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The curious diplomacy of US sanctions on allies

View of the Nordstream gas pipeline terminal. (AFP)
View of the Nordstream gas pipeline terminal. (AFP)
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22 Dec 2019 05:12:59 GMT9
Cornelia Meyer
22 Dec 2019 05:12:59 GMT9

US President Donald Trump has signed a defense budget package that includes sanctions against companies and individuals involved in the construction of the Nordstream 2 pipeline.

Nordstream 2 will double the capacity of the existing Nordstream 1 pipeline and transport an additional 55 million cubic meters of gas from Russia to Germany under the Baltic Sea. The complex subsea project will circumvent the traditional surface pipelines via Ukraine. It guarantees better security of supply for client countries no longer at the mercy of annual squabbles over payment between Russia and Ukraine.
The pipeline is owned by the Russian gas company Gazprom, which is financing half of it,
with the rest covered by its European partners — Wintershall and Uniper of Germany, Anglo-Dutch Shell, Engie of France and OMV of Austria.

The US opposes the pipeline, on the ground that it will make Germany and the rest of Europe more dependent on Russia. Germany’s defense budget, which is not expected to reach the NATO-stipulated 2 percent of GDP for some time, has been a thorn in the side of US president. He takes a dim view of the US paying a disproportionate amount to defend a NATO ally against Russia when that ally is dependent on Russia for its gas supply. Moreover, thanks to the shale revolution, the US is an exporter of liquid natural gas, for which US companies need new export markets.

Through the German prism, however, things look different. Germany has imported Russian gas since 1973. Gazprom has been a reliable supplier, and has not missed a single BTU, even during the traumatic break-up of the Soviet Union. The energy connection is advantageous, from both a commercial and a strategic perspective; countries that trade with each other are far less likely to engage in conflict, armed or otherwise.

The US sanctions pose the question of whether energy security is a matter of national sovereignty, or of bowing to the will of allied nations with different priorities.

Cornelia Meyer

Germany has furthermore embarked on an “Energiewende” (energy transition), which entails closing down all nuclear power plants by 2022 and reducing carbon emissions by 95 percent by 2050 compared with 1990; the latter goal becomes ever more stringent with every new climate-change or energy law, and in line with the European Commission’s aim for Europe to be the first climate-neutral continent.

Nuclear power plants emit zero carbon dioxide. The decision to close down nuclear reactors, which constituted 30 percent of the country’s electricity generation as recently as 2000, was taken after the Fukushima incident in Japan. Triangulating the ambitious climate-change goals with the closure of nuclear power plants is a challenge for the German government, and makes low-carbon-emitting gas an important transition fuel.

Nordstream 1 and 2 are a significant part of Germany’s energy strategy. The US sanctions pose the question of whether energy security is a matter of national sovereignty, or of bowing to the will of allied nations with different priorities.

German Chancellor Angela Merkel reacted calmly, and said she saw “no option but to talk to the US and make it clear that the German government does not approve of extraterritorial sanctions.” Foreign Minister Heiko Maas said European energy policy was decided in Europe, not in the US.

More than 2,000km of Nordstream 2 has been laid, leaving only 300km until the project is complete, but sanctions apply anyway. The Swiss subsea engineering company Allseas has suspended work on the pipeline off the coast of Denmark, effective immediately; so the long arm of US sanctions reaches as far as the Swiss Alps.

However, Maas and Merkel have a point. How a country achieves energy security is an issue for its government, and thus a matter of national sovereignty. Imposing sanctions on allies is an interesting tool of diplomacy. Merkel is right not to adopt a tit-for-tat strategy, which would be futile. Dialogue is the only way these two NATO partners can solve this dispute. Germany has every interest in getting along with the US and vice versa; they are anchor NATO members and important trading partners. However, Germany also has its specific needs when it comes to energy security and getting along with its neighbors.

  • Cornelia Meyer is a business consultant, macro-economist and energy expert.Twitter: @MeyerResources
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