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EU Readies For Transatlantic Fight Over New U.S. Sanctions On Russia

  • Rikard Jozwiak

A construction site for the Nord Stream energy pipeline in Portovaya Bay near Vyborg. (file photo)

BRUSSELS -- When it comes to Europe's energy security and dependence on Russia for natural gas, Brussels has a message in mind for Washington: don't make our business your business.

This has become evident as the European Commission awaits word from Washington on the fate of a bill that would introduce new, sweeping sanctions against Russia for meddling in the 2016 U.S. presidential election that brought President Donald Trump to the White House.

Agreement on the wording of a revised bill, which was reportedly altered to address European concerns by lessening the potential impact on a pet gas-pipeline project, was recently reached by a group of bipartisan negotiators representing both houses of Congress, and announced by Congressional Democrats on July 22.

A European Commission source familiar with the executive body's concerns but not authorized to speak on the matter told RFE/RL that the EU is "increasingly confident that the new legislation will contain provisions or assurances that protects the EU's energy interests." But as the bill awaits a vote in the U.S. House of Representatives, which is expected to pass the measure on July 25, EU commissioners are watching closely -- ready to retaliate, if necessary, to protect businesses and Brussels' ability to forge its own energy policies with Russia without U.S. interference or attempts to muscle in as an energy supplier.

The 28 EU commissioners are planning to discuss the issue on July 26, the day after the U.S. House vote, with an eye on having a response in hand should the bill pass the Senate and eventually be signed by President Trump.

Another European Commission source, speaking on the same conditions of anonymity, suggested that the "EU simply will take note of the vote in the House of Representatives, but wait with any real measures until the bill is signed by the president, whenever he intends to do so."

Bone Of Contention

Natural-gas supplies are a bone of contention within the EU itself, with some (mainly Central and Eastern European) members decrying an over-reliance on Russian imports and calling for greater diversification of supply.

The new sanctions have prompted concerns within Europe over how the legislation -- which would give the U.S. president the authority to impose sanctions against any companies that aid Russian export pipeline projects -- might affect European suppliers for the proposed Nord Stream 2 project, a contentious extension of a Brussels-backed pipeline that supplies Western Europe with Russian gas.

U.S. President Donald J. Trump in Warsaw in July.
U.S. President Donald J. Trump in Warsaw in July.

Trump, meanwhile, traveled recently to Eastern Europe to promote U.S. supplies as a means of countering European reliance on Russian natural gas. "If one of you need energy, just give us a call," Trump told a July 6 meeting in Warsaw that was held to discuss the "Three Seas Initiative" -- a Croatian-Polish project that aims to boost cooperation, including in the sphere of energy, among 12 Russian-gas reliant EU states in the vicinity of the Adriatic, Baltic, and Black seas.

Trump's comments have fed a growing suspicion among some European countries that Washington sees the proposed sanctions as a way to open up a European market for liquefied natural gas (LNG) shipped across the Atlantic.

Christian Egenhofer, who works as a senior fellow and energy expert with the Brussels-based think-tank CEPS, explains that the U.S. State Department had long expressed worries that over-reliance on Russian/Gazprom gas could create a security issue for Europe.

"The argument is that once you are having higher reliance it makes it more difficult to impose sanctions in case something goes wrong," he said. "The new twist is now that it was linked recently to this possibility to carve out a market for U.S. gas which would come in the form of LNG."

Judy Dempsey, a senior fellow at Carnegie Europe, is even blunter in her assessment of how the European Commission and some European countries such as Germany and Austria perceive the prospect of new sanctions.

"They see this as a blatant attempt to use the sanctions to weaken European companies and get in to make up for the shortfall if, indeed, the Russian gas imports are drastically reduced because of these measures," Dempsey said. "As it is, the Americans have been very active in trying to export liquefied natural gas to Europe and [are] looking for a huge chance now, especially since shale gas is coming online."

'Detrimental Impacts'

Brussels views Nord Stream II, which would bring Russian gas to Germany by way of undersea pipelines, circumventing the Baltic states and Poland, as a way to ensure the continued provision of cheap natural gas. But the bipartisan U.S. bill singles out Nord Stream 2 as having "detrimental impacts on the European Union's energy security, gas market development in Central and Eastern Europe, and energy reforms in Ukraine," a view that is in line with concerns expressed by some EU members but not shared by the bloc overall.

A European Commission impact assessment of an earlier version of the proposed sanctions determined that Nord Stream 2 would be a high-profile target, but that such sanctions could also potentially affect maintenance work on other pipelines in former Soviet Union states as well as other sanctions-complying EU-Russia business in a number of fields, such as mining and the transport sector.

The EU's working relationship with Gazprom also comes into play here. Since finding that the Russian energy giant broke EU antitrust rules in 2015 by "pursuing an overall strategy to partition Central and Eastern European gas markets," Gazprom has worked hard to get back on good terms with Brussels.

Earlier this year, it offered commitments that, according to the European Commission, would "enable the free flow of gas in Central and Eastern Europe at competitive prices." It these warmer relations, on the EU's terms, that some European companies want to take advantage of, according to Dempsey.

"Gazprom knows that it now has to deal with the [European Commission] more and more. And in some ways, Gazprom's behavior has improved a little," she told RFE/RL on July 25. "There is no doubt about this and energy experts say this. But, you know, if a French company or a particular German company can get cheaper gas now from Russia and not just because of the lower gas prices but because Russia needs to sell gas, then in some ways the Europeans are in the driving seat."

Like the first Nord Stream pipeline, the Nord Stream 2 project would use undersea conduits to bypass the Baltic states and Poland in delivering gas supplies to Europe. (file image)
Like the first Nord Stream pipeline, the Nord Stream 2 project would use undersea conduits to bypass the Baltic states and Poland in delivering gas supplies to Europe. (file image)

Essentially, now that the EU appears to have gained control of its working relationship with Gazprom, it doesn't want to see the United States muck things up.

Earlier concerns expressed by European energy companies, European Commission President Jean-Claude Juncker, and the German and Austrian governments, appear to have been addressed in the revision of the bill by rewording it to note that the U.S. president could introduce the sanctions "in coordination with allies of the United States."

That compromise appears to have fallen short of fully assuaging the European Union, and over the last few days the bloc's mission in Washington has worked intensively to lobby Congress ahead of the House vote. European Commission spokesperson Margaritis Schinas on 24 July confirmed that the European Union was "activating all diplomatic channels to address these concerns [stemming] from these U.S. measures with our U.S. counterparts."

Schinas added that "we in the European Union will have an interest in this discussion and we expect this interest to be addressed in the ongoing pre-legislative process."

It the EU fails to get such assurances, it can consider a number of measures in response to the U.S. legislation, including enacting its own laws to nullify the new U.S. sanctions, or filing a complaint at the World Trade Organization (WTO).

An EU diplomat familiar with trade issues who wasn't authorized to speak on the record told RFE/RL that a WTO complaint could lead to tariffs on U.S goods, especially in the energy sector, but that the whole process "would take many months with a lot of legal wrangling."

Nuclear Option

A final, nuclear, option would be bans on doing business with certain, unspecified U.S companies. But this would need the agreement of all 28 EU member states, something that at this moment looks improbable as several European countries are keen on maintaining good trade relations with the United States.

Ultimately, any response will carefully weigh past good cooperation with the United States against current European interests.

A diplomat from a Western EU member state, speaking to RFE/RL off the record, said that when international sanctions were first imposed against Russia after its annexation of Crimea in 2014, Washington and Brussels worked "hand in hand" on all measures to ensure that neither side would "exploit market opportunities previously enjoyed by the other side."

President Trump vowed during his recent trip to Poland that "the United States will never use energy to coerce your nations," but also said "we cannot allow others to do so."

Considering the concerns that Washington might be sticking its nozzle in Europe's gas business, one diplomat from an Eastern EU member appeared to yearn for the way things used to be done between Brussels and Washington.

"While we are against Nord Stream 2, 100 percent, we also recognize that it is very important that the EU and U.S. cooperate when it comes to sanctions," said the diplomat, who spoke on condition of anonymity because he was not authorized to discuss the current dispute. "That has always been the case before and that is why this new bill can be troubling."

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    Rikard Jozwiak

    Rikard Jozwiak covers the European Union and NATO for RFE/RL from his base in Brussels.​ Write to him at rikard.jozwiak@gmail.com

     

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