Zurich Insurance Group AG has decided to stop providing insurance services linked to the Nord Stream 2 gas pipeline, over the threat of further U.S. sanctions on the project, according to people close to the matter.
Source: Bloomberg News, by Vanessa Dezem
Zurich’s insurance plans cover the construction of the controversial Russia-Germany gas pipeline. The company could potentially be a target of a fresh round of sanctions that’ll penalize companies that provide technical certification and insurance to the project, said the people who asked not to be identified as the matter is private.
The decision comes as Nord Stream 2 steps up work on the 1,230-kilometer (764-mile) pipeline. The gas link, once complete, will deliver Russia’s natural gas to Germany and was halted after U.S. sanctions in December 2019, when all but 160 kilometers of the link had been put in place. The U.S. maintains that the gas link, owned by a unit of Gazprom PJSC, gives Moscow too much leverage over Europe.
Zurich would be the third company this month to pull out of NS2. The prospect of losing access to the U.S. market has already seen a certifier, Norway’s Det Norske Veritas Holding AS, and the Danish engineering firm Ramboll, cut ties with the project. Zurich is one of a number of insurers linked to the pipeline.
A Zurich spokesperson declined to comment on customer relationships to protect confidentiality. The firm has a “comprehensive compliance framework in place and is committed to fully comply with any applicable sanctions regulations.”
The project’s operator is set to resume construction in Danish waters this month. Vessels completed the pipe-laying of a section in Germany waters recently. Nord Stream 2 plans to complete major construction work one of the branches of the link in the first half of 2021.
Russia argues that the U.S. moves to tighten sanctions on the gas link from Russia to Germany are a bid to gain market share for American producers.
Nord Stream 2 should benefit European economies as the price of Russian pipeline gas is 20% lower than U.S. LNG, according to President Vladimir Putin.
Nord Stream 2 could still turn to other insurers including in Russia, as there’s no restriction on the nationality of the company writing insurance for the project, according to the Danish Energy Agency.