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The US and Germany sign an agreement to complete the controversial Russian Nord Stream 2 pipeline

Workers during the production process of pipes in the Nord Stream 2 plant in Mukran on the island of Ruegen in Sassnitz, Germany.

Carsten Koall | Getty Images

WASHINGTON – The United States and Germany have reached an agreement to enable the completion of the $ 11 billion Nord Stream 2 pipeline, a sensitive, longstanding point of contention between the otherwise steadfast allies.

The agreement between Washington and Berlin announced on Wednesday aims to invest more than 200 million euros in energy security in Ukraine as well as in sustainable energy across Europe.

“Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will act at the national level and press for effective action at the European level, including sanctions, to restrict Russian export capabilities to Europe in the energy sector. "Said a senior State Department official when he called reporters on Wednesday.

The senior State Department official, who requested anonymity to openly discuss the deal, added that the US will also retain the privilege to impose sanctions if Russia uses energy as a coercive measure.

The official said the United States and Germany are "firmly committed to the sovereignty and territorial integrity" of Ukraine and have therefore consulted closely with Kiev on the matter.

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The discomfort with the nearly complete Nord Stream 2 project, a sprawling underwater pipeline that will pump Russian gas directly to Germany, stems from Moscow's history of using the energy sector to influence Russia's neighbor, Ukraine.

When completed, the underwater pipeline from Russia to Germany will stretch over 764 miles, making it one of the longest offshore gas pipelines in the world. Last month the Kremlin announced that only 100 miles of Nord Stream 2 remained to be built.

In May, the US lifted sanctions against Switzerland-based Nord Stream 2 AG, which operates the pipeline project, and its German CEO. The waiver gave Berlin and Washington three more months to reach an agreement on Nord Stream 2.

The deal comes on the basis of Chancellor Angela Merkel's visit to the White House, the first visit by a European leader since Biden took office and probably her last trip to Washington after nearly 16 years at the helm of Europe's largest economy.

Merkel, the first woman at the helm of Germany, has announced that she will be stepping down after the federal elections in September.

At a joint press conference in the White House, Merkel promised a tough stance on Russia should Moscow abuse the energy sector for political purposes.

On Wednesday, the White House announced that Biden would receive Ukrainian President Volodymyr Zelenskyi next month.

Prior to the July 15 meeting, Biden government officials and representatives from Germany told CNBC that the leaders of the world's largest and fourth-largest economies were anxious to rebuild a frayed transatlantic relationship.

A handout photo from the Federal Government Press Office of Chancellor Angela Merkel and US President Joe Biden is in the White House overlooking the Washington Monument in Washington, DC on July 15, 2021.

Guido Bergmann | Handout | Getty Images News | Getty Images

"Of course we have had a number of seizures in bilateral relations in recent years," said a senior German government official who requested anonymity in order to speak openly about Merkel's agenda.

"The entire focus was on issues where we disagreed," the official said, adding that sometimes "allies were viewed as enemies".

Throughout his term in office, former President Donald Trump often disguised allies and often highlighted Merkel's Germany as "defaulting on its payments" to NATO.

Last year, Trump approved a plan that would move 9,500 U.S. soldiers stationed in Germany to other countries, another blow to transatlantic relations.

“The American-German relationship was severely negatively impacted during the Trump administration. So there was no question that the relationship needed to be renewed, etc., ”said Jenik Radon, associate professor at Columbia University's School of Public and International Affairs.

Radon, a legal scholar who has worked on energy issues in more than 70 countries, spoke about the complexities of global energy agreements.

The Nord Stream 2 pipeline is intended to double the amount of natural gas exported directly to Germany via a network under the Baltic Sea, bypassing an existing route through Ukraine.

"If you ever try to pipeline gas or oil through transit countries, you always find yourself in a predicament because a third party is involved," said Randon.

"It's not just the seller, it's not just the buyer, there is transit too, but you don't have absolute control over this third country," he said, adding that "transit deals are among the most difficult".

Workers are seen at the construction site of the Nord Stream 2 gas pipeline near the city of Kingisepp in the Leningrad region, Russia, June 5, 2019.

Anton Vaganov | Reuters

Experts in the region see the underwater pipeline as a form of Russian aggression against Ukraine.

"By abolishing Ukraine as a transit country, Russia can deny it the benefits of gas delivery through its territory," said Stephen Sestanovich, Senior Fellow on Russian and Eurasian Studies at the Council on Foreign Relations.

There are two elements that people often confuse, he added, citing Russia's ability to use natural gas as a political weapon against Ukraine and its ability to harm the Ukrainian economy.

"That is why the Biden government has concentrated on limiting or compensating for any economic damage – and wants firm German approval of this goal," he said.

However, Russia's influence on its American allies has weakened somewhat due to shifts in the energy markets, Sestanoitsch said.

"In the years that Nord Stream 2 has been discussed and is now almost finished, the energy markets have changed and it has become much more difficult for Russia to hold European countries hostage – there are just too many alternative sources of energy," said he. "The image we have of Russia, which has our allies in a political stranglehold, is out of date."

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