Thursday

22nd Apr 2021

Opinion

The German mayor now facing US sanctions over Nord Stream

  • The small Baltic port town of Sassnitz, on Germany's coast (Photo: Sassnitz.de)

Donald Trump or Joe Biden on 3 November, the US will continue to weaponise international trade and economic sanctions to achieve its political goals or advantage American companies - and China is just getting started in using economic blackmail to further its global dominance.

US sanctions, once directed at terrorists or persons from "rogue states", including Iran and North Korea, now target European businesses and state officials.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Mayor Frank Kracht would never have anticipated being treated like a terrorist or dictator for holding political office in the port town of Sassnitz (Photo: WDR)

Take mayor Frank Kracht for example.

He would never have anticipated being treated like a terrorist or dictator. Certainly not for holding political office in the German seaside town of Sassnitz, or for being responsible for the city's port on the Baltic Sea.

He now faces sanctions from a bipartisan coalition in the US Congress, opposed to the deepening economic ties with Russia and European dependence that the project allegedly represents.

So are local companies if they continue to work on the Nord Stream 2 German-Russian pipeline. The port at Sassnitz, heavily dependent on the project, might not survive the economic headwinds.

Many argue that Nord Stream 2 is a flawed project, or oppose its construction outright. They may have good reasons for holding such views.

But even for Nord Stream critics, it's unlikely they'd support extraterritorial threats against state officials or businesses, especially from a country that claims to be a close ally of Europe.

And even Nord Stream critics have to face the fact that this is only one example of Washington's use of economic blackmailing.

In September, the Trump administration imposed measures on the chief prosecutor of the International Criminal Court (ICC), Fatou Bensouda, to deny her access to any bank account or credit card – simply because she was investigating alleged US war crimes.

While a longer-running dispute, on aircraft subsidies, intensified last year when Washington imposed $7bn [€5.9bn] in tariffs on European imports – to the detriment of wine, cheese and olive oil producers, from France, Italy and Spain.

Worryingly, the US is not alone in this behaviour.

First US, then China

China has also used the threat of punitive tariffs on German car exports as a method of strengthening Huawei's pitch to build the country's 5G infrastructure.

It also threatened to curb medical supplies to the Netherlands, in April, to force it to reconsider changing the name of its Taiwan office.

Its treatment of countries, including Canada and Australia, which have "misbehaved" in Beijing's eyes, shows that it might soon take even tougher measures to coerce European policy.

For European businesses, the picture gets worse.

Export controls, from both China and the US, could be used to control Europe's trade with unrelated third countries. Re-export rules mean that EU-based businesses have to request authorisation from Beijing or Washington to export their goods to specific markets.

These constraints on the export of European products can apply because a small number of upstream products in their supply chain originally came from these countries.

Europe's options, in the face of this extraterritorial pressure, are scant. However, there is scope to bolster its arsenal.

Europeans could create a European Export Bank (EEB) to enable trade that US financial sanctions seek to curb.

The centrality of the US dollar and the US financial system to trade and project finance means that EU companies and institutions are often vulnerable, even when they are not explicitly involved in EU-US trade.

This would give EU member states a comparable source of support and mean that, in any dispute with the US or China, they would be "too big to sanction".

It would also free Europe of its dependence on the dollar, and could facilitate trade with countries, such as Russia, which would hitherto invoke hostility from Beijing and Washington.

Digital currency could give Europe greater freedom in the medium term, too, and reduce dependency on the US financial system. Following the lead of China, which is developing a highly advanced digital currency that will bring transaction partners into its payment network, the European Central Bank (ECB) could establish its own payment infrastructure for a digital euro.

This would reduce the risk of comprehensive disclosure of transaction data and increase Europe's sovereignty in payment infrastructure.

It's also time Europeans learned the true financial impacts of economic aggression by China and the United States.

A regular EU report could calculate the cost and disadvantages imposed on European companies and analyse the exact percentage of Europe's market share that is lost to global competitors, such as China, as a result of a unilateral sanctions policy.

Europe could then levy fees on Chinese or US companies on the European market to correct the market distortion.

The reality is that, in an increasingly divided world, Europe can no longer stand aside as third countries aggressively dictate policy, pursue its member states, and undermine leading figures from international organisations, such as the ICC.

In these circumstances the EU, and its individual members, should be prepared to develop and utilise new, and potentially more confrontational, options for the defence of their market.

Author bio

Jonathan Hackenbroich is a policy fellow for economic statecraft at the European Council on Foreign Relations (ECFR), and the head of ECFR’s Task Force for Protecting Europe from Economic Coercion.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Concerned UK lawmakers push for faster Huawei 5G ban

A crossparty group of British MPs urged the government to consider removing Huawei from the country's 5G networks as soon as 2025 saying there is "clear evidence of collusion" between Huawei and the Chinese state.

EU tells China to prove investment deal is worthwhile

"China has to convince us that it is worth having an agreement," EU Commission president Ursula von der Leyen said, telling China to move on key reciprocity issues on the planned bilateral investment agreement.

News in Brief

  1. Golden backdoor to EU exposed in Malta
  2. India hits 1m infections in four days
  3. Report: Biden to call out Turkey on 1915 Armenia 'genocide'
  4. Putin threatens West with Cold-War geometry
  5. Coronavirus: Japan to declare state of emergency in Tokyo
  6. Navalny must now be treated abroad, UN experts say
  7. World body stigmatises Syria for gassing own people
  8. Hungary to tweak NGO and university law after EU rulings

Column

Muslims, Ramadan, and myths facing 'European civilisation'

Happy Ramadan? The UN special rapporteur on freedom of religion or belief warned the Human Rights Council last month that institutional suspicion of Muslims and those perceived to be Muslim has escalated to "epidemic proportions" worldwide.

A German judge: my fears on rule of law in EU

As a German national, I see German history as a constant warning to defend the rule of law - and to be vigilant to detect even the slightest beginnings of its erosion.

Stakeholders' Highlights

  1. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  2. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  3. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  4. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance
  5. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  6. Nordic Council of MinistersWomen benefit in the digitalised labour market

Latest News

  1. Chemical-weapons vote reveals 'friends of Syria' axis
  2. Russia should pay 'costs' for Czech attack, US says
  3. Merkel 'open' to EU treaty change on health
  4. EU seeks global AI leadership with new rules
  5. EU defers decision on gas and nuclear as 'green' energy
  6. After China ban, Romania hit by illegal waste imports
  7. Hungary: Why we oppose carbon price, but back gas
  8. EU negotiators strike deal on climate 'law of laws'

Join EUobserver

Support quality EU news

Join us