The German-Russian proposal for the construction of the new Nord Stream 2 undersea natural gas pipeline is on the verge of creating a diplomatic conflict between the US and Germany.
According to Germany's Bild newspaper, the US ambassador in Berlin, Richard Grenell, sent letters directly threatening sanctions on German companies that participate in the project.
"We emphasize that companies involved in Russian energy exports are taking part in something that could prompt a significant risk of sanctions," the ambassador wrote. The German newspaper also quoted a Grenell spokesman who said that the letter should not be seen as a threat, but as a "clear message of US policy."
Nord Stream 2 is being built by Russia’s energy firm Gazprom and backed by five European energy companies. The 1,225km pipeline will run under the Baltic Sea from Russia to Germany. Its construction began in 2010 and is scheduled to be finalised by the end of this year.
The new pipeline would increase the amount of gas going under the Baltic to 55 billion cubic metres a year.
Eastern European, Nordic, and Baltic countries think the pipeline would give too much control of the EU’s energy supply to Russia, which accounted for 39% of the bloc’s gas imports in 2013, ahead of Norway, which is part of the EU’s single market. However, Northern Europe and Germany believe the economic benefits outweigh this issue.
US President Donald Trump's administration has been lobbying against the pipeline as the Nord Stream 2 project anticipates an increase in Russian natural gas going directly to Germany and to other countries in Europe through the Baltic, bypassing Ukraine.
The new pipeline would go through the territorial waters of five countries: Russia, Finland, Sweden, Denmark and Germany.
Critics are worried that the pipeline could deliver a major blow to Ukraine's economy because, along with its TurkStream (a pipeline that runs from Russia to Turkey), Russia would be able to completely bypass Ukrainian lines, leaving Kyiv without gas transit fees.
German businesses are very involved in the pipeline, having invested heavily in the project, which is run by former Chancellor Gerhard Schröder.
German energy companies Uniper and Wintershall would have a lot to lose should the project be cancelled.
Other European companies involved in the project include the Anglo-Dutch Shell, Austria's OMV and France's Engie.
German Chancellor Angela Merkel has said the pipeline would not make Germany dependent on Russia and stressed that Ukraine must remain a transit country.