IS THE EU ON EUROPE’S SIDE OR RUSSIA’S?

Nordstream 1 in black, Nordstream 2 in red

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 trans-Atlantic showdown over America’s extra-territorial police powers.

A consortium of Shell, Engie, Wintershall, Uniper, and Austria’s OMV is providing half the $11 billion funding for the 760-mile pipeline through the Baltic Sea to Germany. “This is a spectacular interference in internal European affairs,” says Isabelle Kocher, the director-general of Engie in France.

There are many voices in Europe, however, who see Nord Stream 2 as spectacular collusion between Berlin/Brussels and the Kremlin.

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

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

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 says.

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 signaled that President 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 says 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 caustically 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.

Do Berlin/Brussels actually want Poland and Ukraine to be permanently under the Kremlin’s thumb for energy that keeps them from freezing in the winter?  It certainly would seem so.

It is hard to see how Brussels can forge ahead with meaningful retaliation when the EU itself is bitterly divided, especially if it were seen to do so at the behest of Germany and Austria.

The original draft of the US bill passed last month (6/15) by 97:2 in the Senate, and the final draft by the House yesterday 419:3 — capturing the mood of anger in both the Democrat 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 one official described it. The method is to cut off the lifeblood of offenders by using America’s control of the world’s dollarised financial system.

The sanctions bill does not automatically impose penalties. This will require an executive order by the White House, but President Trump 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,” says Professor Alan Riley from the Institute for Statecraft.

While the language covers all pipelines, 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.

Without doubt, 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 drone strikes. It creates a “Straits of Hormuz’ risk.

Further, 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.

The Nord Stream 2 pipeline project will link Russia to Germany but will not add any extra gas. It circumvents existing land lines in Poland and Ukraine – which is to many the very purpose of the $11 billion project.

Fears of LNG gas arriving from America make no sense either. It is precisely this American 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, says claims that Washington is trying to push its own exporting agenda as an energy superpower make 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 says.

Perhaps it is time to examine if the EU perspective is a pocketbook project?  The amount of money at stake for Russia is in many, many billions.  Putin has a history of no qualms paying whatever it takes in bribes to have his way.

Perhaps those specific Eurocrats in Berlin and Brussels most vociferous in denouncing US sanctions should have their assets examined?

Ambrose Evans-Pritchard is the International Business Editor of the London Telegraph.