Germany Winding Down Sanctions-Busting Pipeline Foundation

BERLIN (Reuters) — A public foundation established to help Gazprom complete the Nord Stream 2 pipeline despite U.S. sanctions is to be wound down, the premier of the German state that set it up said on Monday.

The foundation was set up last year by the state of Mecklenburg-Vorpommern, where the Baltic Sea pipeline makes landfall. 

"I asked the foundation's board to pause the foundation's work, and, to the extent legally possible, to start work on dissolving it," state premier Manuela Schwesig said on Twitter.

Set up with a 20-million-euro ($22.4 million) donation from Nord Stream 2 AG, wholly owned by Russia's state-controlled Gazprom, and 200,000 euros from the state government, the foundation ostensibly financed environmental causes, for example by offering to buy every kindergarten in the state a tree.

But a separate, commercial arm of the foundation was free to buy and own assets needed to complete the pipeline, taking advantage of a loophole in U.S. legislation that excluded entities owned by European states from the sanctions.

The commercial arm was run by an individual appointed by Nord Stream 2 AG, whose identity is not known, and its operations were and remain a secret, despite being housed within a public foundation.

Nord Stream 2 AG, based in the Swiss town of Zug, did not immediately respond to a request for comment on Schwesig's announcement.

The pipeline was heavily criticized from the start: by bringing gas directly from Russia to Germany, it would have cut Ukraine out of the lucrative gas transit trade and deprived Ukraine of a lever against its hostile larger neighbor, by whom it was invaded last week.

Critics said the pipeline was a political project designed to weaken Ukraine, though supporters, including the German government, said it was a purely commercial venture.

Chancellor Olaf Scholz announced last week that the pipeline, now complete, would not go into operation.

Schwesig, who said she would be absent from a debate in the state parliament on Tuesday on Russia's invasion of Ukraine as she was recovering from an operation, defended her state against charges that it had been too close to Russian President Vladimir Putin.

"That is nonsense," she said. "I never talked with President Putin and never supported his actions against Ukraine," adding that there was no justification for Russia's attack on Ukraine.

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