Fact Check: White House National Security Adviser Misleadingly Describes Pipeline Company As ‘Not Russian’


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Bash told Sullivan that President Joe Biden had “decided not to impose sanctions” on the pipeline. After Bash cited a Republican criticism of Biden’s handling of the problem, she asked, “Why are you giving in to Russia on this pipeline?”

Sullivan correctly replied that Biden has “sanctioned several Russian entities“Regarding the pipeline; he said Bash’s question involved a” misunderstanding. ” critical Republican lawmakers.

Sullivan said the only two entities or individuals the administration has lifted sanctions against – the pipeline company, Nord Stream 2 AG, and its CEO, Matthias Warnig – are not Russian.

“We only lifted the sanctions on two of them, and they weren’t Russian. It was a German and a Swiss company,” Sullivan said.

Facts first: Sullivan’s claim that Nord Stream 2 AG is “not Russian” is misleading. Although the company is effectively registered as a Swiss entity, it is 100% owned by Gazprom, an energy company majority owned by the Russian government.

In the context of the Biden administration’s approach to Russia, it’s also important to take note of Warnig’s track record. Warnig is German, but he is a longtime associate of Russian President Vladimir Putin – some media reports said Putin’s “friend” – and a extensive business experience in Russia as well as other countries. Putin and Warnig are both former intelligence officers: Warning work for the Stasi in the former communist state of East Germany while Putin worked for the Soviet KGB.

A company controlled by Putin’s Kremlin

We cannot say that it is completely wrong to claim that Nord Stream 2 AG is “Swiss”. A pipeline expert, Katja Yafimava, a senior researcher at the Oxford Institute for Energy Studies, told us that Sullivan is “absolutely correct” that Nord Stream 2 AG is a Swiss company “as a point of law”.
Yafimava noted that Nord Stream 2 AG is considered Swiss in arbitration proceedings that the company has launched against the European Union. And she said she doubted Sullivan had “bad intentions” by not mentioning ownership of the company.

Yafimava makes valid remarks about the law. But we still believe that Sullivan went too far, whatever his intention, when he said without further explanation that the company was “not Russian,” even though it was in fact controlled by Putin’s Kremlin.

We are not alone.

“I think it was misleading to call Nord Stream 2 AG a ‘Swiss company’,” said Marguerite Balmaceda, an expert on comparative energy policy in post-Soviet states and professor in the School of Diplomacy and International Relations at Seton Hall University. Balmaceda said the company can be called Swiss “in a very narrow technical sense”, “but not in a real sense”.
Balmaceda added that the Swiss city of Zug, where Nord Stream 2 AG is located, has long served as the “official address” for many Russian and ex-Soviet companies due to its internationally renowned fiscal advantages.
Benjamin Schmitt, a former European Energy Security Advisor to the State Department, also called “misleading” to qualify Nord Stream 2 AG as a “Swiss company” because “the key fact” is that “Gazprom controlled by the Kremlin” is the sole owner.
Schmitt, who is now a principal researcher at the Center for European Policy Analysis think tank and postdoctoral researcher at Harvard University, said this situation is similar to cases in which American companies are incorporated offshore in a tax haven like the Cayman Islands.

“You wouldn’t describe these companies as ‘Cayman’,” he said.

In fairness, senior Biden officials have, by several other occasions, described Nord Stream 2 as a harmful “Russian” project.

People who have benefited from exemptions

Sullivan said the Biden administration lifted Nord Stream 2’s sanctions on “only two” entities, a Swiss company and a German individual. But the State Department said explicitly, both in a public statement and in may report in Congress, that he had also waived sanctions against other executives of Nord Stream 2 AG.
Those four corporate officers are Financial Director Paul Corcoran, Project Director Marco Casirati, Commercial Director Reinhard Ontyd and Technical Director Pavel Persidskii.
Warnig was found to have personally engaged in sanctionable conduct, so he was liable to financial sanctions; the other four, as executives of the company, faced possible travel bans to the United States but no financial penalties.
We won’t be too hard on Sullivan on claiming to have lifted sanctions on “only two” – because the US government sometimes makes the difference between “sanctions” and “visa restrictions”. Language aside, the important thing to know here is that Warnig wasn’t the only person logged into Nord Stream 2 who got some sort of waiver.

Pipeline policy

The Nord Stream 2 gas pipeline is should double the capacity of an existing Nord Stream pipeline between Russia and Germany. Critics of the project say, among other things, that the new gas pipeline will increase European dependence on Russia and weaken Ukraine. Supporters say this will increase the stability of Europe’s energy supply and keep Russia connected to the West.
The State Department said in its May report explaining waivers that sanctioning Nord Stream 2 AG and its leaders would harm critical U.S. relations with Germany, other European allies and the European Union in general. The German government and some other European countries oppose sanctions against people and companies involved in the project. (Large European companies finance a substantial percentage of the cost of the project, while other European companies have been involved in various other ways.)
Biden also cited the United States’ relationship with Europe as an explanation for the waivers. He told reporters at the end of May that, despite the fact that he opposed the Nord Stream 2 project from the start, these sanctions “would henceforth be counterproductive in terms of our European relations”.
Sullivan pointed out in the CNN interview last Sunday – in which he also said the Biden administration was preparing another “sanctions package” against Russia for the poisoning of opposition leader Alexey Navalny – that the pipeline was 90% complete when Biden took office.

“So the question we were asked was whether we will proceed directly, using our sanctioning power, to our European allies and friends? And, there, President Biden said:” I am not ready to do this. What I will do is continue to apply, every 90 days, sanctions against Russian entities involved in the construction of Nord Stream 2. ‘ He has done it and will continue to do so, “Sullivan said.



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