July 16, 2021

By Andrea Shalal and Timothy Gardner

WASHINGTON (Reuters) -President Joe Biden and German Chancellor Angela Merkel failed on Thursday to settle their dispute over Russia’s Nord Stream 2 natural gas pipeline but said they agreed that Moscow must not be allowed to use energy as a weapon to coerce its neighbors.

“Good friends can disagree,” Biden told reporters after two meetings with Merkel at the White House, adding that both leaders had asked their teams to look at practical measures they could take together if Russia’s actions posed a threat.

Biden said he expressed his long-standing concerns to Merkel about the $11 billion pipeline, which would deliver gas from the Arctic to Germany via the Baltic Sea, bypassing Ukraine and depriving it of valuable transit fees.

Washington is pressing Germany to find ways to ensure that Russia could not use the pipeline to harm Ukraine or other allies in Eastern Europe.

Officials from both countries have been negotiating a solution that would stave off the resumption of currently waived U.S. sanctions, but it became clear this week that no deal would be ready in time for the Biden-Merkel meeting.

The Biden administration concluded in May that Nord Stream 2 AG, the company behind the project, and its chief executive engaged in sanctionable behavior. But Biden waived the sanctions to allow time to work out a deal and avoid derailing his efforts to repair ties badly frayed during former President Donald Trump’s administration.

The pipeline is 98% complete https://www.reuters.com/business/energy/nord-stream-2-ceo-says-construction-work-be-finished-august-2021-07-12 and should be finished in late August, its CEO said this week.

Biden told reporters that he and Merkel are “absolutely united in our conviction that Russia must not be allowed to use energy as a weapon to coerce or threaten its neighbors.”

Merkel told reporters that Germany, Europe’s biggest economy, has different views on the pipeline from the United States. But she said Ukraine should remain a transit country and Berlin would take “actively” respond if Russia did not respect Ukraine’s sovereign rights.

Asked to elaborate, Merkel said the European Union had “a number of instruments” it could use, including sanctions, if Russia violated its commitment to continue to ship natural gas through Ukraine.

Russia says the pipeline, led by Russian state energy company Gazprom and its Western partners, will go into operation later this year.

Biden said both leaders agreed to continue to support the sovereignty and territorial integrity of Ukraine.

The two countries agreed to collaborate to accelerate moves to tackle the climate crisis in emerging economies, pledging to mobilize investment in Central and Eastern Europe.

A joint statement singled out investments aimed at supporting Ukraine’s energy transformation, energy efficiency and energy security. The move could factor into an eventual agreement, expected before August, to end the threat of U.S. sanctions over Nord Stream 2.

(Reporting by Andrea Shalal, Timothy Gardner and Jeff Mason; Editing by Sandra Maler and Peter Cooney)

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