Nord Stream 2 owner contemplates insolvency following pipeline halt and sanctions

Two sources close to the matter said that the Swiss-based company that built the Nord Stream 2 gas pipe from Russia to Germany is contemplating filing for bankruptcy being reported by Reuters.

This is in an attempt to settle claims before the U.S. sanctions deadline, which would allow other entities to cease dealings with it. After Russia recognized two regions of eastern Ukraine as independent, the United States sanctioned Nord Stream 2 AG. This was in response to a wave of economic sanctions from the West.

Nord Stream 2 AG is registered in Switzerland. It is owned by Gazprom, a Russian state-owned gas giant. The $11 billion project was completed last year to increase the gas flow from Russia to Germany.

Two sources spoke under the condition of anonymity to discuss the potential insolvency talks. They said Nord Stream 2 AG had been working with a financial advisor on clearing some of its liabilities. The company could formalize insolvency proceedings before a Swiss court this week.

Nord Stream 2 AG declined to comment on the possibility of insolvency. Gazprom declined comment.

The 1,230 km (767 miles) pipeline was not yet in commercial operation because it was still awaiting certification in Germany. This process was put on hold last week due to the escalating Ukraine crisis.

On February 23, the U.S. Treasury Department’s Office of Foreign Assets Control issued a directive authorizing “the winding down of transactions involving Nord Stream 2 AG” and “any entity in Nord Stream 2 AG’s, directly, or indirectly, a 50% or greater interest” by March 2.

Gazprom was able to pay half of Nord Stream 2’s construction costs. The remaining $11 billion pipeline project was funded by Shell, OMV Austria, Engie France, and Wintershall DEA Germany.

Engie, Shell, and Wintershall DEA didn’t immediately respond to our requests for comment. OMV did not respond to requests for comment.

Uniper spokesperson said that the company doesn’t currently have such information when being asked about a Nord Stream 2 AG insolvency filing.

It wasn’t clear if Nord Stream 2 AG entities would be closed down, or how Gazprom intends to continue with maintenance.

Guy Parmelin, the Swiss Economy Minister, stated Monday in an interview with Swiss radio station RTS that all Nord Stream employees (more than 140) who worked in the Swiss city Zug were fired.

Nord Stream 2 AG confirmed Tuesday’s job cuts, saying in a statement that “Due to recent geopolitical developments which led to the imposition of US sanctions against Nord Stream 2 AG”, the company had to end contracts with employees. This is a very regrettable development.

Germany, which receives half of its gas from Russia has backed Nord Stream 2 in order to diversify the energy supply for Europe. However, the project was opposed by the European Union as well as the United States. It increased the region’s dependence on Russia and allowed Moscow to reduce volumes through Ukraine. Moscow must pay a transit fee.

Several large oil companies, including major oil companies, have announced that they will be exiting their Russian operations following Russia’s invasion last week. Shell said it would no longer participate in Nord Stream 2 and other investments.

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