Report

With Trump Going Soft on Nord Stream, Congress Moves to Kill the Pipeline

U.S. lawmakers, at least, worry that Europe’s reliance on Moscow for energy could give Russia key leverage.

Russian President Vladimir Putin attends the 50th anniversary of a gas pipeline to Europe in Vienna on June 5. (Thomas Kronsteiner/Getty Images)
Russian President Vladimir Putin attends the 50th anniversary of a gas pipeline to Europe in Vienna on June 5. (Thomas Kronsteiner/Getty Images)

After U.S. President Donald Trump’s embrace of Russia at the Helsinki summit, lawmakers in the U.S. Congress are again putting Moscow’s huge and controversial European energy project in the crosshairs, rolling out a new slate of sanctions that could kill the Nord Stream 2 pipeline and boost U.S. energy exports to Europe.

Tougher U.S. sanctions on the $11 billion natural gas pipeline from Russia to Germany across the Baltic Sea, are about the only thing that could kill the project at this point. What’s less clear is whether U.S. natural gas will be able to make up the difference—and whether Europe wants or needs Washington’s help in managing its own energy security.

On Wednesday, Republican Sens. John Barrasso and Cory Gardner introduced a bill that would make mandatory U.S. economic sanctions on companies building the Nord Stream pipeline. Last year, Congress passed tough potential sanctions on Russian energy projects, but the new bill would make them explicitly applicable to Nord Stream and mandatory, rather than leaving them to the president’s discretion. The bill also seeks to streamline the export of more U.S. natural gas to allies such as Japan and members of NATO.

Separately, Democratic Sen. Bob Menendez said Thursday that he will introduce a new bill to put teeth into the existing but still unused sanctions on Russian energy.

Barrasso has been trying to boost U.S. energy exports to allies for years and has been a vocal critic of Nord Stream 2. But energy analysts viewed the introduction of the new bill as a timely response to Trump’s softer language on the Russian energy project in his meeting with Russian President Vladimir Putin in Helsinki on Monday.

The legislation advances Barrasso’s “long-standing goal of finding ways to increase European energy security,” said Laura Mengelkamp, a spokeswoman for Barrasso, who had previously introduced a similar bill. “American natural gas is a reliable and dependable source of energy.”

The United States has been railing for years against big Russian pipeline projects, including Nord Stream 2, that could redouble the European Union’s reliance on Moscow for energy, thus handing Russia potential leverage over the continent’s economic lifeblood. But by promoting U.S. energy exports as a replacement for Nord Stream 2, Washington is sending the wrong message on Russian energy coercion, said Brenda Shaffer, an energy expert at Georgetown University.

“Linking U.S. gas exports to anti-Nord Stream 2 legislation undermines the U.S. position against the pipeline,” she said, because it “reinforces Moscow’s claim that the U.S. is acting out of self-interest, despite that not being the case.”

Another problem is that several big Western European energy firms are helping Russia’s Gazprom to build the pipeline, and Germany—where the gas will arrive—has long supported it. That means that any U.S. action against Russia’s big energy project would actually take aim at nominal friends and allies in Europe; Trump will meet the president of the European Commission in Washington next week to talk about energy security and other issues.

“Sanctioning German and other European companies building Nord Stream at this point, when the U.S. is facing tensions with its European allies and with Germany itself, may inadvertently result in more division between the United States and Europe, rather than strengthening a joint posture against Moscow,” said Agnia Grigas, an energy expert at the Atlantic Council.

But from a U.S. point of view, there are few options left to halt the pipeline, which would double the amount of natural gas shipped directly from Russia to the heart of Europe, largely bypassing Ukraine—traditionally the middleman for Russian energy exports. That role as a transit state earns Kiev billions of dollars in annual revenue and some insurance against seeing itself suddenly deprived of energy supplies, as it has several times in the past. Nord Stream 2 has now secured virtually all of the permits it needs for construction. Workers began laying pipes off the German coast in the Baltic Sea this spring.

“Nord Stream 2 has now advanced to the stage when it could be stopped only by U.S. sanctions,” said Vaclav Bartuska, the energy ambassador for the Czech Republic. “Otherwise it’s going to be built.”

Since Nord Stream’s expansion was announced in 2015, the project has divided Europe. Leaders in Central and Eastern Europe, and especially in Ukraine and Poland, fear that allowing Russia to supply its main customers directly will leave them in the cold—perhaps literally. (Russia cut off gas supplies to Europe in the winters of 2006 and 2009.)

Brussels, too, has long been critical of the project because it is at odds with the European Union’s goal of diversifying its energy sources. Last year, Russia delivered record levels of natural gas to the EU, providing about one-third of the bloc’s total gas supplies.

Critics say decades of reliance on Russian energy have skewed Germany’s foreign-policy priorities—and that things could get even worse if Nord Stream 2 is completed. Former German Chancellor Gerhard Schröder has infamously become a key part of Russia’s energy complex, overseeing the first Nord Stream pipeline and later joining the board of the Russian oil giant Rosneft.

“Since Germany started buying Soviet gas [in] the 1970s, relationships and interest groups have been created, and that was further solidified with Nord Stream 1,” Grigas said. “Nord Stream 2 is like a cherry on top.”

Supporters of the project counter that Nord Stream 2 will boost Europe’s energy security by providing lots of cheap gas to the heart of the continent at a time when Europe produces less gas of its own and when demand for energy is again on the rise. The fact that private European firms are taking part in it, they say, shows that it is a commercial project, not a geopolitical weapon dreamed up in Moscow.

The Russia-Europe gas trade is also a two-way street. Europe makes up the vast majority of Gazprom’s earnings, which in turn help finance the Russian state. That mutual interest keeps the trade on track, Shaffer said.

“In the case of Germany and Russia, the gas supply relationship is interdependent: Moscow is dependent on Germany for revenue from its most important market, and Russia is Germany’s main gas supplier.”

Whether or not Nord Stream 2 is a threat or a godsend, it’s far from clear that growing U.S. exports of natural gas on tankers will be the short-term answer for Europe’s energy needs. The bill just introduced in Congress seeks, like similar bills introduced years ago, to streamline the U.S. regulatory approval process so more gas-exporting infrastructure can be built.

But the first wave of U.S. export terminals is already nearing completion; America’s capacity to export liquefied natural gas, or LNG, will jump next year as new terminals come online. That means that regulatory hurdles that were an issue five years ago are less important today.

There are bigger obstacles to U.S. gas pouring into Europe. Germany has no facilities for importing LNG; most of the two dozen-odd terminals in Europe are concentrated on the western edge of the continent, while energy dependence on Russia is most pronounced farther east.

And so far, global markets are pushing most U.S. LNG exports to Latin America and Asia. The entire European Union imported half as much U.S. LNG as did Mexico last year. One big reason for that is the price of gas in different markets. LNG cargoes tend to fetch a higher price in Asia and Latin America than in Europe, and as natural gas prices edge higher, so do those price differentials, making Europe even less attractive as an export market.

More important, the context of U.S. support for Europe’s efforts to diversify its supplies of energy has changed since Washington first broached the idea of becoming a major energy exporter thanks to the shale energy boom of the last decade. In the Obama administration, congressional calls to use U.S. energy wealth to support NATO allies and Japan reinforced the administration’s own support for those countries.

That’s not the case today. Just ahead of his closed-door meeting with Putin, Trump called the European Union a “foe”—a sentence that European diplomats insist won’t soon be forgotten. He has also repeatedly questioned the value of NATO allies and the alliance itself and has also labeled EU countries a security threat when it comes to trade in steel, aluminum, and, potentially, cars.

The new legislation seeks to make support for “countries that are allies or partners of the United States” official policy. But from the Trump administration’s recent rhetoric, it’s not clear that EU and NATO countries are even considered allies and partners anymore.

Keith Johnson is Foreign Policy’s global geoeconomics correspondent. @KFJ_FP

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