Trump is right on Nord Stream 2

President Trump was right to criticize Chancellor Angela Merkel’s plan for a new pipeline carrying Russian natural gas to Germany. This project threatens European independence and the North Atlantic Treaty Organization, and it was opposed by the Obama administration and many Senate Democrats, although not much was done to stop the pipeline’s construction. Numerous European countries have also been sharply critical of Mrs. Merkel’s energy plans. Mr. Trump has correctly sought to diminish Moscow’s European energy footprint, belying claims he is a stooge of Vladimir Putin.

In 2015 the European Commission cited Russia’s politically motivated disruptions of energy exports as one of the main causes of Europe’s energy insecurity. Moscow is the largest energy exporter to Europe; Gazprom alone supplied almost 40% of Europe’s natural gas in 2017. According to World Bank data, Gazprom’s European gas prices last year were more than double the U.S. domestic price. Russia has also repeatedly used its gas to blackmail Europe, cutting off the supply in 2006, 2009 and 2014, and causing severe shortages in Eastern Europe.

Germany has sought for years to maintain a special energy relationship with Moscow as a means of securing its own energy-supply predominance in Europe. Once the Nord Steam expansion is completed, it will account for 80% of Russian gas imported to Europe, making Germany the Continent’s major gas-distribution hub.

The Nord Stream 2 project has received particularly strong support from the center-left Social Democratic Party, a key member of Mrs. Merkel’s shaky governing coalition. Gerhard Schröder, a former SPD chancellor, has served as chairman of Nord Stream 2 AG, a Gazprom-owned consortium.

Berlin signed the original Nord Stream pipeline deal with Russia during Mr. Schröder’s chancellorship in 2005. In 2017 the Russian government nominated Mr. Schröder to the board of Rosneft, the Russian oil giant. German media report that Mr. Schröder was paid some €250,000 annually at Gazprom, and is expected to be paid €300,000 to €425,000 at Rosneft. But Germans have largely shrugged at the spectacle of a former chancellor on Russia’s payroll.

Many other European countries, however, have been critical of Germany’s Russian-energy romance. Thirteen EU states vehemently oppose the Nord Stream expansion. They are concerned about the loss of transit-fee revenue from existing pipelines that run mostly through Ukraine and the security risk of Russia’s growing dominance over Europe’s gas market. They have demanded the European Commission transfer negotiating power over the pipeline from Germany to the EU.

The new pipeline would enhance Russia’s blackmail capability by enabling Moscow to cut off gas supplies to Eastern Europe without subjecting Western Europe to the same treatment. Not surprisingly, Eastern European states have taken the lead in trying to develop alternatives. In 2016 Croatia and Poland led the formation of the Three Seas Initiative, or 3SI, which united 12 states from the Baltics to the Balkans.

At a 3SI summit in Warsaw in June 2017, Mr. Trump pledged that the U.S. would bolster exports of liquefied natural gas to Europe so the Continent “can never be held hostage to a single supplier.” That statement was anchored in the administration’s broader strategy of transforming the U.S. into a pre-eminent low-cost global energy supplier.

Russia’s gas stranglehold is a source of vulnerability as well as power. Europe accounts for more than 80% of Gazprom’s exports. Energy accounts for almost half of Russia’s exports and 40% of its national budget. The implementation of a 3SI energy plan would drain Russia’s pocketbook and frustrate its geopolitical ambitions.

Moscow has recognized the challenge and done its best to block efforts to diversify European energy supplies. Russian proxies have moved to delay or stop the 3SI project. According to the Croatian media, Gasfin, a Luxembourg company acting as Gazprom’s cat’s-paw in Europe, is supporting local environmentalists opposed to construction of a new LNG terminal on Croatia’s Krk Island. Gasfin has even purchased land on the island so that it can hobble the project via legal challenges—while at the same time suggesting that Gazprom might support the Krk project if it receives only Russian gas. During Croatian President Kolinda Grabar-Kitarovic’s visit to Russia last October, Mr. Putin publicly offered a partnership to gasify Croatia.

Mr. Trump’s leadership on this issue has had tangible results. Poland has committed to buying LNG from the U.S. and has already completed a new LNG terminal. It will not renew a contract with Gazprom set to expire in 2022, ending a 74-year exclusive partnership. U.S. LNG imports to Europe rose 22% last year, and will likely keep growing.

Yet the fate of 3SI is uncertain. The Trump administration should ramp up its energy strategy in two ways. First, promote U.S. investment in all facets of 3SI projects. Second, nudge European countries to accept a long-term package of sanctions on Russian energy, patterned after Carter- and Reagan-era sanctions, including restrictions on technology transfers and financing of Russian gas production and exports. If the Europeans balk, the U.S. should impose such sanctions unilaterally.

An all-out U.S. effort to stop Nord Stream 2 would help restore credibility in the aftermath of the Helsinki summit. Over time, this strategy would reduce Moscow’s European gas exports dramatically, freeing Europe from Moscow’s blackmail. American energy exports to Europe would be reliable and fairly priced. More Americans would have jobs, trans-Atlantic ties would be stronger, and it would be a major blow to the Putin regime.

Mr. Rivkin, a constitutional litigator, served in the Reagan and George H.W. Bush administrations at the White House Counsel’s Office and the Energy and Justice departments. Mr. Zuzul is a former Croatian foreign minister and ambassador to the U.S.

Source: https://www.wsj.com/articles/trump-is-right-on-nord-stream-2-1532289915

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