Nord Stream 2 owner considers insolvency after pipeline halt and sanctions

Nord Stream 2 AG could formally begin insolvency proceedings in a Swiss court this week

Workers at the construction site of the Nord Stream 2 gas pipeline, near the Russian town of Kingisepp, in June 2019. Reuters

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The Swiss-based company that built the Nord Stream 2 gas pipeline from Russia to Germany is considering filing for insolvency, sources said, as it tries to settle claims before a US sanction deadline for other entities to stop dealing with it.

The US imposed sanctions on Nord Stream 2 AG last week after Russia recognised two breakaway regions in eastern Ukraine before its invasion of the country, which brought economic sanctions from the West.

Nord Stream 2 AG, which is registered in Switzerland and owned by Russian state-owned gas giant Gazprom, last year completed the $11 billion project, which was designed to double the capacity to pump gas from Russia to Germany.

The sources said that the company has been working with a financial adviser on clearing some of its liabilities and could formally begin insolvency proceedings in a Swiss court this week.

Nord Stream 2 AG did not comment on possible insolvency. Gazprom declined to comment.

Swiss newspaper Blick's website posted a video interview with Silvia Thalmann, director of economic affairs in the canton of Zug, where Nord Stream 2 AG is based.

"This is not a mass dismissal [of staff]," Ms Thalmann said. "A mass dismissal is only when the company continues to exist. In this case, however, it is a bankruptcy."

She could not be reached for immediate comment outside business hours. Nord Stream 2 AG was also not immediately available.

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The 1,230km pipeline had not begun commercial operations because it was pending certification in Germany, which last week put the process on hold as a result of the escalating Ukraine crisis.

The US Treasury Department's Office of Foreign Assets Control issued an executive order on February 23 authorising "the wind down of transactions involving Nord Stream 2 AG" or "any entity in which Nord Stream 2 AG owns, directly or indirectly, a 50 per cent or greater interest" by March 2.

Gazprom paid half the cost of building Nord Stream 2, with the rest of the project financed by British oil and gas major Shell, Austria's OMV, France's Engie and Germany's Uniper and Wintershall DEA.

It was unclear if all entities related to Nord Stream 2 AG would be shut down or how Gazprom plans to proceed with the pipeline maintenance.

Switzerland's Minister of Economy, Guy Parmelin, told Swiss radio station RTS on Monday that all Nord Stream staff, more than 140 employees, who worked for the company in Zug had been fired.

Job cuts were confirmed on Tuesday by the company.

"Following the recent geopolitical developments leading to the imposition of US sanctions on Nord Stream 2 AG, the company had to terminate contracts with employees," it said. "We very much regret this development."

Germany, which gets half of its gas from Russia, backed Nord Stream 2 to diversify energy supplies for Europe.

But the project faced opposition within the EU and from the US for increasing the region's gas dependence on Russia and allowing Moscow to reduce volumes through Ukraine, for which it had to pay a transit fee.

Since the development of the Ukraine crisis last week, several large companies, including oil majors, said they would leave their Russian operations.

They included Shell, which said it would no longer be involved in Nord Stream 2, among other investments.