New Russia Sanctions Could Push U.S., EU Further Apart

You would think that a stiffening of Washington’s backbone when it comes to Russia would be welcomed by Europe. After all, it was Germany’s Angela Markel that has led the tough stand taken against Moscow following the Russian-sponsored uprising in eastern Ukraine and annexation of Crimea.

But on the contrary, cross-party support in the US House of Representatives led to a 419 to 3 vote in favor of new financial sanctions against Russia this week, a move that has faced fierce criticism from Bonn and considerable debate about the wider implications.

The EU probably does not care about the inclusion of North Korea in the proposed sanctions, although it has taken a distinctly different and more tolerant line on Iran (the third regime included in the action).

But it is Russia that is really raising the hackles in Bonn according to Carnegie Europe, a Brussels-based think tank.

Impact on Europe

A post on the site reports the action could not only severely impact many European companies who have already invested heavily in projects, particularly in the oil and gas sector, but that it could also precipitate a political divide among Europe’s partners. Seen in the context of this development, President Donald Trump’s focus on Poland during his recent visit to the continent for the G-20 summit takes on a more sinister slant — at least, that is the view many Europeans are taking.

The bill singles out Nord Stream 2, a natural gas pipeline project which would expand an existing gas pipeline from Russia to Germany under the Baltic Sea, currently led by Russian energy giant Gazprom (MCX:GAZP). Its partners, Carnegie explains, consist of five major European energy companies: France’s Engie (PA:ENGIE), the British-Dutch firm Royal Dutch Shell (LON:RDSa), Austria’s OMV (VIE:OMVV), and Germany’s Uniper (F:UN01) and Wintershall. Poland and the Baltic states claim, however, that Nord Stream 2 will increase, not weaken, Europe’s dependence on Russian gas, and by circumventing Ukraine and Poland would reduce transit fees paid to countries with the original the Bratstvo and Soyuz overland pipelines.

Adding further angst in Europe is a suspicion the US sanctions bill is designed to deny Europe access to Russian gas so it will be forced to import more liquefied natural gas (LNG) from America’s shale frackers.

Those involved with Nord Stream 2 wouldn’t be the only casualties.

Companies working with the Russian energy company Lukoil (LON:LKOHyq), which is developing the large Shah Deniz gas field in Azerbaijan, would also be fined, Carnegie explains. In addition, Caspian gas shipments to Europe via the Southern Gas Corridor, which would be fed gas from the Shah Deniz field, would be affected. That would deny Europe the chance of more energy security and diversification, Brussels claims.

Then there is the Caspian Pipeline Consortium, in which the US company Chevron (NYSE:CVX) holds a 15% stake. That, too, would be hit, because Russia holds a 24% stake in the project. As for the planned Turkish Stream pipeline, which would send Russian gas to Turkey under the Black Sea, the proposed US sanctions would further increase antagonism between Ankara and Washington.

Disagreement about the policy is set to run as the details are hashed out. On top of environmental policy, NATO and possible trade sanctions fallout from the US Department of Commerce’s Section 232 investigations, Europe and the US seem ever further apart.

by Stuart Burns