US sanctions and Nord Stream 2: Every dog has its day?

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The new US sanctions against Russia only added fuel to EU divisions over its energy dealings with Russia, write Aleksandra Gawlikowska-Fyk and Bartosz Wiśniewski. [European Commission]

The US’ new Russia sanctions only added fuel to the EU’s divisions over how to deal with Russian energy, write Aleksandra Gawlikowska-Fyk, Bartosz Wiśniewski.

Aleksandra Gawlikowska-Fyk and Bartosz Wiśniewski are researchers at the Polish Institute of International Affairs (PISM).

Last week, President Trump signed into law changes related to Russia sanctions. The US Congress initiated these changes almost exclusively out of internal political considerations. Still, the sanctions were used to shield the most controversial energy project involving Russia, the Nord Stream 2 gas pipeline. All at the expense of US-European cooperation vis-a-vis an unrelentingly aggressive Russia.

Advocates of Nord Stream 2 kept arguing, contrary to the unfolding congressional debate, that new sanctions are squarely about eliminating competition for US LNG exports to Europe. They clearly hoped to mislead the public.

In June, Austrian Chancellor Christian Kern and German Foreign Minister Sigmar Gabriel openly scolded the legislative process in the United States. In late July, the CEO of energy company OMV, an Austrian sponsor of Nord Stream 2, said that the United States, Poland and the Baltic states should have no “right to exercise a veto over Euro-Russian gas relations.”

However, existing infrastructure already enables Russia to supply Europe with volumes of natural gas far greater than US companies’ capacity to send LNG across the Atlantic Ocean, even with all planned export terminals.

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At the centre of the debate is a project that sows divisions between EU member states and jeopardises the energy interests of some of them and, by extension, the energy security of the EU as a whole.

The European Commission is currently working on a formal mandate for negotiations with Russia over the legal status of the pipeline. At the end of June, the Commission circulated a draft mandate among EU member states.

In light of the US’ move on Russia sanctions, the Commission may find itself under pressure from those EU member states whose companies are pushing for Nord Stream 2. What they demand is that the so-called third energy package is not applied to the pipeline.

Backers of Nord Stream 2 so far tried to keep a low profile. That is because when the project was criticised in September 2015, Gazprom and five energy companies from EU member states announced that they would move forward to expand the pipeline. Granted, these plans were not new. Still, the timing of the announcement, paired with purely commercial rationale, came across as a bold spin of political realities. It was a little more than a year since Russia annexed Crimea, and the EU was working on the details of the Energy Union, a concept predicated on the need to lessen energy dependence on Russia.

In an attempt to dodge criticism, five EU-based companies extended a loan to Gazprom. For its part, Gazprom applied for construction permits, secured Finland’s logistical support along the pipeline route, and conducted environmental consultations. All according to the project timetable and in line with the classic Russian proverb: “the quieter you go, the further you will be.”

In such a context, the US debate on Russia sanctions was a blessing for Nord Stream 2, albeit a skillfully manipulated one. Project stakeholders overlooked those elements of the debate that did not fit with what they claimed was an “anti-European” rationale driving the bill. But there could be a more coherent transatlantic approach to Russia sanctions.

First, the Congress clearly intended to punish Russia in the light of mushrooming reports about Russian interference in the US election. Lawmakers were anxious to avoid a scenario in which Trump would wave the sanctions through unilaterally. Their concerns were amplified by revelations that Trump inner circle’s might have had mysterious dealings with Russian diplomats, business people, lawyers.

Passing a bill on Russia sanctions allowed Congress to become part of a decision on their future. That means the United States’ policy towards Russia became more predictable. Europeans will not be taken by surprise if and when the US administration decides to do away or simply to loosen the sanctions.

Even though the Congress brought about a qualitative change to the sanctions regime, it merely created an option to introduce new restrictions. It is up to the president to decide whether to go through with them. This applies to Russian energy projects and thus, potentially, also to Nord Stream 2.

That is why new sanctions, if they are introduced, would not run counter to US-European relations. Plus, Congress has now put an obligation on the executive to coordinate with allies on any new penalties against Russia.

All in all, Nord Stream 2 played a marginal role in the new Russia sanctions. It certainly was not the primary target throughout the process. Ultimately, it is not tensions between the US and Russia that harm the EU’s energy interests. It is Nord Stream 2.

What does this teach us? Divisions within the EU over energy cooperation with Russia are not the result of the US sanctions. These differences existed long before and ought to be attributed to Russia’s policies writ large, well beyond its gas policy.

Congress only added fuel to the ongoing European debate. Nord Stream 2 emerged as its unlikely and wholly undeserved beneficiary.

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