Tuesday

22nd Jan 2019

US votes to sanction EU firms in Russia project

  • Nord Stream II pipeline segments at storage yard in Finland (Photo: nord-stream2.com)

US congressmen are preparing to vote on new Russia sanctions on Tuesday (25 July) in a move set to anger parts of the EU.

The bill, entitled Countering Iran's Destabilising Activities Act of 2017, which covers Iran, Russia, and North Korea, is expected to pass after sailing through the Senate by 98 votes to two in June.

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  • Former German chancellor Gerhard Schroeder is a leading lobbyist for the Nord Stream project (Photo: nord-stream2.com)

Bob Corker, the Republican senator who sponsored the law, told reporters in Washington on Monday that only “procedural issues” remained to be finalised.

"We're about there, there's still some procedural issues we're discussing but, you know, I think it worked out very, very well," he said, referring to weekend talks between Republicans and Democrats on the legislation.

"It [a deal] is not quite done, but it feels like it's moving to a good place," he said.

The law could lead to US fines on EU firms that take part in Russian energy projects, including the planned Nord Stream II gas pipeline from Russia to Germany, which involves German firms Wintershall and Uniper, Austrian company OMV, French firm Enie, and Anglo-Dutch firm Shell.

It could still be vetoed by the Russia-friendly US president, Donald Trump.

"He [Trump] is going to study that legislation and see what the final product looks like,” his spokeswoman, Sarah Sanders, said on Monday.

But a veto would be unlikely if the bill passed by more than a two-thirds majority on Tuesday because congressmen could subsequently overrule the White House, causing embarrassment for Trump.

A European Commission spokesman said in Brussels on Monday that the EU was using “all diplomatic channels” with the US to address its concerns over the new measures.

He said the US law was “broader” than just Nord Stream II and “relates to EU energy independence and energy securtiy”.

He added that the Commission chief, Jean-Claude Juncker, had already warned at the G20 summit in Germany earlier in July that the EU might take retaliatory measures against the US if it went ahead.

EU response

Juncker “said the EU is always ready to respond adequately … should the case require it. Let’s hope the case does not require it here” the Commission spokesman said.

The Commission also on Monday leaked an internal memo to be discussed by its 28 commissioners on Wednesday.

The memo said there was a “serious risks of detrimental political spillovers” if the US went ahead, the Financial Times, a British newspaper, reported.

“The assessment is that the bill responds primarily to the US domestic political situation and that its harmful consequences are probably unintentional yet serious,” the memo said.

It said the Commission might ask the US to exclude EU firms from the new regime, to pass an EU law to block US jurisdiction over European companies, or to impose retaliatory sanctions on US firms, such as limiting their access to credit from EU banks.

EU counter-measures would be unlikely to get the required unanimous support from member states.

Germany and Austria have railed against the draft US law, but Poland, the Baltic states, and the Nordic states, among others, are opposed to Nord Stream II which, its critics say, would increase EU dependency on Russian gas and leave easterly EU states more vulnerable to Kremlin energy blackmail.

World upside down

But a discussion in the EU Council on potential anti-US sanctions for the sake of cooperation with Russia would turn on its head the previous EU-US diplomatic consensus.

Dmitry Peskov, the Kremlin, spokesman, noted that the EU and Russia had already held talks on the potential US measures.

"We are working with European partners on the implementation of a number of big projects," he said, without naming Nord Stream II.

“Logically, we discuss some sanctions-related topics that potentially can hamper implementation of these projects, which causes concern for us,” he said.

The EU Council is to also hold low-level talks on Russia sanctions on Wednesday, focusing on Crimea.

The Reuters news agency said EU diplomats would consider adding four Russian individuals and entities to a blacklist after it emerged that these had helped to smuggle electricity turbines sold by German firm Siemens to the Ukrainian peninsula, which Russia annexed from Ukraine in 2014.

Anti-tank weapons

The EU and US imposed sanctions on Russia after it invaded Ukraine in an ongoing conflict which flared up last week when shelling by Russia-controlled fighters in the Donetsk region killed five Ukrainian soldiers.

Kurt Volker, a US special envoy on the crisis, told the BBC on Monday that the US was considering sending anti-tank weapons to the Ukrainian military to keep Russia at bay.

“Defensive weapons, ones that would allow Ukraine to defend itself, and to take out tanks for example, would … help”, he said.

Corker's Russia sanctions bill covering Nord Stream II was put forward in retaliation against Russia’s meddling in last year’s US elections.

The new law would also prevent Trump, who is under a spotlight for alleged collusion with Russia, from deleting existing US measures against Russian energy firms and banks without congressional permission.

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