Trans-Atlantic Failure

All-out war of words among Germany, EU and US

Treffen der EU-Staats- und Regierungschefs in Bulgarien
So united, they're even trying to copy Ms. Merkel's signature hand gesture. Source: DPA

If future political scientists ever look back for a time when the trans-Atlantic relationship collapsed, this could be the moment they pinpoint. On multiple fronts, this week is shaping up as an unprecedented showdown among Germany, the European Union and the United States.

Take your pick of major flashpoints: the Iran nuclear deal, US trade tariffs, the Nord Stream 2 pipeline, ties with Russia, or the US embassy’s move to Jerusalem. And take your pick of high-stakes meetings, too: Angela Merkel will meet Vladimir Putin this week; the EU’s 28 leaders just held a summit in Bulgaria; foreign ministers of Germany, France and Britain met with Iran; and Israel’s Benjamin Netanyahu telephoned Ms. Merkel and France’s Emmanuel Macron.

The common denominator of all these high-level meetings is Donald Trump. That fact was summed up in a widely-reported tweet by EU Council President Donald Tusk on Wednesday: “Looking at latest decisions of [Donald Trump] someone could even think: With friends like that, who needs enemies.”

The fact that Mr. Trump has antagonized the European Union with his “America First” policy stance isn’t new. What is new is that Berlin, Brussels and other EU capitals seem ready to fight back. In the words of Mr. Tusk: “If you need a helping hand, you will find one at the end of your arm.”

That is the main message from the summit of EU leaders this week in Sofia, Bulgaria. There’s also been a clear change in tactic: Europe is starting to see its relationship with the United States in the same transactional terms as the Trump administration. Such a change could go one of two ways: Either Mr. Trump respects Europe’s new negotiating style, or the trans-Atlantic alliance falls into disrepair.

Below is a rundown of the four biggest areas where the United States and Europe have the most to lose.

Exhibit A: Saving the Iran nuclear deal

Germany, France and Britain’s foreign ministers met with their Iranian counterpart on Tuesday. The goal: Finding a way to save the Iran nuclear deal after Mr. Trump pulled out and announced the re-introduction of US sanctions. Iran’s foreign minister described the EU talks as constructive, but saving the deal not only involves keeping Iran from going back to enriching uranium — it also puts Europe on a direct collision course with the United States.

On Thursday, EU leaders took direct aim at the Trump administration, invoking a “blocking statute” that basically requires European companies to ignore US sanctions imposed on Iran. There’s also talk of the state-backed European Investment Bank providing financing for EU businesses in Iran, and even a proposal for direct payments to Iran’s central bank.

It’s an extremely bold move and one that makes German multinationals extremely wary. The US has demanded that German companies stop all business with Iran. But Iran’s energy minister, Reza Ardakanian, told Handelsblatt that companies like Siemens must uphold their existing contracts. “Contracts are contracts,” he said. German businesses are worried about being caught in the middle: “The economy is increasingly being used as a weapon to achieve political goals,” complained Carl Martin Wecker, head of the machinery association VDMA. Adopting the blocking regulation “cannot be the solution,” he added.

Exhibit B: How to avert a trade war

“The EU will not negotiate with a gun to its head,” was the message of 28 EU leaders meeting in Sofia, Bulgaria. Emmanuel Macron, France’s president and Donald Trump’s one-time bromance partner, made clear what that means: The US must unconditionally end its threat of imposing tariffs on EU steel (the latest deadline for those tariffs to be introduced is June 1) before any formal talks about what the EU can do for the US in return.

Though Mr. Macron played down the odds of a deal, there is one in the works. If the US relents, the EU’s leaders could offer lower trade barriers on a range of US goods — ranging from liquefied natural gas to cars — and renegotiate the rules of the World Trade Organization. Kevin Hassett, chairman of the White House Council of Economic Advisors, told Handelsblatt that he’s “hopeful” a deal can be reached. “I don’t see a trade war,” he said. But for that to be true, Donald Trump will still have to give some ground. Chancellor Angela Merkel made clear that any lowering of EU tariffs would have to be “reciprocal.”

putin_merkel_84881518_reuters
A chance to roll the eyes again on Friday. Source: Reuters

Exhibit C: Don’t you dare build a pipeline with Russia

Angela Merkel’s biggest moment this week might be yet to come. The German chancellor will be meeting with Russian President Vladimir Putin on Friday in Sochi. Ties between Germany and Russia are rather confusing these days (on this, the US and Germany have a fair amount in common). On the political front, Berlin has taken a tougher line than the United States, though some politicians on both ends of the political spectrum here have pushed for leniency.

Where Germany and the US differ in a big way, however, is on energy ties — specifically a new natural gas pipeline being built between Russia and Germany known as Nord Stream 2. Germany, though it has backed economic sanctions against Russia, is reliant on Russia for its energy needs and has been loath to turn elsewhere.

The United States is now throwing down the gauntlet, making clear that it opposes the pipeline and will use all diplomatic means necessary to stop it. That includes extending US sanctions on Russia to the EU energy firms involved if the project goes ahead. “Any pipeline project, and there are multiple pipeline projects in the world that are potentially covered, is at an elevated sanctions risk,” Sandra Oudkirk, the US deputy assistant secretary of state, in charge of energy issues, told reporters in Berlin. Ukraine is also wary of the pipeline, but so far Ms. Merkel seems determined to push forward: The goal of her meeting with Mr. Putin is to reach a deal that meets Ukraine’s concerns, but probably not those of the United States.

Exhibit D: The embassy move that started it all

Back when Donald Trump announced plans to move America’s embassy in Israel from Tel Aviv to Jerusalem, Europe was united in its opposition. With Palestinians claiming east Jerusalem as their own capital, the move was seen as an unnecessary provocation. That played out this week as the embassy was officially opened: Protests in the Gaza Strip resulted in Israeli security forces killing more than 50 Palestinians.

Unlike the United States, which stood unequivocally by Israel’s side, most European leaders condemned Israeli security forces for their heavy-handed response. Germany took something of a middle road — sharply criticizing both sides for their role in the violence — but there’s little doubt that this issue, too, has opened up a chasm between the US and European Union.

Christopher Cermak is an editor with Handelsblatt Global in Berlin. Various Handelsblatt correspondents contributed to this story. To contact the author: Cermak@handelsblatt.com.

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