REYKJAVIK, Iceland — The Biden administration on Wednesday decided against sanctioning the company in charge of a Russian gas pipeline, just hours before Secretary of State Antony Blinken sat down with Russian Foreign Minister Sergei Lavrov in the first face-to-face gathering of a Biden Cabinet member and their Russian counterpart.

The decision drew criticism from Russia hawks in Congress who want the United States to block the multibillion-dollar Nord Stream 2 project because they say it gives Moscow leverage over U.S. allies in Europe. But Blinken stressed Washington’s preference for a “predictable, stable relationship with Russia” as he sat across the table from Lavrov, each man flanked by six aides.

Blinken and Lavrov met on the sidelines of the biennial Arctic Council meeting in Reykjavik, the chilly Nordic capital known for hosting meetings of U.S. and Soviet leaders during the Cold War. The two diplomats gave each other an elbow bump and a smile before sitting down and exchanging brief remarks on the importance of mutual cooperation — a markedly friendlier tone than Blinken’s combative first meeting with his Chinese counterparts in March.

The Biden administration views the nearly completed pipeline running from Russia to Germany as a dilemma that forces it to choose between restoring its beleaguered relationship with Berlin and keeping its public promise to oppose the project.

Wednesday’s decision is the clearest sign yet that the Biden administration will not put its concerns about the pipeline above its relations with European allies who view U.S. attempts to undermine the project as a violation of their sovereignty.

“The secretary has determined that these sanctions would negatively impact our relations with Germany, the E.U. and other allies and partners,” said a senior State Department official directly involved with the decision, who spoke on the condition of anonymity to discuss internal policy thinking.

“The administration inherited a pipeline that was over 90 percent complete. Stopping it has always been a long shot, but that doesn’t mean we’re ready to give up that last 10 percent,” the official added.

The Biden administration announced it would sanction four entities and four pipe-laying vessels involved in the project, but did not move against the most consequential targets: the company Nord Stream 2 AG and its CEO, Matthias Warnig.

Sen. Marco Rubio (R-Fla.) called the decision “naive, deceitful and weak,” and Sen. Ben Sasse (R-Neb.) said it gives Russian President Vladimir Putin “massive strategic leverage in Europe.”

German Foreign Minister Heiko Maas, meanwhile, praised the decision as “a constructive step which we are happy to further discuss with our partners in Washington.”

The move may help stabilize the U.S. relationship with Russia, which has plummeted to Cold War levels. The Biden administration’s grievances include interference in U.S. elections, the attempted murder of Russian opposition leader Alexei Navalny, a ransomware attack on a key U.S. pipeline by hackers the U.S. believes are based in Russia, and the Kremlin’s military provocations in Ukraine.

President Biden has harshly criticized Putin, calling him a “killer,” while conveying that he seeks a productive relationship with the Russian leader, whom he will meet in Europe in the coming weeks.

Blinken noted Tuesday that the Biden administration has imposed sanctions on Russia for its cyber offensiveness, such as the SolarWinds hack, while extending the New START arms control treaty during his first week in office.

U.S. relations with Russia under President Donald Trump were turbulent, with the president routinely praising Putin while his Cabinet pushed through tough measures opposed by the Kremlin, including the transfer of powerful antitank missiles to Ukraine and a raft of economic sanctions.

The message Blinken brought during his travels to Iceland and Denmark this week was that the Biden administration would oppose Russian efforts to threaten its allies but would seek to work with Moscow “where it’s in our mutual interest to cooperate,” he told reporters.

Lavrov, as he sat across the table from Blinken, said Moscow and Washington have “serious differences” but “our task is to make the best of the diplomatic opportunities that we have.”

U.S. officials have said part of the Blinken-Lavrov meeting would be about ensuring a successful summit between Putin and Biden in Europe in the coming weeks.

The Arctic Council consists of the eight countries with territory in the Arctic Circle, established in 1996 to address environmental and sustainable development issues.

Blinken has voiced opposition to Moscow’s expanded military presence in the Arctic, which he said “increases the dangers of accidents and miscalculations and undermines the shared goal of a peaceful and sustainable future for the region.”

Lavrov forcefully rejected any criticisms of Russia’s Arctic policy, telling reporters on Monday that “it has long been common knowledge that this is our territory, our land. We are in charge of keeping the Arctic coast safe. Everything Russia is doing there is absolutely legal.”

Lavrov said Monday that the Biden administration’s remarks on wanting a more stable relationship may be just empty rhetoric. “Apparently, a decision was made to promote stable, predictable relations with Russia,” he said at a news conference in Moscow. “However, if this includes constant and predictable sanctions, that’s not what we need. Our attitude towards the U.S. includes the hope that normalized relations will be based on specific actions rather than words — of which we have heard too many.”

Lavrov recommended holding regular meetings of military officials representing the Arctic Council members — a proposal Blinken rejected.

“I think the Arctic Council is very appropriately focused and should remain focused on how we advance peaceful cooperation in the region,” Blinken said. “We need to avoid a militarization of the region.”

Karoun Demirjian in Washington contributed to this report.