may affect European companies involved in the controversial Nord Stream II gas pipeline project, namely PEG Infrastruktur AG (15.5%, subsidiary of E.ON), Wintershall (15.5%, subsidiary of BASF), Gasunie (9%) and Engie (9%); the remaining 51% is owned by Gazprom. Germany and Austria have already voiced sharp criticism of the bill, fearing that it could affect European energetic security. The 1,220-km-long Nord Stream 2 undersea gas pipeline should consist of two offshore strings with a total capacity of 55 bcm/year. The project, which is opposed by Poland, will double the throughput of the current Nord Stream route. Construction work is expected to begin in 2018 and will be completed by the end of 2019.