Rubio denies reports of US planning to lift Nord Stream 2 sanctions

US Secretary of State Marco Rubio denied reports in a statement on X on April 24 that the White House is discussing lifting sanctions on the operator of Russia's Nord Stream 2 gas pipeline.

Rubio said neither he nor US Presidential Special Envoy Steve Witkoff had held talks about lifting sanctions on Russia as part of a potential deal involving Ukraine.

"This is journalistic negligence. If Politico has even a shred of honesty, they will fully retract this fabrication," Rubio said.

Politico had reported, citing five sources familiar with the matter, that Witkoff had proposed lifting sanctions on Nord Stream 2, but that Rubio and US Interior Secretary Doug Burgum had opposed the idea.

One of Politico’s sources said that any move to restore Russia’s status as a leading energy supplier to Europe could lead to a "bloodbath" for US oil and gas producers.

Russian Foreign Minister Sergey Lavrov said in late March that Moscow and Washington were in talks on the possibility of restarting the remaining one 27.5bn cubic metre per year Nord Stream 2 string. The pipeline’s other string and two more comprising the Nord Stream 1 pipeline were blown up in the autumn in 2022 in a sabotage attack.

Sergey Vakulenko, a political analyst with Carnegie Endowment for International Peace, said in a recent note that the restarting of the Nord Stream 2 was one of the few cases where US-Russian cooperation looked viable after the fighting in Ukraine ended. 

After a cold winter and the end of Ukrainian transit gas in Europe at the start of this year, Europe has a 25 bcm gas deficit – exactly the capacity of the surviving Nord Stream pipeline that is still full of technical gas and which could be turned on tomorrow, the analyst argued.

US investor and a veteran of the Russian market Stephen Lynch has already applied for permission to take the pipeline over, which currently belongs to Germany. His previous deals include acquiring the foreign assets of former oligarch Mikhail Khodorkovsk’s Yukos oil major that was broken up by the Kremlin, as well as Sberbank (Switzerland) AG, the Swiss branch of Russian state-owned banking giant Sberbank.

Lynch has already submitted a request to have sanctions on the pipeline suspended to allow the deal to go ahead but it has apparently not yet been approved. “As a long-time donor to the Republican Party, Lynch is likely counting on a more sympathetic reception from Trump than he got from the president’s Democrat predecessor, Joe Biden,” said Vakulenko.

Economically re-launching the pipeline makes perfect sense. The EU, despite pledges to wean itself of Russian gas, has seen gas imports climb to around 18% of the EU’s total imports, mostly as costly LNG, owing to the dearth of alternative supplies. Moreover, rising demand means Europe could face another energy crisis this summer that restarting Nord Stream would go a long way to alleviating.

However there are various stumbling blocks, including whether Germany would accept Nord Stream 2’s restart.