Congress pushing Russia to greater self-reliance
The European Commission is preparing to counteract the new sanctions the U. S. Congress may impose on Russia. This may sound as if Europe is siding with Russia after three years of upholding economic restrictions against it and the Western alliance is showing cracks. But it’s more complicated than that: Europeans are merely looking after their economic interests, which the U.S. bill clumsily steps on.
Last Tuesday, the U. S. House overwhelmingly approved a bipartisan bill that imposes new sanctions on Iran, Russia and North Korea. It still has to be passed by the Senate. The bill has a controversial section that empowers the president to sanction any company that provides technology, services, investment or any support to Russian export pipeline projects. That has dangerous implications for European companies that are partners in Russia’s planned Nord Stream 2 pipeline to Germany, including France’s Engie, the U.K.-Dutch Royal Dutch Shell, Austria’s OMV Group and Germany’s Uniper and Wintershall.
Nord Stream 2 is named in the U.S. bill as a threat to Europe’s energy independence. But the way the bill is written, it also threatens firms that work on other Russian pipelines, including Turkish Stream, already under construction, and any upgrades to the old pipeline system that runs through Ukraine.
The earlier version of the bill earned criticism from European energy companies, a sharply worded joint statement from the German and Austrian governments and a belligerent response from European Commission President Jean- Claude Juncker, who called on commissioners to be ready “within days” to respond, first by seeking U. S. assurances that sanctions won’t be imposed on EU companies, then by placing the U. S. law under Europe’s statute that invalidates other countries’ extraterritorial laws, then by retaliating in the World Trade Organization.
The Europeans have good reason to worry about the bill, even as amended. The pipeline part of the bill is likely to be President Donald Trump’s favourite. Trump has been pushing U. S. liquefied natural gas as an alternative to Russia’s pipeline exports to Europe. Europeans don’t trust Trump’s assurances that “the United States will never use energy to coerce your nations, and we cannot allow others to do so. You don’t want to have a monopoly or a monopolistic situation.”
The sanctions bill accuses Russia of weaponizing its gas exports — an obsolete criticism as far as Europe is concerned. The EU has fought Russian state- owned supplier Gazprom’s attempts to abuse its dominance in East- ern Europe for years, and now the parties are close to settlement almost entirely on the EU’s terms. Gazprom needs the European market as much as Europeans need Russian gas, if not more. Now that Russia is pliant, the EU doesn’t need U.S. attempts to impose its own, more expensive product on its market.
It’s likely, however, that Trump won’t push the Europeans too hard. His administration has criticized the bill, and if he signs it, he won’t be overzealous in implementing it. The current version says the president may introduce the sanctions “in co- ordination with allies of the United States.” European companies should be partially reassured by the change.
The reassurance likely won’t impress anyone in Moscow. Russia is already operating under the worstcase scenario. In recent weeks, it sped up construction of Turkish Stream under the Black Sea, using pipelaying ships that belong to Allseas Group S. A., a Swiss contractor — even though there is no final agreement on where the pipeline will resurface in Turkey. Last year, Gazprom also made sure to acquire underwater pipelaying capacity that would be immune to sanctions. Using a Gazprom-guaranteed loan, a Russian contractor paid $1 billion for a giant pipe-laying ship built in Singapore for a Nigerian company that ran into financial trouble.
Therein lies a major probl em with U. S. sanctions. While they irritate U. S. allies and businesses, they also push Russia towards greater self-sufficiency. Weaker sanctions force Russia to make a bigger effort to acquire, and ultimately to develop, the technology it may stop receiving from the West. That is hardly the outcome the U.S. ultimately needs.
RUSSIA IS ALREADY OPERATING UNDER WORST-CASE SCENARIO.