Explainer: How a German “climate” fund tried to help Russia evade US sanctions

BERLIN, Feb 10 (Reuters) – A German politician set up a state-backed foundation with Russian energy company Gazprom last year to help Moscow avoid US sanctions on a pipeline designed to carry Russian gas to Europe.

The move adds to questions about whether the United States and Germany are on the same side on the $11 billion project – a crucial issue given that the two major democracies have joined NATO allies in a pushback against Russian President Vladimir Putin to lead Read more .

In 2019, Washington imposed sanctions on those involved in laying the Nord Stream 2 pipeline. The United States has argued that the pipeline that is being built but is not yet pumping gas is one tool that Russia supports the aggression against Ukraine.

A major pipeline from Russia to Europe is currently crossing Ukraine, but Nord Stream 2 runs under the Baltic Sea directly to Germany. By allowing Russia to cut off Ukraine from Europe’s energy supply, Washington says the pipe will weaken Kiev and make it more vulnerable to a Russian invasion.

Germany rejects US sanctions and says Nord Stream 2 is primarily a commercial project that diversifies energy supplies for Europe. Senior German politicians from both main parties said the US objections were self-serving: Washington wants to sell more gas to Germany.

Russia has repeatedly said the project is commercial, not political, that it would help alleviate Europe’s electricity shortages and bring down gas prices; The sanctions are unfair and serve as an instrument against competitors.

Despite the sanctions, the line was completed in 2021.

By December, Moscow had amassed more than 100,000 troops on Ukraine’s borders. She denies planning an invasion. US officials say an attack could happen within days or weeks.

What is the basis?

The Climate and Environmental Protection Foundation was set up by the government of Mecklenburg-Western Pomerania, the eastern German region where Nord Stream 2 will make landfall, in January 2021, when the pipeline was practically complete. The foundation is an initiative of Social Democrat Prime Minister Manuela Schwesig and says it will strengthen the role of renewable energy and gas as a bridging technology to cleaner fuels.

Where did the money come from?

The regional government has contributed 200,000 euros (230,000 US dollars) to the foundation, according to the region’s audit office. According to a company spokesman, the foundation was also endowed with €20 million from Nord Stream 2 AG, a Switzerland-based company owned by Gazprom PAO.

Nord Stream 2 said it would give the foundation an additional €2 million each year. All profits from the commercial branch also flow into the foundation according to its statutes.

What does the foundation do?

It is a philanthropic fund to promote environmental projects that also has a commercial arm according to its charter. The commercial branch conducts its activities related to Nord Stream 2.

His website lists the environmental projects he supports: For example, he offers every kindergarten in the country a free tree for children to plant plus 500 euros and runs competitions for children to come up with promising ways to make schools more climate-friendly, with scholarships for the winners.

Its charter states that the foundation’s secondary objective is to ensure that the Nord Stream 2 pipeline is completed “regardless of external efforts.”

The foundation may acquire, manage, own, provide or lease land, tools and machinery that will help it achieve both goals, including completing the pipeline, the charter says.

“We believe building the pipeline is the right thing to do,” Schwesig told reporters in January 2021.

You and others have argued that Germany needs an energy source that does not depend on goodwill between Russia and Ukraine. Schwesig campaigned for the pipeline in the state parliament last January said the US sanctions were self-serving.

“No one working on the construction of the pipeline is doing anything wrong,” she said. “Those who get it wrong are the ones who try to stop the pipeline at the last minute… That’s why we expect our federal government to act decisively against the sanctions.”

Former Finance Minister Olaf Scholz – now Chancellor – has dismissed US sanctions as interference in Germany’s affairs.

Who else supports the foundation?

Schwesig’s Social Democratic Party (SPD), which leads the German governing coalition and has traditionally backed close ties with Russia, is the bedrock of political support for the foundation, but a politician from the opposition Christian Democrats also sits on the board – a reflection of the broad public’s support for Nord Stream 2 in Mecklenburg-West Pomerania.

The President of the Foundation is the former Prime Minister of the SPD, Erwin Sellering. Gerhard Schröder, a former SPD chancellor and close friend of Putin, has chaired Nord Stream’s shareholders’ committee since 2005. He is also on the board of directors of Russia’s leading oil producer Rosneft and was nominated for Gazprom’s board of directors this month. Schroeder declined to comment to Reuters.

What advantages does Germany have from the pipeline?

The pipeline would double the amount of gas that Russia can pump directly to Germany. Russian natural gas covers around half of Germany’s gas requirements. Gas keeps half of German households warm and is the key for manufacturing industries such as ceramics in Europe’s largest economy. According to the energy and water industry association BDEW, gas accounted for slightly more than 15% of German electricity generation last year.

What did the Foundation do to help build the pipeline?

It declined to answer the question.

A report on its first year on its website states that in order to complete the pipeline, “US illegal threats had to be met by a variety of measures which, for obvious reasons, cannot be publicly explained”.

The commercial branch, which conducts its activities related to the pipeline, will be headed by a person appointed by Nord Stream 2, in accordance with the Foundation’s charter. The foundation declined to tell Reuters who Nord Stream 2 had appointed to head its commercial department.

Public records show that the Foundation owns the blue ship, a general cargo vessel built in 2006, flying the Cypriot flag. The vessel, which was stationed in Russia’s port of Murmansk for much of 2020, entered the Baltic Sea on July 1 last year and has since moored near the port of Mukran, some 30 km (18 miles) from the pipeline’s landing point in Lubmin removed. No other vessels are registered with the foundation.

A State Department report to Congress last November said the Blue Ship is one of two vessels involved in pipeline-laying activities at Nord Stream 2 or another approved project.

However, the Blue Ship was not sanctioned. The State Department said the shipowner was exempt from sanctions. A 2021 bill When the sanctions were issued, governments of the European Union and non-corporate EU governments were excluded. The State Department did not elaborate.

US President Joe Biden’s administration waived some sanctions on Nord Stream 2 in May 2021 as Washington sought to rebuild ties with Germany after ties deteriorated under former President Donald Trump.

How does the region benefit from the pipeline?

Several hundred local workers were involved in its construction, “several hundred million euros” have been invested in the country so far in relation to Nord Stream 2, and the pipeline operator expects to employ around 30 workers in the long term, said a spokesman for Gas Europe ( G4E), the German subsidiary of Nord Stream 2, told Reuters.

Mecklenburg-West Pomerania hosts much of Germany’s offshore wind capacity, and the local government says it aims to use wind power to produce “green” hydrogen that can be exported via the Nord Stream 2 pipeline in the future.

What does the rest of Germany say about the foundation?

The State Department declined to comment on the foundation or its goals. Former Foreign Minister Heiko Maas, who was in office when the foundation was set up, said at the time that it was “a decision by Mecklenburg-Western Pomerania, not a decision by the federal government”.

The regional audit office has criticized the foundation. In a statement to Reuters, the bureau said the state had given it only partial information about the foundation so late, and that the public funds the state gave to the foundation were no longer under state control.

Some environmentalists argue that gas support is harmful to the climate, noting that gas releases carbon when burned. The German NGO Environment Aid has described the foundation as “a service for Nord Stream 2 AG”.

What does the foundation say about the Ukraine crisis?

Its President Sellering told Reuters the crisis was being used as a pretext by “significant forces” in the United States and Germany, who have always opposed the pipeline and are now “prior to and independent of any action by Russia” attempting to build Nord Stream 2 to put an end to.”

He said it would be unfair if Germany had to stop importing Russian gas while the United States continued importing commodities from Russia.

If new sanctions are imposed on the pipeline, will the Foundation act to mitigate its impact?

The foundation did not answer this question.

Additional reporting by Jonathan Saul in London, Daphne Psaledakis, Timothy Gardner and Andrea Shalal in Washington DC, Andreas Rinke in Berlin, Jacob Gronholt-Pedersen and Stine Jacobsen in Copenhagen, Vladimir Soldierkin in Moscow; Edited by Sara Ledwith

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