Russia’s Gazprom Acknowledges Risks About Nord Stream 2 Project

MOSCOW (Reuters) — Russian gas producer Gazprom has acknowledged in a Eurobond prospectus seen by Reuters on Tuesday that there are risks that the Nord Stream 2 gas pipeline project may be suspended or scrapped amid political pressure.

The undersea Russia-to-Germany pipeline, set to double the existing Nord Stream's annual capacity to 110 billion cubic meters, has become a point of contention between Moscow and Washington, which has slapped sanctions against the project.

The $11-billion project was suspended in late 2019 after the main pipe-laying company, Allseas, has dropped out amid sanctions. The work resumed last month when a small 2.6-km stretch of the pipeline was built in German's waters.

The main work is still yet to be resumed.

Gazprom, as a public company, is obliged to inform investors of all potential risks in Eurobond prospectus ahead of the debt papers offer to the market.

"While implementing our major international projects, such as the Nord Stream 2 pipeline, we have faced and may continue to encounter risks associated with changes in political conditions in various regions related to such projects," Gazprom said.

"In exceptional circumstances, including owing to political pressure, such changes may result in a project being suspended or discontinued."

Germany, which so far has supported the project which Moscow says is purely commercial, came under fresh pressure to scrap it after a Kremlin critic Alexei Navalny, who was poisoned last year, was arrested on Monday shortly after his return to Russia.

The United States seeks to block the pipeline as it plans to raise sales of its own seaborne liquefied natural gas to Europe and this week has moved to sanction Fortuna, one of the main pipe-laying ships Moscow planned to use to finish the works.

"We are closely following situation in order to continue works towards completion of this project," Kremlin spokesman Dmitry Peskov told reporters on Tuesday while calling fresh U.S. sanctions "unlawful".

It was not immediately clear how Gazprom plans to complete the construction. Should Nord Stream 2 be suspended or cancelled, Gazprom may face financial claims from contractors, it said in the prospectus.

"We may be required to pay compensation, including damages, penalties, cancellation fees and make other payments. We may also be required to record significant impairment provisions relating to our investments," Gazprom said.

The state gas company plans to issue 8-year Eurobonds denominated in U.S. dollars of a benchmark size, or no less than $500 million, IFR, the financial markets analytical service run by Refinitiv, said separately on Tuesday.

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