On a platform at the pipeline laying ship "Castoro 10" off the southeast tip of the island of Rügen, experts are working on the connection of two pipeline sections of the Baltic Sea natural gas pipeline Nord Stream 2. picture alliance

The U.S. Senate has approved a defense bill that will see sanctions imposed on companies working on Russia's massive flagship gas pipeline project to Germany — but the sanctions might not have much effect given that the Nord Stream 2 pipeline is almost complete. The Senate voted overwhelmingly to pass the multi-billion dollar billion defense policy bill, formally known as the National Defense Authorization Act (NDAA), on Tuesday. The NDAA covers a broad range of defense policy and military spending. The annually-set NDAA is also significant for Europe's energy scene, however, as the 2020 bill also contains provisions to impose sanctions on companies installing deep sea pipelines for Russia's $10.5 billion Nord Stream 2 (NS2) gas pipeline linking Russia and Germany (via the Baltic Sea). The pipeline is Russia-led, under the aegis of the country's state-owned energy giant Gazprom, but has been part-financed by several European energy companies, including Shell, OMV and Engie. The TurkStream project which stretches from Russia to Turkey, and estimated to cost around $12 billion, was also mentioned in the defense bill but the pipeline is set to launch early January so sanctions would be ineffectual.

Sanctions

The defense bill says that no later than 60 days after it's enacted, a report should be filed to congressional committees identifying vessels that are "engaged in pipe-laying" for Nord Stream 2. Individuals who are identified as being involved in the projects could also have U.S. visas revoked and see transactions related to U.S. property blocked, although the bill allows a 30-day period for individuals to "wind-down" their operations in the project. The NDAA, which also greenlights the creation of a U.S. Space Force and paid parental leave for federal employees, was approved by the House of Representatives last week. It will now be sent to President Donald Trump to be signed into law; he signalled last week he would do so without delay. Tweet: Germany's Foreign Minister Heiko Maas has joined Russian criticism of the sanctions, saying last week that "European energy policy must be decided in Europe, not the U.S." while Russian foreign Minister Sergei Lavrov said last week that "I assure you that neither Nord Stream 2 nor TurkStream will stop" because of U.S. sanctions.

Race against time

The U.S. sanctions would not have mattered at all if Nord Stream 2 had been completed on time. However, the project was subject to months of delays because Denmark was hesitant about the pipeline traversing through its territorial waters before it finally granted a permit for the project at the end of October. The decision was seen as removing a last hurdle to the completion of NS2, and a blow to U.S. efforts to stymie the project. But the delay caused by Denmark's procrastination means that U.S. sanctions, if targeted quickly, could impact several specialist companies involved in pipe-laying for the project — although there is not much of the route left to complete. Nord Stream 2 was tight-lipped about the possible impact of U.S. sanctions on the project's contractors, telling CNBC in a statement Wednesday that it is "aware of the ongoing legislative procedure in the U.S. and the political debates. We cannot comment on any implications for our project."

A worker is standing at the construction site of the Nord Stream 2 Baltic Sea pipeline. picture alliance

NS2 would not provide direct comment on when it expected the pipeline to be completed, or how much more of the route was yet to complete but in November, Russia's deputy prime minister told reporters that the pipeline was expected to launch in mid-2020. At the end of October, Nord Stream 2 said the pipeline was 87% complete, or 2,100 kilometers long (the total of both Nord Stream 2 and its parallel predecessor pipeline, Nord Stream), so it's estimated that the pipeline is currently 90% complete.

Controversial pipelines