Eight European projects to be hit by US sanctions on energy sector

US President Donald Trump delivers remarks at the Unleashing American Energy event at the Department of Energy in Washington, DC, USA, 29 June 2017. [Kevin Dietsch/EPA]

Eight projects involving European companies could be affected by US sanctions if Congress passes a bill on Tuesday (25 July) to hit firms working with Russia in the energy sector.

The College of Commissioners will discuss on Wednesday how to react to Tuesday’s Congress vote.

The legislation would punish any company working not only to develop, but also to upgrade and maintain, Russian-related projects across the planet.

This would place any European company involved with Russian pipelines in Europe under its scope. “This would be brutal,” an EU official told EURACTIV.com.

EU sounds alarm, urges US to coordinate on Russia sanctions

The European Union sounded the alarm on Saturday (22 July) about moves in the US Congress to step up sanctions on Russia, urging Washington to keep coordinating with its G7 partners and warning of unintended consequences.

The initiative affects “our energy independence and energy security interests”, emphasised European Commission chief spokesperson Margaritis Schinas.

Companies working with Iran and North Korea would also be subject to he sanctions.

As part of the College’s assessment, the Commission  services prepared a list of eight projects that would be affected by a watered-down version of the draft bill after intense pressure from EU diplomats in Washington.

The list of where European and Russian companies are involved, and seen by EURACTIV, includes Baltic Liquiefied Natural Gas (Schell and Gazprom); Blue Stream (Eni and Gazprom); CPC Pipeline (Shell, ENI and Rosneft); Nord Stream 1 (various European firms and Gazprom); Nord Stream 2 (various European companies and Gazprom); Shakhalin 2 expansion (Shell and Gazprom); Shah Deniz and South Caucasus Pipeline (BP and Lukoil); and Zhor Field (BP, ENI and Rosneft).

Intense lobbying

The EU stepped up its efforts to minimise the impact on European firms. The EU mission in Washington convinced US congressmen to amend the wording of the draft text over the weekend.

One of the main changes they influenced was to increase the threshold for Russian participation in an energy project from 10% to 33%, in order for it to qualify for sanctions.

“Our concerns are being taking on board,” an EU official told EURACTIV.

The US draft resolution will start its legislative process today with a vote in Congress, followed by the Senate. President Donald Trump would have to ratify the final text.

Officials were confident that the softened version will stand. “We are moving in the right direction,” an official added.

Following the vote in the US Congress, the European Commissioners will meet on Wednesday to discuss their options.

G20 wraps up avoiding a trade war… for now

The most powerful nations agreed today (8 July) on keeping markets open, but German chancellor Angela Merkel urged the leaders to progress on steel overproduction to avoid a trade war.

Schinas did not want to detail what retaliatory measures the EU is considering and whether any such measures would be adopted on Wednesday.

As part of the preparatory work, the Commission wrote in an internal note that it was ready to retaliate within days.

The document was drafted before the Congress amended its resolution on Saturday. Its “unusually” strong wording, another official explained, aimed to pass a message to US authorities to limit “unintended economic consequences” on European companies.

According to sources familiar with the discussion, the EU’s High Representative Federica Mogherini was not completely satisfied with the tough stance showed in the note.

Sending such a signal could only aggravate the risk of a trade war with the unpredictable Trump, when EU diplomats were intensively lobbing US congressmen to amend the text.

Members of her team did not confirm or deny her concerns with the note. But they pointed out that, for weeks, the EU delegation had been “very active” on the ground working to introduce changes in the draft bill, to avoid any impact on the EU economy, in particular on the energy sector.

Ready to react

On Monday the Commission maintained its pressure in Washington to ensure that the softened version of the bill passes through Congress.

Schinas said that the institution is following the process “with some concern”.

He added that the EU has “interests” in the discussion ongoing in the US. And “we expect these interests to be addressed by the ongoing pre-legislative process”.

Otherwise, “the EU is always ready to respond adequately and immediately, should the case is needed, and let’s hope that the case is not needed here”, he said.

Diplomats confirmed that some member states had been informed about the possibility of introducing retaliatory measures to punish the US.

Commission passes the Nord Stream 2 buck to member states

The Commission asked the member states on Friday (9 June) for a mandate to negotiate with Russia an agreement on the Nord Stream 2 gas pipeline project. It is very likely to obtain permission, despite several Central European countries strongly oppose it.

One of the countries informed was Poland, a critic of the Nord Stream 2 pipeline. Countries less affected by Russian energy-related projects, such as Spain, were not aware of the discussion on potential retaliatory measures to respond to the US move.

Any retaliatory measure against the US would require the support of the group of countries opposing Nord Stream 2. Warsaw and other Eastern capitals are against the controversial pipeline given that would increase energy dependency by bringing more gas from Russia.

For some European officials, keeping these key countries in the loop was a way to start sounding out their readiness to retaliate.

“Let’s see what happens on Wednesday in the college meeting,” a diplomat from an Eastern country said.

The risk of an escalation of sanctions between the EU and US came against the backdrop of similar threats addressed to various regions, including Europe, by President Trump to counter the dumping of steel into US territory.

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