From bad to worse – US and EU response to Nord Stream 2

From bad to worse – US and EU response to Nord Stream 2

Americans no longer coordinate their sanctions policy with the European Union; and thus, increase the popularity of Nord Stream 2 supporters in Europe. However, only a unilateral approach to this matter stands a chance at stopping this contentious project. This discussion should also be about Germany’s schizophrenic policy.

EC keeps to the letter of the law

So far the European Commission’s policy was based on the assumption that it could not block Nord Stream 2, which is formally an initiative led by a Russian company and bankrolled by companies from Western Europe. This approach is questioned by Poland’s Office of Competition and Consumer Protection. Previously the office decided that the parties involved could not form a consortium, as it was against the competition law. Now it is investigating whether the companies’ current form of cooperation is just a scheme to get the same result without establishing a consortium. Moreover, we should acknowledge the fact that the European Commission is inconsistent, as it managed to stop the South Stream gas pipeline, which was to land in Bulgaria, by questioning the legality of tenders. It is unclear whether the EC would be able to stop Nord Stream 2 if it had political support, like it did in the case of its southern twin.

Still, the Commission did take measures to protect Europe against the negative consequences of Nord Stream 2. In 2019 Brussels proposed to review the EU law, specifically the Gas Directive, so that it could be applied to the contentious gas pipeline from Russia to Germany after it will be completed. This would ensure the protection of European clients against possible abuse by Russia. Poland together with other countries supported this initiative, which yielded initial success. Germany has to implement the Gas Directive’s regulations with regard to Nord Stream 2, which will at least delay the project, which originally made Gazprom the sole provider and owner of the pipe through a company Nord Stream 2 AG. That was in line with Russian law, which gave the company a monopoly on export via gas pipelines, but it was against the Gas Directive, which imposes ownership unbundling. As long as Nord Stream 2 is not adapted to the EU law and the EC does not approve its application, the gas will not be allowed to flow, even if the pipe is completed.

The US is continuing its old policy in Trump’s era

Americans took a step further and want to stop the construction of Nord Stream 2. They do not agree with the EC’s assumption that the project cannot be legally stopped. So, they introduced sanctions against companies that are building the contentious gas pipeline, which forced Switzerland’s Allseas to abandon the construction site. They are also planning to widen the sanctions to encompass all entities, including European companies, that support Nord Stream 2. US senators sent a letter to the harbor in Germany’s Sassnitz warning that the new restrictions would financially destroy it. The US administration started a dialogue with German businesses warning against the negative consequences of the impending restrictions. This policy has not been consulted with the European Commission, which potentially could stop Nord Stream 2 provided Russians are not be able to finish the pipe on their own, or transmit gas right after it will be completed. Germany’s Uniper, which is the first financial partner of Nord Stream 2, admitted it was concerned about the future of the contentious gas pipeline, and it was considering lowering its contribution in case the project was delayed further or even stopped. It happened on the day Germany’s Foreign Minister Heiko Maas was visiting Moscow, where he maintained, together with his Russian counterpart – Sergey Lavrov, that in the end Nord Stream 2 will deliver gas to Europe.

The case of Nord Stream 2 shows how Brussels and Washington changed their approach to sanctions against Russia after the illegal annexation of Crimea. Until then they coordinated their efforts very well. However, Americans created a precedence when in 2015 they introduced sanctions against Gazprom’s project on the Yuzhno-Kirinskoye field on Sakhalin without coordinating this decision with the EC . This was before president Donald Trump, who is criticized for pursuing policies that go against the expectations of Western Europe, assumed office. Back then the EC was silent and did not comment on what the Americans were doing. The introduction of US sanctions at the end of 2019 and plans to widen them in 2020 are an analogous situation to this case, but this time the EC decided to stand up for European companies that might be impacted by the new restrictions. The difference in Brussels’s reaction in these two instances is apparent, as the EU did not intervene on Shell’s behalf despite the fact that the company was engaged in the project in Sakhalin.

Americans want to stop Nord Stream 2 and to that end they are organizing an alliance across the political aisle, which goes back to Ronald Reagan’s foreign and security policy, whose goal was to limit Russian influence over Europe, also by taking action in the energy sector. The European Commission is acting in a principled way and in line with its own interpretation of the letter of the law, believing that what Americans are doing is an example of unilateralism that goes against the international law. Brussels’s position is winning more support among the proponents of NS2, who in turn are getting more support across Europe, which is increasingly disappointed in Donald Trump who based his policy on giving instructions to Europeans. Perhaps a policy more akin to Barack Obama’s coordinated efforts would be more understandable on the Old Continent, but – and it is worth stressing – it could make it impossible to introduce such radical solutions, as the current widening of sanctions, which could block NS2.

This means the policy of the European Commission fails at delivering the results expected by those opponents of the pipeline, who are seeking to block the project. Whereas, the decisions made by Washington make it possible, but at the same time because of the US President’s clumsy diplomacy, they fuel anti-American sentiment in Europe, giving more support to the proponents of the contentious investment. A coordinated, transatlantic policy against NS2 would be less radical, but more legitimate on the continent. Perhaps this would make it impossible for Russia to play off Europe against the US. However, as the case may be it would not undermine the project itself. A unilateral policy pursued by the US could stop NS2, but it creates a growing chasm between Brussels and Washington. When the West coordinates its sanctions against Russia in the energy sector, it is bad (ineffective). Yet, things may be even worse when done separately, as it may deepen the transatlantic disputes with the entire administration, which are visible in a number of subjects over which Donald Trump was successful at antagonizing Europe.

Germany’s true schizophrenia

eThis is a contribution to a reflection on the most schizophrenic policy on Nord Stream 2, which is pursued by Germany. On the one hand, Berlin wants to maintain gas transit via Ukraine; but on the other, it wants to continue doing business with Russians. This is because of its unilateral economic policy, that goes against the principles of supply security and diversification professed by the European Commission. We should continue talking about Trump’s policies, but we cannot overlook Germany’s. If Germany recognized the EC’s position that Nord Stream 2 goes against European interests, Berlin could stop the pipe’s construction overnight by withdrawing its support for the project. Instead, Germany prefers to coordinate its policies on this issue with Russia.

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