European firms clash with US over pipeline

Sanctions bill could force European giants, including Shell, to pull out of project or face US ‘scarlet letter’

Several leading European companies will be forced to pull out of the Nord Stream 2 gas pipeline project with Russia or face crippling sanctions under US legislation. Berlin and Brussels have threatened retaliation if Washington presses ahead with sanctions agreed in Congress over the weekend.

A RAFT of top European companies will be forced to pull out of the Nord Stream 2 gas pipeline project with Russia or face crippling sanctions under draconian legislation racing through the US Congress.

Berlin and Brussels have threatened retaliation if Washington presses ahead with penalties on anything like the suggested terms, marking a dramatic escalation in the simmering transatlantic showdown over America’s extraterritorial police powers.

A consortium of Shell, Engie, Wintershall, Uniper, and Austria’s OMV, is providing half the €9.5bn (£8.5bn) funding for the 760-mile pipeline through the Baltic Sea to Germany. “This is a spectacular interference in internal European affairs,” said Isabelle Kocher, the director-general of Engie in France.

The wording of the US legislation is so broad that it could sweep up dozens of other companies in different ways. “The measures could impact a potentially large number of European companies doing legitimate business,” said the European Commission.

An internal note by the Commission said the EU should “stand ready to act within days” if the US imposes sanctions unilaterally without first securing some degree of consent from the European side.

Nord Stream 2 Gas Pipeline, OGZPY Nord Stream Map, Gazprom.

Hubertus Heil, general-secretary of Germany’s Social Democrats (SPD), called the bill a naked attempt by “America-first” forces to seize market share for coming deliveries of US liquefied natural gas. “It is an attack on the basic principle of free trade. Europe must give a strong, united answer to this,” he said.

The House and Senate in Congress reached a deal on the Russian sanctions over the weekend, with slight changes to the text.

The White House has signalled that Donald Trump will not veto the bill, even though it locks in a hostile relationship with Russia for years to come.

The text calls for close consultation with European allies before the sanctions trigger is pulled, but said nothing about the EU itself. Washington sources say this was deliberate.

The Nord Stream project is bitterly opposed in Poland, where it is seen as a sweetheart deal between Berlin and the Kremlin at the expense of allies – and is known as the Molotov-ribbentrop pipeline. It brings no new gas to Europe. It merely switches supply from existing pipelines through Poland and Ukraine, depriving these countries of strategic leverage.

It is hard to see how Brussels can forge ahead with meaningful retaliation when the EU itself is bitterly divided, especially if it was seen to do so at the behest of Germany and Austria. A showdown with the US over this particular issue would deepen what is already a dangerous line of cleavage. It would further undermine emotional and political consent for Nato in Washington at a time when the security guarantee is already coming under scrutiny.

The original draft of the US bill, passed last month by 97:2 in the Senate, captured the mood of anger in both the Democratic and Republican Parties over the Kremlin’s attempt to subvert US democracy through cyber-warfare.

Section 232 of the bill states that entities continuing to take part in the “construction of energy export pipelines” – or merely providing services,

equipment and technology – will be vulnerable to sanctions.

It is almost suicidal for any company with global operations to ignore this threat. Shell, Engie, and others have listings on the New York stock exchange, as well as assets in the US sphere of influence.

An elite cell at the US Treasury has perfected the art of “the boa constrictor’s lethal embrace”, as the creator of the unit described it. The method is to cut off the lifeblood of offenders by using America’s hegemonic control of the world’s dollarised financial system.

A “scarlet letter” under the US Patriot Act can bring a company to its knees even if it operates outside the United States.

Kremlin spokesman Dmitry Peskov attended an emergency meeting with Russian President Vladimir Putin and Ben van Beurden, CEO of Royal Dutch Shell, in Moscow, over fears that U.S. sanctions may hurt the Nord Stream 2 pipeline.. Credit line: Profimedia.com.

The sanctions bill does not automatically impose penalties. This will require an executive order by the White House, but the president is under such political pressure over Russia that he may be constrained to act.

“Nobody wants to end up on the wrong side of a sanctions list. The mere prospect is enough to shut down financing even if the power is never actually used,” said Professor Alan Riley from the Institute for Statecraft.

While the language covers all pipelines – and could embroil Washington in a conflict with Beijing over Russiachina deals – it is obvious that the real target is Nord Stream 2.

The text states explicitly that the project damages the security of energy supply in Europe – rather than enhancing it as claimed by Berlin and Brussels – and it is an open secret on Capitol Hill that the purpose is to shut down Nord Stream 2 once and for all.

Thierry Bros, from the Oxford Institute for Energy Studies, says US pressure would ultimately backfire. “They can make life difficult for European companies, and it is China that will profit as usual. But there are lots of ways round this,” he said.

“The Commission is starting to understand that it must bite back. Do we decide our own energy policy in Europe or do we let Washington decide,” he said.

Yet Germany’s passion for the venture is peculiar. Nord Stream 2 will double flows through four pipelines together in shallow Baltic waters – less than 20 meters deep in places – increasing the share of EU gas imports vulnerable to terrorist attacks and drone strikes. It creates a “Straits of Hormuz” risk.

The sea is littered with unexploded ordinance from the two world wars. Nord Stream 1 was briefly closed in 2015 when the Swedish navy discovered a mine nearby.

Fears of LNG gas arriving from America make no sense either. It is precisely this source of global gas supply that has broken the Kremlin’s monopoly in Europe and forced Gazprom to slash prices.

Ian Bond, a former British ambassador in the Baltic states and now at the Centre for European Reform, said conspiracy theories that Washington is trying to push its own exporting agenda as an energy superpower makes no sense. The pipeline adds no extra gas. It reroutes gas. “It is nonsense. From the Russian perspective Nord Stream 2 has always been a purely political project,” he said.

Source: The Daily Telegraph.

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