Pipeline Defense

Nord Stream 2 takes center stage in Trump’s NATO performance

A little more to the right. Source: Reuters

Source: Reuters

As Donald Trump’s performance at the NATO summit made clear, sometimes it’s not what you say, but how you say it.

Amid a trade war with European allies and tensions following the US withdrawal from the Iran nuclear deal, President Trump opened the summit with a blistering critique of allies’ failure to meet their spending commitments. He saved particularly pointed words for Germany, which he called out for not paying its fair share – and for its plans to build a second pipeline to bring Russian gas to the country.

Mr. Trump went so far as to call Nord Stream 2 a tragic mistake and that Germany’s gas and oil purchased from Russia made it “captive” to the country – an ironic statement considering the president’s chummy relationship with Russian President Vladimir Putin, underscored by their meeting in Helsinki.

The US president is not the first to push partners on their NATO spending commitments. In pointing out the geopolitical ramifications of the Nord Stream 2 pipeline, linking the two conflates – and confuses – these important but distinct issues. When Mr. Trump urges allies to increase their defense budgets, the president has a point. It is a serious mistake, however, to associate the security alliance, traditionally a source of unity amongst member states, with the pipeline. The issue is not the protection of Europe as such from outside incursion, but the need for a unified approach to common security challenges, which is clearly in the US national interest.

By linking the two, Mr. Trump runs the risk of introducing division into the alliance – a tactic, it might be noted, favored by Russia to sow division amongst European member states.

Trump’s point on Nord Stream 2

On Nord Stream 2, a proposed gas export pipeline from Russia to Germany, capable of exporting 55 billion cubic meters, and companion to the currently operational Nord Stream line, the president has a point as well. The project has significant geopolitical risks, including further deepening the reliance on Russian gas amid aggressive behavior from Moscow in Europe’s neighborhood. But calling out Germany as “totally controlled by Russia” is not just false; its provocative character weakens the credibility of his overall point.

Still, the president’s point about German reliance on Russian natural gas warrants consideration – as well as clarification. Germany does import significant quantities of gas and oil from Russia, as does Europe. Gazprom’s provision of 40 percent of Europe’s gas supply has been and is a key source of concern for American and European policymakers.

This concern has been the foundation of US energy diplomacy in Europe for many years, and is a driver behind many of the EU’s diversification and market integration policies. Germany relies on Russia for roughly half of its gas imports, with the rest coming from the Netherlands and Norway. However, this is far from the “60 to 70 percent” of Germany’s energy that the president claimed, because gas accounts for around 20 percent of Germany’s total energy mix.

However, German reliance on Russia is worrying, and the president’s rhetoric raises a necessary question: To what length is President Trump’s administration willing to go in opposing it?

Gesticulating his point. Source: AP Photo/Pablo Martinez Monsivais

Source: AP

Will the administration bring on the sanctions?

One tool at the administration’s disposal is sanctions, or the threat thereof. Mr. Trump has the authority to sanction the pipeline, but it is an option many assume he will not exercise. However, the president’s comments introduce uncertainty that could accomplish the administration’s goal of thwarting the project without having to follow through on the threat itself.

While the president has the discretionary authority to sanction the pipeline under sanctions legislation known as CAATSA, which passed last year, State Department guidance notes that this will apply to projects initiated after the passage of the legislation, which many took as an exemption for Nord Stream 2.

Changing the guidance is possible, but the retroactive application of sanctions would be divisive – and probably counterproductive, given Germany’s strong role in maintaining a European consensus on the 2014 sanctions against Russia for aggression against Ukraine.

Another possibility might be through the 2014 US and EU sanctions targeting individuals for being part of the Russian leadership’s “inner circle.” If any of the Russian partners in the project, such as contractors, are already sanctioned, it is fair to go after them – and everyone dealing with them. That could make Nord Stream 2 vulnerable to US sanctions, which could compromise the whole project.

Congress could also move more aggressively on Nord Stream 2, even making sanctions mandatory in response to Russian behavior and the Mueller investigation, including the recent indictments of Russian intelligence officers. Indeed, just this week new draft legislation was introduced that would impose sanctions should gas flows from Russia through Ukraine drop below 75 percent of the previous three-year average.

Europe’s response

A further question is whether Europe will do anything about it. When asked about the issue during UK Prime Minister Theresa May’s press conference with Mr. Trump, she responded that “there are discussions to be had in the EU.” German Chancellor Angela Merkel responded that rather than being dependent, Germany “can make our independent policies and make independent decisions.”

However, it is exactly this independence that might be at issue. While Ms. Merkel was asserting her country’s autonomy from Mr. Trump, EU member states opposed to the pipeline accused Germany of exactly this: Making unilateral decisions at the expense of Europe as a whole.

To contact the authors: columnist@handelsblatt.com