Nord Stream 2 insurer risk ending cover from Europe

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Nord Stream 2 insurer risk ending cover from Europe

LONDON Reuters - A simmering threat of sanctions against the operator of the $11 billion Nord Stream 2 pipeline risks shutting off cover from European insurers for the politically sensitive project to bring Russian gas directly to Germany.

The Kremlin-backed energy giant Gazprom leads the consortium, despite stiff opposition from the U.S. and some European nations, which has built the pipeline under the Baltic Sea - bypassing Ukraine amid a geopolitical battle for influence in the region.

The U.S. stepped up the sanctions on companies linked to the project last week. COM business energy us-imposes further sanctions on connection-with-normstream 2 gas pipeline -- 2021 -- 11 -- 22 this 20 week, while Germany's energy regulator temporarily halted its certification process. The Swiss consortium behind the pipeline had to form a German unit to show it has enough funding and independence from Gazprom, it said.

I don't think any insurers will touch this project with a barge pole until the situation becomes more settled, said Leigh Hansson, a partner at Reed Smith.

The U.S. and some European opponents of Nord Stream 2 say it will make Europe too dependent on Russian gas, allowing Moscow to expand its political, economic and military influence. As gas prices surge and the threat of power outages looms, other governments say it is vital to secure energy supplies.

The European insurers AXA and Zurich and Munich Re pulled out of insuring the construction this year because of concerns over new sanctions. The pipeline operator could be exposed to costs for damage, delays or litigation, and find it hard to secure loans if you don't have cover.

The Biden administration waived sanctions on the pipeline's operating company earlier this year, which theoretically allows non-U. Germany has agreed to take action if Russia uses energy as a weapon in its relations with Ukraine, despite the S. companies' commitment to provide financing and insurance.

The political risk analysts and lawyers say the likelihood of sanctions being imposed has risen as a build-up of troops on Ukrainian borders fuels fears of a Russian invasion.

Moscow has dismissed talk of a new Russian assault as inflammatory, but NATO and the U.S. warned Russia it would pay a high price for military aggression.

A Swiss-based operating company spokeswoman for Nord Stream 2 said all construction, operation and other activities of our company are covered by appropriate insurances. The company did not comment on its contractual partners.

In the absence of European insurers, the project could use Russian entities, lawyers say. One Russian insurer - now renamed RNCB Insurance - has already been sanctioned.

RNCB Insurance didn't respond immediately to a request for comment.

European insurers, such as those in the Lloyd's of London insurance market, could in theory underwrite the pipeline, Chief Executive John Neal said.

Neal said that we need to be hugely respectful of sanctions, because we've previously been involved with the Nord Stream project. Lloyd's of London didn't want to say anything further.

Munich re CEO Joachim Wenning told Reuters it is not currently involved with Nord Stream 2 due to sanctions issues.

Zurich didn't comment on potential or existing customer relationships, but stressed that it placed high priority on sanctions compliance. AXA didn't want to say anything.

Allianz, Europe's biggest insurer, said it could not comment on client relationships, but said the German firm followed all sanctions regimes very thoroughly. With construction complete, insurance for the pipeline itself would protect against problems, such as property damage, business interruption and directors and officers' and officers' liability.

Ross Denton, head of international trade at Ashurst, said that the delayed approval will likely slow arrangements.

Experts say that the United States could extend sanctions to European firms at short notice.

Nigel Kushner, chief executive of London law firm W Legal, says the U.S. has a reputation for using sanctions against tactics that aggravate NATO and the West.

He says that the U.S. has ramped up sanctions on almost every occasion.

Who in their right minds will jump into something and finance something, because there is a risk that they will be sanctioned?

I think that the insurers will be reticent.