European Gas Prices Jump As US Announces Nord Stream 2 Sanctions
On Tuesday, European natural gas futures jumped after the U.S. imposed new sanctions on the highly contested Nord Stream 2 pipeline.
U.S. Secretary of State Antony Blinken issued a statement on Monday describing the new round of sanctions targeting a vessel and a “Russian-linked entity” called Transadria Ltd. associated with the pipeline’s construction that allows natural gas flows from Russia directly to Germany.
Blinken said a report had been sent to Congress and the sanctions support Protecting Europe’s Energy Security Act of 2019. There’s been a lot of concern over Moscow’s ability to leverage natural gas supplies over Europe.
“Today’s report is in line with the United States’ continuing opposition to the Nord Stream 2 pipeline and the U.S. Government’s continued compliance with PEESA,” Blinken said in his statement. “With today’s action, the Administration has now sanctioned 8 persons and identified 17 of their vessels as blocked property pursuant to PEESA in connection with Nord Stream 2.”
“Even as the Administration continues to oppose the Nord Stream 2 pipeline, including via our sanctions, we continue to work with Germany and other allies and partners to reduce the risks posed by the pipeline to Ukraine and frontline NATO and E.U. countries and to push back against harmful Russian activities, including in the energy sphere,” Blinken said.
Any action against the Nord Stream 2 has stoked higher natural gas prices in Europe. After the U.S. announced sanctions, the Dutch month-ahead gas, the European benchmark, increased as much as 8.7% to 91.34 euros a megawatt-hour.
Kremlin spokesperson Dmitry Peskov said the move by the U.S. to sanction a ship involved in the pipeline construction is “illegal and wrong.” He said, “We view this extremely negatively.”
Nord Stream 2 is one of several undersea pipelines that Russia has laid in the Black Sea and Baltic Sea to replace old pipelines that run through eastern Europe. The move to reshuffle supplies could allow Moscow to target eastern Europe and western Europe energy flows.
Natural gas flows on the controversial pipeline have yet to begin and suffered a significant setback last week after the German energy regulator suspended the certification process. Even though the lines are filled with natural gas, the latest hurdles could suggest gas will not be flowing during the Northern Hemisphere winter amid Europe’s lowest gas storage levels since 2013.
Europe is hungry for more gas. If E.U. politicians want to remain in power by not upsetting their constituents over soaring energy inflation, they might have to rely on Moscow, a move that would infuriate Washington.