Germany and Austria have lashed out against US Senate for approving a legislation tightening sanctions on Russia. The bill has a provision that enables the United States to impose sanctions on European firms involved in financing Russian energy export pipelines to Europe. European companies could be fined for breaching US law. In a joint statement, German Foreign Minister Sigmar Gabriel and Austrian Chancellor Christian Kern accused the US of threatening European economic interests, describing it as an illegal attempt to boost US gas exports. The United States recently started shipping liquefied natural gas to Poland and has ambitions to cultivate other European customers.
The bill says the US government «should prioritize the export of United States energy resources in order to create American jobs, help United States allies and partners, and strengthen United States foreign policy». But the European foreign chiefs believe that «Europe’s energy supply is Europe’s business, not that of the United States of America». Gabriel and Kern said they «can’t accept» proposed US sanctions targeting European energy companies as part of measures against Russia.
German firms BASF and Wintershall, Austria's OMV and Voestalpine, and Royal Dutch Shell are involved in Nord Stream 2, a pipeline project to pump Russian natural gas via the Baltic Sea to landfall in Germany. Russia’s Gazprom and its European partners are pushing ahead with the plans to double the capacity of the existing Nord Stream undersea gas pipeline to Europe. Gazprom has already received more than €1 billion from its partners for Nord Stream 2 financing. In April Uniper, Wintershall, Shell, OMV and Engie agreed to each loan 10% of the cost of the venture, or up to €950 million each. The Russian company will shoulder 50% of the cost of the 55 billion cubic metre pipeline, which is due to start operating in 2019.
The foreign ministers emphasized that the very fact that the US bill threatens European firms taking part in pipeline construction is «a completely new and very negative dimension into European-American relations». The officials wrote that, «In noticeable frankness, the draft US legislation describes what it's really about: the sale of American liquefied petroleum gas and the squeezing out of Russian natural gas from the European market». German Economy Minister Brigitte Zypries joined in the criticism on June 16 and warned of possible retaliation if Washington ended up fining German companies. The Senate’s move is a way for the US «to try to favor its own gas» in Europe, Isabelle Kocher, the chief executive officer of Engie, France’s former gas monopoly, told reporters in Paris on June 15. «I don’t think at all that the United States can stop this project». she said.
It’s worth to note that the US space agency (NASA) is exempt from the Senate bill but fines against foreign companies are specifically mentioned! Can there be a better example of double standards practiced by America’s political elite?
It’s very important to emphasize that the joint statement of the foreign ministers goes beyond the Nord Stream project. It puts into doubt the very idea of US-European joint policy on Russia. The paper says, if the bill becomes a law it would «diminish the effectiveness of our stance on the conflict in Ukraine if we were to no longer take joint action» against Russia in future.
Actually, the attempts to undermine Russia’s gas exports to Europe are doomed if the game is fair and politics is not mixed up with economy. Russia has a clear advantage. Natural gas transportation by pipeline is significantly cheaper than building and employing expensive LNG port infrastructure. Besides, the Russia’s export infrastructure is already built while the US export terminals are still under construction. At present, only Sabine Pass LNG export facility in the Gulf of Mexico is operational but still has a long way to go to reach full operational capacity. And with more terminals built, the US will be seeking to export LNG to Asia, which is more profitable than the supplies to Europe.
Russian Gazprom can produce and export gas to Europe at a much lower cost than LNG from across the Atlantic. It can flood Europe with cheap gas to kill off US sea exports. It has 100 billion cubic meters of annual gas production capacity sitting on the sidelines in West Siberia, which can effectively be used as spare capacity. The company’s latent capacity is equivalent to 3 percent of global production. This large volume of capacity is the result of investments in a major project on the Yamal Peninsula.
And the bottomline? Evidently, the United States clout in the Middle East is on the wane, while Russia is emerging as an important broker. Qatar, a leading world gas exporter, has recently started to shift to the Moscow-spearheaded Russia-Turkey-Iran axis as a result of the US-supported recent rift in the Arab world. What does it mean for global energy market? A new gas cartel is emerging to include Russia, Iran and Qatar – a dangerous competitor and for the US nascent shale industry. What to do about it? Here they are – the US lawmakers are going to any length to turn the tide. No scruples, anything will do when it comes to the implementation of the «America First» principle.
Another aspect to take into account. The Russia sanctions are part of the Iran bill. European companies are chomping at the bit for sealing lucrative contracts with Iran. Europe does not have to join the restrictive measures unilaterally imposed on Tehran by US Congress. The interests diverge and the gap between the US and Europe is getting wider. The process is gaining momentum.
The statement made by the German and Austrian officials is not just a separate event – another scoop to hit headlines. This present rift between the US and its European allies is another reflection of the trend that has been gaining momentum recently. America and Europe appear to go separate ways on many issues and no turgid words and high-fallutin’ speeches can hide this fact.