The US house of representatives has passed a tightened sanctions bill against Russia which could have major consequences for European companies working on Russian energy projects and the export of gas to Europe.
The new sanctions add restrictions to banks’ and energy companies’ ability to raise capital, and target state-owned entities in the rail, shipping, metals and mining sectors. The bill, which is called Countering Iran’s Destabilising Activities Act of 2017, covers Iran, Russia and North Korea and is now awaiting sign-off from President Donald Trump.
The draft bill has raised concerns in Europe as it could lead to US fines on EU firms that take part in Russian energy projects, as well as impact Europe’s energy supply and infrastructure.
The European Commission (EC) has identified eight major projects that could be affected by the new sanctions, most notably the planned Nord Stream II gas pipeline from Russia to Germany. The project, which aims to carry 55 billion cubic metres of Russian gas under the Baltic Sea to Germany, involves German companies Wintershall and Uniper, Austrian company OMV, French firm Enie and Anglo-Dutch firm Shell.
Other projects include the Baltic Liquified Natural Gas (LNG) project in the Baltic Sea, the Russia-Turkey Blue Stream pipeline, the CPC pipeline carrying Kazakh oil via Russia to the Black Sea, the existing Nord Stream I pipeline, the expansion of Russian LNG export facility Sakhalin II, the Shah Deniz and South Caucaus Pipeline project in Azerbaijan, and development of the field in Egypt.
Concerns that the US has a hidden agenda to adjust its large trade deficit with the EU by pushing more of its own LNG to the region have been raised by some market commentators. So far, US LNG exports to the EU have struggled to build market share due to cheaper Russian gas and infrastructure bottlenecks. By putting sanctions on Russian gas projects, or threatening to do so, US LNG is poised to become more attractive.
EU seeks assurance
The EC is seeking assurances from Washington that, if passed, the new measures would not be applied in a way that affects EU interests or energy companies.
“We are following the draft bill on Russia sanctions with some concern, notably because of its possible impact on the EU’s energy independence,” EC spokesman, Margaritis Schinas, said on Monday.
Should Trump ratify the bill, the move would raise tensions with the EC, creating further transatlantic friction. Similar tensions arose between the two recently when Trump made threats to various regions, including Europe, to counter the dumping of steel in the US.
A position paper drafted earlier this month said Brussels should be prepared to act “within days” if the sanctions are adopted “without EU concerns being taken into account”. President of the EC, Jean-Claude Juncker, has called for an urgent review of how the EU should respond following the vote on Tuesday by the house of representatives. Commissioners are due to meet on Wednesday.
In a leaked memo for the meeting, reported on by the Financial Times, the Commission is believed to be considering three options: to 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.
However, it is unclear if EU counter-measures would be able to get the required unanimous support from all member states. While Germany and Austria have railed against the draft US law, others including Poland, the Baltic states, and the Nordic states are opposed to Nord Stream II which they argue would increase EU dependency on Russian gas and leave eastern EU members more vulnerable to Russian energy politics.