The Cable

Germany Hits Back at Possible New U.S. Sanctions on Russia

And Putin also threatens retaliation.

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Germany and Austria hit back at U.S. lawmakers Thursday, one day after the Senate passed new provisions that could open the door to sanctions on European companies that do energy business with Russia.

The Senate amendment, which passed overwhelmingly but which still needs to clear the House, would ramp up U.S.ability to hit back at Russia. Specifically, under the new legislation, the White House would have the authority to extend sanctions to any firm that invests money to help build Russian energy projects. That takes square aim at Nord Stream 2, a pipeline that would deliver natural gas from Russia directly to Germany, bypassing Ukraine.

On Thursday, German Foreign Minister Sigmar Gabriel and Austrian Chancellor Christian Kern said in a joint statement the sanctions, if implemented, could threaten Russian gas supplies to Europe. They called the bill a “new and very negative quality in the European-American relations”.

“Europe’s energy supply is a matter of Europe, not the United States of America!,” said the statement. “We can not accept . . . the threat of illegal extraterritorial sanctions against European companies that participate in the development of European energy supply!”

Nord Stream has torn Europe apart already. Eastern and Central European countries oppose the project, fearing that their dependence on Russian energy would increase. Many Western European countries, especially Germany, back it, arguing that a new pipeline will increase supplies and lower energy prices in Europe. U.S. officials in the Obama and Trump administrations have opposed the pipeline, saying it could undermine European energy security.

If the legislation passes the House and survives any veto threats from President Donald Trump, it could be used against companies like Shell, Uniper, Wintershall, Engie, and OMV, which are teaming up with Gazprom, Russia’s state-owned energy behemoth, to build the $10.6 billion pipe.

At the same time, Gabriel and Kern allege the United States was acting in the interest of domestic suppliers, which in recent years have begun to export natural gas and even crude oil, including to Europe.

“The goal is to secure jobs in the oil and gas industry in the USA,” they said. “Who gives us energy and how we decide is according to the rules of openness and market competition.”

In a statement, the Nord Stream 2 consortium said, “This unprecedented course of action is clearly aimed at undermining the position of a future commercial competitor in an already diversified market. It follows similar scare tactics by some European countries with existing or planned gas import infrastructure to protect their own commercial interests by using political arguments.”

Meanwhile, not to be outdone, Russian President Vladimir Putin weighed in, threatening retaliation if the new measures become law.

Photo credit: ERIC PIERMONT/Getty Images

David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis

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