While Germany tries to make sure Ukraine will not suffer too badly from the addition of Nord Stream 2 to the European natural gas pipeline network, a senior State Department official has threatened sanctions for the controversial project.
Speaking to media in Berlin, Deputy Assistant Secretary of State for Energy Diplomacy Sandra Oudkirk said Washington deemed the pipe as a security threat because it would give Russia the chance to install “undersea surveillance equipment” such as “listening devices” in the Baltic. Oudkirk did not go into detail about the surveillance equipment that she suspected Russia might put on the seabed.
What she did make a point of noting was that the threat of sanctions was motivated by Washington’s strong desire to curb Russia’s influence in Europe and had nothing to do with the fact that U.S. LNG is one alternative to Russian gas. Oudkirk also said Washington did not believe there was a way to enforce guarantees for Ukraine’s transit fee revenues from current Russian pipeline exports to Russia.
These revenues have turned into a sticking point between Russia and Germany, with the latter showing genuine concern for Ukraine’s revenues, although it was clear from the beginning that an expanded Nord Stream would mean diverting part of current gas transit from Ukraine.
Europe has been very active in showing its support for gas transit revenue dependent Ukraine, although little of this support has been constructive, such as finding ways to generate other revenues besides those from transit fees. Besides, concern for Ukraine may be genuine, but it is not the single concern of all European countries when it comes to Nord Stream 2. Related: China Crushes Vietnam’s South China Sea Drilling Hopes
For Germany, Nord Stream 2 means more gas amid nuclear and coal power plant phasing out. Germany’s Chancellor Angela Merkel is today meeting with President Vladimir Putin in Russia to discuss, among other things, the pipeline, whose construction in Germany just started earlier this week. She has been stalwart in her support for the pipeline, just as she has been stalwart about EU sanctions against Russia for its involvement in Ukraine.
Meanwhile, President Trump is applying pressure on Merkel: German, EU, and U.S. government officials told the Wall Street Journal that Trump has offered Merkel a trade deal for the EU if she cancels Nord Stream 2. According to the sources, the U.S. President offered the deal back in April.
Also in April, Trump said “Germany hooks up a pipeline into Russia, where Germany is going to be paying billions of dollars for energy into Russia. And I’m saying, ‘What’s going on with that?”’ at a recent meeting with the leaders of Latvia, Lithuania, and Estonia at the White House. The remark certainly reflected the views of the Baltic leaders on Nord Stream 2, but what it did not reflect was Germany’s view on the matter, and it still doesn’t.
Should the U.S. go ahead with the threat and impose sanctions on the pipeline, under a bill passed in 2017 with relation to the allegations of Russian meddling in the 2016 U.S. elections, the companies that might fall within their scope would include Shell, Wintershall, Uniper, OMV, and Engie, who are Gazprom’s partner in Nord Stream 2.
These are all very large and very important European companies, and there is a good chance that Germany, France, and Austria will seek ways to shield them, just as they are shielding their companies doing business in Iran.
Speaking of Iran, now may not be the best time to threaten Europe with sanctions: the EU has already made it clear that it will not follow Washington’s example in Iran and will continue importing crude from it. Sometimes political pressure works, but other times if it becomes excessive it might spark the opposite reaction of the one sought by the one applying it. Related: Is Russia About To Abandon The OPEC Deal?
As for Oudkirk’s claim that the U.S. is not thinking about its own economic interest in LNG, this is the same as Moscow claiming that Gazprom is building Nord Steam 2 out of the goodness of their hearts, to supply gas-strapped Germany with fuel. There is nothing wrong with protecting your economic interest, but trying to disguise it as altruism could cause vicarious embarrassment to some.
Germany’s Economy Minister today shot back at Washington, by saying “They are looking for markets, which we can understand, and they can land it here easily. But it [U.S. LNG] is much more expensive than pipeline gas, so blocking Nord Stream 2 on its own won’t guarantee exports.”
Peter Altmeier warned the U.S. that “The U.S. are our friends and partners, and we want to defend our common values. “But if it’s America first, and they put their economic interest before others, then they have to expect Europe to define their own interests and fight for them.”
By Irina Slav for Oilprice.com
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