WASHINGTON — The Biden administration has decided to waive sanctions against the company overseeing the construction of Russia's Nord Stream 2 gas pipeline to Germany, despite bipartisan opposition in Congress and appeals from Eastern European governments.
Republican lawmakers immediately accused the administration of handing Russian President Vladimir Putin a major political victory. Democrats urged the White House to reconsider, and the Kremlin called the news a "positive signal."
The State Department announced the decision in a report to Congress. The move was first reported by Axios.
Secretary of State Antony Blinken opted to waive sanctions against the Russian-owned company behind the pipeline, Nord Stream 2 AG, as well as its German CEO, Matthias Warnig, and other corporate officers, because sanctions "would negatively impact U.S. relations with Germany, the EU and other European allies and partners," said the State Department report, which was obtained by NBC News.
Warnig, a longtime ally of Putin's, is a former East German Stasi intelligence officer who has served on the supervisory boards of major Russian companies.
The State Department report said "close cooperation" with Germany, the European Union and other European countries will be critical for U.S. efforts to tackle the Covid-19 pandemic, promote a global economic recovery, fight climate change and address other challenges, including countering "malign behavior by Russia and China."
Sen. Bob Menendez, D-N.J., chairman of the Foreign Relations Committee, denounced the decision in a scathing statement.
"I am opposed to the decision by the Biden administration to waive sanctions on NS2 AG and Matthias Warnig. I urge the administration to rip off the Band-Aid, lift these waivers and move forward with the congressionally mandated sanctions," Menendez said.
"The administration has said that the pipeline is a bad idea and that it is a Russian malign influence project. I share that sentiment, but fail to see how today's decision will advance U.S. efforts to counter Russian aggression in Europe," he said.
Menendez asked, "What does the administration now expect from Germany after having made this significant concession to exercise the waiver?" He said the decision "has created uncertainty in many corners of Europe and I expect to hear very soon from the administration on its plans moving forward."
Sen. Jeanne Shaheen, D-N.H., expressed "disappointment."
"Completion of this pipeline poses a threat to U.S. security interests and the stability of our partners in the region. The administration should uphold its commitment to Congress. Every option available to prevent its completion should be utilized," Shaheen said in a statement.
Although several European governments and members of both parties in Congress strongly oppose the project, German Chancellor Angela Merkel's government had quietly lobbied the administration not to impose sanctions that would block the completion of the pipeline, which runs under the Baltic Sea to Germany.
The Biden administration sought to balance the need to counter Russia with its desire to repair relations with Germany, which were badly strained during the Trump administration. But critics said that the administration had failed to fulfill its vows to stand up to Moscow and that the move would give Putin valuable leverage over Ukraine and other Eastern European states.
"It demonstrates that ultimately standing up to Russia was of less importance," said John Herbst, a retired career diplomat who was U.S. ambassador to Ukraine. "It really undercuts Biden's 'I'm-tough-on-Russia' stance.'"
Herbst said that there is still time to change course and that a political backlash among Democrats on Capitol Hill could alter the White House's calculations.
Some career diplomats opposed the decision, but the White House overruled their objections, two sources familiar with the discussions said.
Russia currently has to transport natural gas through Ukraine to Europe. The controversial Nord Stream 2 pipeline would bypass Ukraine, depriving it of transit revenues and making it potentially more vulnerable to Russian aggression, Herbst and other opponents of the project say.
In the report to Congress issued Wednesday, which was required under recently passed legislation, the State Department had to list entities that are involved in the Nord Stream 2 project that merit sanctions. The State Department told Congress that it will sanction eight ships that are supporting the pipeline's construction.
The report acknowledged that the company running the project, Nord Stream 2 AG, and its CEO, Warnig, are involved in sanctionable work. But it said the administration had decided to waive enforcing the sanctions on the Russian-owned company, Warnig and other corporate officers.
The decision means vessels working on the pipeline could be penalized but not the company that contracted them to do the work, Nord Stream 2 AG, which is owned by the Russian state oil giant Gazprom and is based in Switzerland.
The decisions "demonstrate the Administration's commitment to energy security in Europe, consistent with the President's pledge to rebuild relationships with our allies and partners in Europe," Blinken said in a statement. He added that the administration would continue to oppose the completion of the pipeline: "Our opposition to the Nord Stream 2 pipeline is unwavering."
Blinken met with his Russian counterpart, Foreign Minister Sergey Lavrov, in Iceland on Wednesday.
The Russia-to-Germany pipeline has been a source of tension between Washington and Berlin for years. Merkel argues that it is a purely commercial matter that should not be subject to geopolitics or linked to human rights concerns.
Nord Stream 2 would double the shipments of Russian natural gas to Germany, providing German industry with inexpensive energy as the country makes a transition from coal and nuclear energy to renewable sources.
The pipeline is more than 90 percent complete, and opponents argued that failing to act quickly would allow it to be completed.
Poland and Ukraine have appealed publicly and privately to the Biden administration in recent months to act promptly to stop the pipeline.
"We continue to count on the United States to take decisive action to stop the construction of the Nord Stream 2 gas pipeline; it is still not too late," the Polish Embassy in Washington said in an email Wednesday.
"Many countries perceive Nord Stream 2 as a project visibly marked by geopolitics, aiming to strengthen the position of Russia as a major gas supplier to Europe and to undermine Ukraine and the entire region's energy security," it said.
Opinion in Germany is mixed, and federal elections in September could see a new government shift the country's policy on Nord Stream 2. The Green party is ahead of Merkel's Christian Democratic Union in polls, and its leader, Annalena Baerbock, has said Germany should reject the project given sanctions the E.U. imposed on Russia over its actions in Ukraine.
"This pipeline contradicts our sanctions, so it cannot go in place," Baerbock said May 6 from Berlin at a virtual event organized by the Atlantic Council think tank's Europe Center. "It cannot start."
Kremlin spokesman Dmitry Peskov said initial reports about the sanctions decision were a "positive signal" if they turned out to be true.
Deputy Foreign Minister Sergei Ryabkov said waiving sanctions would create "a chance for a gradual transition toward the normalization of our bilateral ties," the news agency TASS reported.
Republican lawmakers pounced on the decision, accusing the administration of showing weakness, defying Congress and failing to live up to its tough rhetoric about Russia.
"Stunning. In defiance of U.S. law, Biden is actively helping Putin build his pipeline," tweeted Sen. Ted Cruz, R-Texas. "Objectively speaking, the Biden administration is shaping up to be the most pro-Russia administration of the modern era."
Cruz has sought to block confirmation of Biden administration nominees to State Department posts because of the delay in implementing sanctions on companies working on Nord Stream 2.
Sen. Ben Sasse, R-Neb., a member of the Intelligence Committee who was critical of former President Donald Trump's approach to Russia, said the Biden administration has made a "strategic mistake."
"Two months ago, President Biden called Putin a 'killer,' but today he's planning to give Putin, his regime and his cronies massive strategic leverage in Europe. You can't pretend to be a Russia hawk but then just roll over," Sasse said.