The week before last, the Senate voted 97-2 in favor of extending sanctions against Russia. This was a remarkable statement of bipartisan unity — and anxiety — on the issue of Russian interference in the 2016 presidential election. The House has decided to refer the bill to the Foreign Affairs Committee, ostensibly for procedural rather than policy-related reasons. This has temporarily stalled the legislation. However, foreign allies in Europe have responded harshly to the legislation, which affect European companies in the energy sector and elsewhere.
What will the bill do?
The bill would add a robust set of new measures to the sanctions that the United States introduced, with European support in 2014, following the Russian annexation of Crimea and Russian activities in Eastern Ukraine. European Union leaders in Germany, Austria and elsewhere have treated the bill with derision. Chancellor Angela Merkel’s spokesman, Steffen Seibert, described the Senate’s decision as “outlandish, to put it carefully,” echoing previous sentiments expressed by German Foreign Minister Sigmar Gabriel.
What’s making Europe so unhappy?
There are three reasons Europe is skeptical about the Senate’s bill: frustration that the United States is abandoning cooperation for unilateralism, unhappiness with the implications of the sanctions for European companies, and differing views on the future of European energy security.
Europeans fear that America is cutting them out of decision-making
Sanctions have been in place against Russia since 2014. They were provoked by Russia’s annexation of Crimea and its actions in Eastern Ukraine, not its meddling in foreign elections, from which Europeans have suffered, too. The need for sanctions was a matter of European-American consensus. As Austrian Chancellor Christian Kern and Germany’s Gabriel have noted, there has been a transatlantic consensus that sanctions were necessary, ever since they were introduced. Indeed, the European Union voted last week to extend its own sanctions to Moscow, as if Europe wanted to emphasize that its opposition to the new proposed sanctions does not mean that it is going soft on Russia.
However, when the Senate passed a bill renewing sanctions, it changed their justification, playing down Ukraine and emphasizing Russian interference in U.S. elections. This means that the bill may be seen as weakening the U.S. commitment to the sanctions’ original goal — raising the cost for Russia of invading and destabilizing Ukraine. The bill may thus make it harder to keep pressure on Moscow to abide by the peace accord, and hurt the cause of peace more generally.
U.S. lawmakers’ unilateral retaliation against Russian may backfire. They are right to be concerned at the broad set of Russian measures aimed at disrupting relations between the United States and its Atlantic allies. Yet it may be that U.S. actions make this worse, by causing further discord between the United States and Europe.
The United States is threatening to punish European companies without Europe’s assent
Europeans also dislike the Senate bill because it looks to make it harder for E.U. companies to do business with Russia, acting extraterritorially to constrain foreign firms while appearing to offer a helping hand to U.S. energy exporters.
The bill would target companies that support “Russian export pipelines.” This could create problems for companies such as Shell, Engie and OMV, all of which have backed Moscow’s Nord Stream II pipeline, which brings Russian natural gas to Western Europe. Washington has long worried that Nord Stream II makes the E.U. too dependent on Russian energy supplies, and some E.U. countries have the same worry. Yet Europeans think that this is basically their own business, not Washington’s.
The Senate’s bill explicitly calls for U.S. energy exports to be prioritized, linking this to the creation of U.S. jobs and the strengthening of U.S. foreign policy. European leaders have little issue with the United States developing its nascent liquid natural gas (LNG) export industry, but aren’t happy that this is happening under the cover of the sanctions regime.
The United States and Europe have basic disagreements about European energy security
Since Americans still worry about European dependence on Russian gas, they think that unraveling E.U.-Russia gas cooperation is a central benefit of the new sanctions.
Europeans, unsurprisingly, disagree, and have disagreed since the Soviet Union started delivering gas to Western Europe in the second half of the 20th century. Where the United States sees a Russian threat, Europe sees cheap and reliable energy. Europe also correctly sees that Russia depends much more on Europe as an energy customer than Europe depends on Russia as an energy supplier. Russia does supply natural gas to other countries such as China, but at a much cheaper rate. It’s the European market that keeps the Russian gas industry viable.
Americans misread this. For example, Republican Sens. John McCain (Ariz.) and John Hoeven (N.D.) wrote a 2014 Wall Street Journal op-ed in which they implored the United States to use its LNG potential to “liberate our allies from Russia’s stranglehold on the European natural-gas market.” The problem is that Europeans don’t necessarily want to be liberated. Russian gas is much cheaper than American LNG, and could become even cheaper to undercut the United States if it entered the European market. American LNG suppliers prioritize their own profits over America’s strategic advantage anyway, and are likely to want to target more lucrative markets than Europe, such as Japan. Finally, the Russian gas supply is likely to be more reliable than the United States’, since it involves predictable long-term contracts, whereas U.S. production capacity rises and falls, as it becomes cheaper and more expensive to extract American unconventional hydrocarbons. Until U.S. exporters can deliver gas more cheaply than Russia, and match Russian reliability, they are unlikely to have much impact on EU markets.
The result is that U.S. policymakers misunderstand what really matters in European energy markets, and are likely to create further consternation in Brussels as a result of the new sanctions. If Russia indeed wants to see the E.U.-U.S. relationship get worse, it plausibly just needs to stand back and do nothing.
Luke Mackle is a recent graduate of the Davis Center for Russia and Eurasian Studies, Harvard University