US Gives Germany an Ultimatum: Drop Russian Gas Pipeline or Trade War Begins

Tensions continue to rise between Washington and its EU “allies”

Cross-posted from Zero Hedge

It became clear just how important it is to the US for Russia’s Nord Stream 2 gas pipeline project to fail two months ago when, as we described in “US Threatens Sanctions For European Firms Participating In Russian Gas Pipeline Project“, the U.S. State Department warned European corporations that they will likely face penalties and sanctions if they participate in the construction of Russia’s Nord Stream 2 on the grounds that “the project undermines energy security in Europe”, when in reality Russia has for decades been a quasi-monopolist on European energy supplies and thus has unprecedented leverage over European politics, at least behind the scenes.

“As many people know, we oppose the Nord Stream 2 project, the US government does,” State Department spokeswoman, Heather Nauert said during a late March press briefing adding that “the Nord Stream 2 project would undermine Europe’s overall energy security and stability. It would provide Russia [with] another tool to pressure European countries, especially countries such as Ukraine.” And speaking of Ukraine, recall that in 2014, shortly after the US State Department facilitated the presidential coup in Ukraine, Joe Biden’s son Hunter joined the board of directors of Burisma, Ukraine’s largest oil and gas company. Surely that was merely a coincidence.

Nauert also said that Washington may introduce punitive measures against participants in the pipeline project – which could be implemented using a provision in the Countering America’s Adversaries Through Sanctions Act (CAATSA).

Fast forward to today, when the dreadfully named CAATSA act just made a repeat appearance; around the time Europe made it clear it would openly defy Trump’s Iran sanctions, the WSJ reported that Trump told Merkel that if she wants to avoid a trans-Atlantic trade war, the price would be to pull the break on Nord Stream 2, according to German, U.S. and European sources.

The officials said Mr. Trump told German Chancellor Angela Merkel in April that Germany should drop support for Nord Stream 2, an offshore pipeline that would bring gas directly from Russia via the Baltic Sea. This would be in exchange for the U.S. starting talks with the European Union on a new trade deal.

While it had long been suspected that Trump would push hard to dismantle Nord Stream 2 just so US nat gas exporters could grab a slice of the European market pie, the aggressive push comes as a surprise, and as the WSJ notes, “the White House pressure reflects its hard ball tactics on trade, moves that have contributed to rising tensions between Europe and the U.S. and raised fears in export-dependent Germany of a tit-for-tat on tariffs that could engulf its car industry.”

The Nord Stream II (or NS2) project was started in 2015 is a joint venture between Russia’s Gazprom and European partners, including German Uniper, Austria’s OMV, France’s Engie, Wintershall and the British-Dutch multinational Royal Dutch Shell. The pipeline is set to run from Russia to Germany under the Baltic Sea – doubling the existing pipeline’s capacity of 55 cubic meters per year, and is therefore critical for Europe’s future energy needs.

NS2 is the second phase of an existing pipeline that already channels smaller amount of gas from Russia to Germany. Construction for the second phase started this week in Germany, after investors committed €5 billion ($5.9 billion) to the venture.

Trump has publicly criticized the Nord Stream 2 pipeline, saying at a meeting with Baltic State leaders at the White House this year that “Germany hooks up a pipeline into Russia, where Germany is going to be paying billions of dollars for energy into Russia…That’s not right.”

“Donald Trump is a deal maker…there is a deal to be made if someone (in Germany) stood up and said ‘Help us protect our auto industry a little bit more, because we’re great at it and we’re going to help you on Nord Stream 2’,” said one U.S. official, who was present at the April meeting between Ms. Merkel and Mr. Trump.

Raising the pressure further, Sandra Oudkirk, a senior U.S. diplomat, told journalists in Berlin on Thursday that as a Russian energy project the pipeline could face U.S. sanctions, putting any company participating in it at risk…

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