July 21, 2021
MODERATOR: Thanks very much, and thanks, everyone, for joining us today for this call on European energy security.
Just a reminder this call is on background, but it is embargoed until the conclusion of the call. As always, we’ll have a transcript available after the fact.
Just for your awareness and not for reporting, we will have two senior State Department officials on today’s call. We’ll have [Senior State Department Official One] as well as [Senior State Department Official Two]. They will be known as Senior State Department Officials One and Two for the purpose of this call. First, [Senior State Department Official One] will give an overview of the action we are taking today, and both will then be in a position to take your questions. Again, this call is on background and embargoed until the conclusion.
And so with that, I will turn it over to our first speaker.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Great. Thanks, [Moderator]. Good to be with all of you today. Last week, the President and German Chancellor Angela Merkel affirmed in the July 15th Washington Declaration the United States’ and Germany’s commitment to close bilateral cooperation in promoting peace, security, and prosperity around the world.
This declaration, which demonstrates this administration’s success in turning the page on a difficult chapter in U.S.-German relations, reflects the importance of our alliance to addressing future challenges – from China to COVID to climate change – and is a reminder of why, even when we disagree, allies must resolve their differences in a spirit of pragmatism, friendship, and trust.
This is how we approached managing our profound differences over the Nord Stream 2 pipeline. While the United States has consistently opposed the construction of the pipeline since the Obama administration, when President Biden took office in January, more than 90 percent of the pipeline had been completed.
Even after Congress passed bipartisan legislation aimed at stopping the pipeline via sanctions in both 2017 and in 2019, the previous administration did not apply sanctions related to the pipeline until its very last day in office, when it imposed sanctions on just one entity and one vessel involved in construction of the pipeline. The previous administration could have used a number of sanctions tools, including its authority under IEEPA, to sanction the pipeline, but it chose not to.
In contrast, in less than six months in office, the Biden administration has imposed sanctions on five entities and five vessels under PEESA, as amended, as well as on an additional nine vessels within the Nord Stream 2 fleet owned by a sanctioned entity. These designations represent sanctions on a significant portion of the Nord Stream 2 fleet. To repeat, there were two entities related to Nord Stream 2 sanctioned before January 20th; there have been 19 applied since.
Nevertheless, while we remain opposed to this pipeline, we reached the judgment that sanctions would not stop its construction and risked undermining a critical alliance with Germany, as well as with the EU and other European allies.
We therefore charted a course in line with the President’s commitment to rebuild relations with our allies and intended to create space for diplomacy with Germany to address the risks an operational Nord Stream 2 pipeline would pose to European energy security and to Ukraine and frontline NATO and EU countries.
That is why Germany came to the table to negotiate a package of measures designed to reduce the risk an operational Nord Stream 2 would pose to European energy security, Ukraine, and frontline NATO and EU countries.
This package is designed to address the root causes of those risks – Russia’s use of energy as a geopolitical weapon and the vulnerability of countries like Ukraine, which are dependent on Russian gas and transit fees, to Russian malign activities.
Throughout this process both we and our German partners have consulted closely with Ukraine and Poland as well as other countries that would be harmed by this project about their concerns, which we have taken into account.
Our joint statement sends a clear message that the United States and Germany will not tolerate Russia using energy as a geopolitical weapon in Europe or escalating its aggression against Ukraine. We’re committed to working together with our allies and partners to impose significant costs on Russia, including in the areas of sanctions and energy flows, if it engages in these malign activities.
We also know that it will take significant time and resources for Ukraine to end its dependence on Russian energy. That is why, in this statement, Germany has committed to appoint a special envoy and use all of its available leverage in the period before Nord Stream 2 becomes operational to help Ukraine negotiate an extension of its gas transit contract with Russia well beyond 2024.
This proposed extension, the negotiation of which the United States will actively support, would preserve gas flows and transit revenue that Ukraine would otherwise stand to lose once Nord Stream 2 becomes operational, postponing the negative impacts of the pipeline on Ukraine and other transit countries such as Slovakia.
To take full advantage of that time, Germany and the United States have proposed a number of measures to support Ukraine’s efforts toward a more secure and sustainable energy future, in which Ukraine is no longer dependent on Russian gas and transit fees for its energy or revenue.
First, as part of our U.S.-Germany Climate and Energy Partnership, Germany has committed to create and administer a billion-dollar Green Fund for Ukraine to support Ukraine’s energy transition, energy efficiency, and energy security.
The goals of the fund will be to promote the use of renewable energy; facilitate the development of hydrogen; increase energy efficiency; accelerate the transition from coal; and foster carbon neutrality.
As a way to jump start this fund, Germany will provide an initial donation of at least 150 million euros and will work toward extending that commitment in future budget years.
The United States will work with Germany to support the fund’s objectives with assistance programming and policy support, as well as helping to promote and support investments in the fund, including from other governments and third parties such as private-sector entities.
Second, Germany has also committed to a 60-million-euro Ukraine Resilience Package to support Ukraine’s energy security, including in such areas as safeguarding reverse flow, facilitating electrical grid integration, building cyber capacity for critical infrastructure, and supporting modernization of and reform to Ukraine’s energy sector.
Third, in light of the adverse effects Nord Stream 2 would have on Central and Eastern European EU member states, Germany will also enhance its engagement with the Three Seas Initiative, with an eye toward investing in projects related to – or part of the initiative. This is in addition to the 1.5 billion euros Germany will invest in energy projects as part of the EU budget between 2021 and 2027.
Fourth, Germany has also committed to implement the letter and the spirit of the EU Third Energy Package with respect to Nord Stream 2, which will support the principles of diversity and security of supply within EU energy markets.
These measures will help to prevent the worst-case scenario – an operational Nord Stream 2 with no protection from its adverse effects for Ukraine, frontline NATO and EU countries, and European energy security as a whole.
Taken together, these measures represent a significant commitment by Germany, supported by the United States, to push back against Russian malign activities and to advance a more secure and sustainable energy future for Ukraine and other frontline NATO and EU countries.
MODERATOR: Thank you. And just a logistical note: the joint statement that our speaker referred to will be out in just about half an hour, so that will be accessible to you all then.
Operator, if you want to repeat the instructions for questions, we’ll turn to them now.
OPERATOR: Certainly. And once again, for questions or comments you may press 1 and then 0, 1 and then 0 for your questions or comments.
MODERATOR: Great. We’ll go to the line of Andrea Mitchell, please.
OPERATOR: One moment. And Andrea, your line is open. Please, go ahead.
QUESTION: Thank you. There was a very contentious exchange at a hearing this morning, (inaudible) the question from Republican Senator Ted Cruz whether or not there was pressure on Ukraine, and also pointing out from his perspective that it may have been only 90 percent complete but that it was being held up until the decision was made to proceed with it, so that it couldn’t get to the 100 percent of completion without this decision. So can you address that and his contention that this is the worst geopolitical mistake in a generation as far as enabling Russia.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Sure. Thanks, Andrea. So first let me just address this question of whether we pressured or threatened the Ukrainians – regarding this issue. There were no threats. Ukraine is a partner and we don’t threaten our partners. We have engaged intensively with Ukraine throughout the course of our diplomatic efforts to ensure that Moscow is not able to weaponize the Nord Stream 2 pipeline, and we’ve done so at multiple levels.
We’ve shared details and ideas, including the text of this statement itself, that it remain deliberative and sensitive. And so, of course, as we always do in the conduct of diplomacy, we have endeavored to keep those consultations private, but we have, as I said, engaged intensively with Ukraine and included its input and ideas in this statement, and we really look forward to continuing to do so as we look to implement the commitments in this statement and as we look forward to welcoming President Zelenskyy to the White House later this summer.
In terms of your next question, in terms of the completion of the pipeline, I would just say that this pipeline was over 90 percent completed when we came into office. As I noted, this administration has put in place sanctions on 19 targets, and that is compared to only two in the previous administration, and so our opposition to the pipeline, our commitment to following the law, I think, is unquestionable. And we agree that this is a Russian geopolitical project, but that is why for us the worst-case scenario was a completed pipeline, which we think, as the Secretary has said, that it is virtually a fait accompli, that the construction will be finished, but a completed pipeline and nothing to help Ukraine to reduce the risks that this pipeline poses to it.
So that’s why today we’re announcing with the Germans a total of more than 200 million euros in new funding to help Ukraine to reduce those risks, as well as other measures to support energy security across Europe and to really help Ukraine to pursue a more secure and sustainable energy future.
MODERATOR: We’ll go the line of Simon Lewis.
OPERATOR: One moment. And Simon, your line is open. Please, go ahead.
QUESTION: Great, thank you. You mentioned the commitment to oppose any Russian measures to weaponize energy. I wonder, in the agreement, is there – is it clearly defined how – clearly spelled out how you and – the U.S. and Russia – sorry, U.S. and Germany will agree on occasions where that’s the case. And there are – are there – is there a criteria to say this action represents Russia weaponizing its energy? And further, what specifically is Germany committing to in terms of what sanctions and other measures they would take in that – if that – if it’s agreed that Russia has taken that kind of action?
SENIOR STATE DEPARTMENT OFFICIAL ONE: Sure. Thanks for that question. I mean, I think there’s a clear commitment on the part of the United States and Germany in this statement that should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, that Germany will take action at the national level and press for effective measures at the European level, including sanctions to limit Russian export capabilities to Europe in the energy sector, and that includes gas and/or other economically relevant sectors.
And so with that, Germany has really committed to taking swift action. As you heard from Chancellor Merkel last week during her visit to Washington, there are a number of tools that Germany and the EU have at their disposal to push back against Russian aggression or malign activities. This is a strong commitment to do so, but I would say we elected not to provide Russia with a roadmap in terms of how they can evade that commitment to push back.
And so what you see is a commitment that we will move forward swiftly together along with the EU if we see these types of activities, and I think you heard that commitment as well from both the President and from Chancellor Merkel last week. As the President said, we may have differences over Nord Stream 2, but we remain united in our commitment to pushing back against Russia’s use of energy as a weapon.
MODERATOR: We’ll go to Lara Jakes.
OPERATOR: One moment. And Lara, your line is open. Please, go ahead.
QUESTION: Great, thank you. I have a – I just need to clarify on the universe of sanctions that have been levied in relation to Nord Stream. I think you mentioned 21 in total, 19 in the last six months, and two by the Trump administration. I’m just confused, are those all now being lifted in order to assuage concerns with Germany, or are those – as I recall, one of them was against a German court that Germany was upset about in January, specifically. So are most of those against Russians or – entities, or are they against German entities, or could you just give me the status of what’s going to happen with the sanctions that are currently in place? Thank you.
SENIOR STATE DEPARTMENT OFFICIAL TWO: Thank you, it’s [Senior State Department Official Two] here. What [Senior State Department Official One] was outlining were the designations that have already taken place previously with respect to Nord Stream 2. So the previous administration, on the last day or maybe second-to-last day of the administration, designated one entity and a vessel that it had provided to the project under CAATSA Section 232, Countering America’s Adversaries Through Sanctions Act. And then the current administration in its regular reports to Congress under PEESA has identified five vessels and five entities as required, and thus imposed sanctions on those five entities, including listing the five vessels as blocked property. And in our May report we identified another nine vessels as blocked property because they had been provided to the project by a designated entity.
So the 19 entities and vessels that [Senior State Department Official One] referenced are the number of targets that – on which the current administration has imposed sanctions, but those sanctions have already been imposed and continue in effect.
And I’m not – you mentioned something about a sanction with respect to a German court. I’m not – that’s not something that – that’s not a sanction that we have imposed. I’m not sure what you’re referring to on that one.
MODERATOR: We’ll go to the line of Matt Lee.
OPERATOR: One moment. And Matt, your line is open. Please, go ahead.
QUESTION: Hi, there. Can you all hear me?
MODERATOR: We can.
QUESTION: Yeah, okay, great. I just wanted to know, based on what Toria said on the Hill this morning and what Ned said in the briefing just now, are you guys really making the argument that the completion of this pipeline was the Trump – the fault of the Trump administration? Thanks.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Thanks for the question, Matt. I mean, I think we’ve been clear that this pipeline was over 90 percent complete when we came into office. And I think we’ve explained our record in terms of the sanctions that we have imposed under PEESA, as amended. We continue to oppose the pipeline as a bad deal for Ukraine and for Europe, and we’re committed to following the law. None of that changes with this statement that we’re issuing today. But certainly, we think that there is more that the previous administration could have done, but we – we’re making the best of a bad hand, and in doing so we’re trying to make sure that we protect our partner, Ukraine, and that that’s really our priority.
But I think we really want to focus our conversation here, again, on the root causes of this problem, which are Russia’s use of energy as a weapon and its aggression against Ukraine. And so that’s really our focus here. We understand the pipeline is a Russian geopolitical project. We continue to oppose it, and that’s why we’re so focused on working with Germany, with Ukraine, with Poland, and all of our other partners to protect them from the risks that the pipeline poses and to strengthen European energy security.
MODERATOR: We’ll go to the line of Nick Schifrin.
OPERATOR: One moment. Your line is open.
QUESTION: Thanks, [Senior State Department Official One]. Can I take you back to the punishment question? I understand that you’re not going to provide Russia with a roadmap, as you said, but you can understand the skepticism, especially on the Hill. Can you discuss any more about the guarantees that this agreement provides, or this threshold over which you and Germany would take punishment of Russia? And separately, how are you going to get or will you get Ukraine some kind of guarantee for the 3 billion that it currently receives from transit fees on the overground transfers? Thanks.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Sure, thanks for that. I mean, first of all, in transit revenues, I mean, I think one really key point here is that by extending the transit agreement that Ukraine has with Russia, that means Ukraine isn’t losing any revenue. And so our goal – and Germany is committing in writing to use all of its available leverage to negotiate that agreement, and we think they have considerable leverage, particularly in this period before Nord Stream 2 is operational, in order to negotiate that agreement.
So our goal is to prevent Ukraine from losing any transit revenues for as long as possible. Right now they have an agreement through 2024, and so an extension would take them beyond that. And so if we’re able to get an extension to the agreement, Ukraine isn’t losing any revenue and they’re gaining a billion-dollar fund to help them transition to a more sustainable and secure energy future as well as other programs to help them to support that effort. So we think there’s certainly something positive here for Ukraine.
In terms of sanctions and other questions, I would just say again that this is a strong commitment, and we heard it last week from the President and Chancellor Merkel, to push back against Russia’s use of energy as a weapon. We know that Russia does use pipeline energy flows and other tools related to energy to pursue its political ends, and we’re committed to pushing back against that.
MODERATOR: We’ll go to the line of Francesco Fontemaggi.
OPERATOR: And Francesco, your line is open. Please, go ahead.
QUESTION: Hi, thank you. I just wanted to ask you again on sanctions. So you confirmed there is absolutely no automatic sanctions in this agreement in the case of aggressive actions from Russia against Ukraine? And if yes, why haven’t you seeked some automatic sanctions? And also on the extension of the transit agreements, so, if I understand, you said that Germany has considerable leverage in this period before Nord Stream 2 is operational. Do you mean that they committed to, like, say to Russia that they won’t make it operational if the transit agreement isn’t extended for 10 years? Is that what they committed to?
SENIOR STATE DEPARTMENT OFFICIAL ONE: So on the question of leverage, Germany has committed to use all of its available leverage to negotiate an extension to the gas transit agreement. That’s all I can say for now, but I think you heard from Chancellor Merkel last week that commitment. She said that Ukraine will be a transit country beyond 2024 and that – and she committed future German governments to that as well. So that is something that we look forward to supporting the German Government as they work with Ukraine to engage in those negotiations, just as we did when the transit agreement was extended previously in 2019.
On the sanctions question, again, this is something where automaticity – and perhaps my colleague [Senior State Department Official Two] can talk about this a little bit more – is not something that we typically see in the sanctions world. And so what we have is really a commitment on the part of both the United States and Germany to hold Russia accountable and to impose costs if it elects to use energy as a weapon or to commit aggressive acts against Ukraine. And so that’s the headline here; that’s our commitment. And you heard, again, from the President and Chancellor Merkel that that we are committed to following through on that.
MODERATOR: We’ll go to the line of Dave Lawler, please.
OPERATOR: And, Dave, your line is open. Please, go ahead.
QUESTION: Thanks. Wanted to follow up on the comment that the goal of this was to protect Ukraine. I think the early indications are that the Ukrainians don’t think this deal protects them, doesn’t address their security concerns. And obviously, that’s being echoed by people on the Hill. Are they wrong about that? Are you confident that this does secure Ukraine and they just don’t possibly recognize the benefits? What’s your position on the concerns that are still out there on the Ukrainian side? Thanks.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Yeah, thanks for that question. So I think we believe that this agreement – sorry, that this statement and the commitments that are outlined in it will help us to reduce the risks that the pipeline would pose to Ukraine and European energy security. And there are a lot of discussions that are part of our wider bilateral relationship with Ukraine. One of the things that I think will be good and important about this agreement is that we hope that it will enable us to move forward with conversations in a number of other areas, including on security, rather than only talking about Nord Stream 2, because our relationship with Ukraine is incredibly important.
We are resolutely committed to the sovereignty, territorial integrity, independence, and Euro-Atlantic future of Ukraine, and we want to support Ukraine – Ukraine’s security, its reform process. And certainly, working toward greater energy security and independence is a part of that, but there are a lot of other issues on our bilateral agenda and we are covering those issues, we’re discussing those issues in a number of different channels. And so President Zelenskyy, when he visits Washington later this summer, will have an opportunity to discuss those security issues and many others with President Biden. We’re really looking forward to that and we’re eagerly preparing the ground.
MODERATOR: We’ll take a couple final questions here. We’ll go to the line of Jennifer Hansler.
OPERATOR: One moment. And Jennifer, your line is open. Please, go ahead.
QUESTION: Hi, thanks so much. Do you have an estimate on when the pipeline will become operational? And then, can you get into more specifics of how the U.S. intends to enforce this or follow the enforcement on Germany’s part with Merkel stepping down from power? What happens if a pro-Russia party comes into power in Germany? Do you expect this agreement to last? Thank you.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Thanks for the question. So in terms of the completion of the pipeline, we understand that it is very, very close to being completed, over 95 precent complete in terms of construction. That doesn’t mean that gas will start flowing through it immediately. There are a number of additional steps that have to be completed in order for it to become operational, and so I would refer you to the German Government for questions about their regulatory processes, since this is – in several cases those steps are in the hands of an independent German regulator.
And on your second question, on the impact a new German government would have, I mean, so this is an agreement between the United States and Germany. I think, again, you heard Chancellor Merkel commit future German governments to Ukraine remaining a transit country and to ensuring that this pipeline doesn’t negatively impact it. I would also say that we really look forward to engaging with a future German government intensively on the implementation of these commitments. I expect that we’ll be working very closely together on a trilateral basis with Germany and Ukraine for some time to come in terms of implementing this.
So we really view this as the first step in an intensive effort to support Ukraine’s energy security and sustainability, and so we look forward to working with the next German government on that. And we also will certainly look to hold any future German government accountable for the commitments that they have made in this statement.
MODERATOR: We’ll go to Rich Edson.
OPERATOR: One moment. And Rich, your line is open. Please, go ahead. And Rich, please check your mute button.
QUESTION: Hello. Sorry about that. Hey, guys. Are the U.S. and Germany in this agreement – are the U.S. and Germany just generally prepared for a case that this investment may not be enough for Ukraine, that it may require more support from the U.S. and Germany?
And secondly, if you could just speak to the timing of this in relation to the White House announcement today that President Zelenskyy will be visiting in August and as to why that was announced on the same day? Is there any connection to that? Thanks very much.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Sure. So in terms of the visit, I mean, that invitation was issued in early June, and so we have been working with the Ukrainians to identify a date for some time. And so that announcement is not related to the issuance of this joint statement.
In terms of your other question, yeah, I would just say that the United States and Germany are the largest bilateral donors to Ukraine, and that has been the case since 2014. And this is not the sum total of our assistance, nor is it the sum total of our assistance even related to energy. My colleagues at USAID and the Department of Energy have programs underway to assist Ukraine in a number of these areas already and we’ll continue to work with the Ukrainians on many, many issues through our assistance, as will Germany, to help them on their reform path, to modernize their energy sector, to pursue sustainable, net zero fuels, et cetera. And so we really look forward to working with Ukraine to help it to achieve its energy security and sustainability goals, and this is just part of that equation.
MODERATOR: And we’ll conclude with the line of Laura Kelly.
OPERATOR: One moment. And Laura, your line is open. Please, go ahead.
QUESTION: Thank you. Last question, no pressure. I just want to be clear: The U.S. is no longer standing in the way of Nord Stream 2 becoming operational?
And then if you could just maybe address the transit agreement one more time between Russia and Ukraine. Can you give a ballpark for how long that transit agreement will be extended – 10, 20, 30, 100 years? Thank you.
SENIOR STATE DEPARTMENT OFFICIAL ONE: Sure. So in terms of the transit agreement, I don’t think we can prejudge the results of those negotiations, but we certainly will do everything we can to support those negotiations and we look forward to Germany naming a special envoy in the coming weeks to get started on those talks. And as I said, we look forward to supporting them. We think the current German Government has been very clear on its intent to ensure that Ukraine is a transit country beyond 2024, and we will support that in any way that we can.
Oh, right. And yeah, I mean, so this question of whether we’re dropping our opposition – I would just say emphatically that we still oppose Nord Stream 2. We still believe it’s a Russian geopolitical malign influence project. None of that has changed, and we are still committed to following the law. And we have a report due to Congress in mid-August, and we will take a look at any potentially sanctionable activity that entities may be engaged in related to this project and make those decisions on a case-by-case basis. So we – again, we remain opposed. We think this is a bad deal for Ukraine and a bad deal for the rest of Europe, but we also are pragmatic, and with it over 95 percent complete, our focus really is on ensuring that we are prepared to push back against Russia’s use of energy as a weapon along with our partners and allies and that we’re doing everything we can to reduce the risk this pipeline poses to Ukraine.
MODERATOR: Well, thanks very much, everyone. Thanks very much to our speakers. Just a reminder, this call was on background. You heard from senior State Department officials. And with that, the embargo is now lifted. Thanks, everyone.