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Angela Merkel with Vladimir Putin. Photo: Adam Berry/Getty Images

The Biden administration will waive sanctions on the corporate entity and CEO overseeing the construction of Russia’s Nord Stream 2 pipeline into Germany, according to two sources briefed on the decision.

Why it matters: The decision indicates the Biden administration is not willing to compromise its relationship with Germany over this pipeline, and it underscores the difficulties President Biden faces in matching actions to rhetoric on a tougher approach to Russia.

Driving the news: The State Department will imminently send its mandatory 90-day report to Congress listing entities involved in Nord Stream 2 that deserve sanctions. Sources familiar with the drafting of the report tell Axios the State Department plans to call for sanctions against a handful of Russian ships.

  • The State Department will also acknowledge that the corporate entity in charge of the project (Nord Stream 2 AG) and its CEO (Putin crony and former East German intelligence officer Matthias Warnig) are engaged in sanctionable activities.
  • However, the State Department will waive the applications of those sanctions, citing U.S. national interests.
  • This planned move seems at odds with Secretary of State Antony Blinken's statement, made during his confirmation hearing: "I am determined to do whatever we can to prevent that completion" of Nord Stream 2.

Between the lines: This planned move also sets up a bizarre situation in which the Biden administration will be sanctioning ships involved in the building of Nord Stream 2 but refusing to sanction the actual company in charge of the project.

  • Sources close to the situation say that top Biden officials have determined that the only way to potentially stop the project — which is 95% complete — is to sanction the German end users of the gas.
  • And the Biden administration is not willing to rupture its relationship with Germany over Nord Stream 2.

The big picture: As Axios has previously reported, the completion of Nord Stream 2 would be a huge geopolitical win for Putin and give him substantial new leverage in Europe.

  • Russian gas currently has to pass through Ukraine on its way to Europe. Bypassing Ukraine with a direct pipeline to Germany is an opportunity for Russia to advance its goal of isolating its former client state, now a fledgling democracy, from Western Europe.
  • Russia has a long track record of cutting critical supplies to its neighbors during disputes, including cutting off gas to Ukraine.
  • The pipeline could be finished by the summer without a major intervention to stop it.

A State Department spokesperson told Axios the Biden administration had made clear that companies participating in Nord Stream 2 could face sanctions and would "continue to underscore U.S. strong, bipartisan opposition to this Russian malign influence project."

  • "The Biden administration has been clear that the Nord Stream 2 pipeline is a Russian geopolitical project that threatens European energy security and that of Ukraine and eastern flank NATO allies and partners," the spokesperson said.
  • The State Department spokesperson would not confirm the waivers or any details about the imminent report.

Administration sources contend any waivers applied to sanctions could be removed at any time.

  • They also argue the act of sanctioning and then waiving an entity establishes leverage over it, given the company would know that at any moment, the U.S. could reinstate the sanction.
  • They also add that the Biden administration's goal remains to see that the pipeline doesn't go into use.

Go deeper

Federal judge voids permits for major Alaska oil project

Illustration: Aïda Amer/Axios

A federal judge on Wednesday voided the permits for a ConocoPhillips oil project in Alaska's North Slope.

Why it matters: The ruling deals a blow to the Willow oil project, which could produce up to 160,000 barrels of oil per day, after the Trump administration approved drilling for it. The government's support for the project continued into the Biden administration.

56 seconds ago - World

Scoop: Ukraine tells senators post-invasion sanctions are no help

Zelensky. Photo: Johanna Geron/POOL/AFP via Getty Images

Ukrainian President Volodymyr Zelensky told U.S. senators visiting Kyiv this week that waiting to impose sanctions on Russia until after an invasion is of no use to Ukraine, according to four sources familiar with the discussions.

Why it matters: The Senate is currently working on a major sanctions package to deter Russia from attacking Ukraine. Democrats and Republicans are united in their support for Ukraine, but divided over whether it would be more effective to sanction Russia now to signal resolve, or hold up the threat of future sanctions to demonstrate the high costs of an invasion.

Starbucks drops worker vaccine or test requirement after SCOTUS ruling

Photo: Jakub Porzycki/NurPhoto via Getty Images

Starbucks has dropped plans to require that U.S. workers get the COVID vaccine or submit to weekly testing, the company announced Tuesday in a memo to employees.

Why it matters: The company's decision comes in response to the Supreme Court's ruling last week to block the Biden administration's COVID-19 vaccine-or-test requirement for large employers.