Two Cheers for the House Russia Sanctions

Energy policy is the geoeconomic tool par excellence. Whether it is the OPEC oil embargoes of the 1970s, the subsequent creation of the International Energy Agency by Western consuming nations, or more recent U.S. and EU efforts to diversify supply and promote renewables, the foreign policy implications of buying and selling oil and gas are never far from the surface. Given the unique role that energy plays in economic growth worldwide, this is a normal state of affairs and one that should be recognized openly.

Against this backdrop, the U.S. House of Representatives’ 419-3 vote in July to strengthen sanctions against Russia for its actions in Ukraine and during the 2016 U.S. presidential election mostly fits comfortably into well-understood diplomatic traditions. Among other options, it provides the U.S. president with new tools to use energy policy to promote U.S. foreign and economic policy goals, most of which also serve the collective strategic interest of the European Union.

Nonetheless, the House bill has led to a number of strong objections from German and other European officials and private sector representatives. The unease on the other side of the Atlantic seems to stem from two misunderstandings and one legitimate concern involving three sections of the bill.

Key changes were made to the House bill after it left the Senate that U.S. allies across the Atlantic should play close attention to. One involves section 232 that now requires the president to impose any new sanctions “in coordination with allies.” Equally important, section 223 of the House version has removed language that could have threatened important energy diversification projects like the Southern Gas Corridor that will deliver gas from the Shah Deniz field in Azerbaijan.

Where European concerns are well grounded relate to section 257, which addresses Ukraine. On the one hand, the bill makes a strong statement in favor of transatlantic cooperation, calling for the U.S. to “work with European Union states and European Union institutions to promote energy security through developing diversified and liberalized energy markets that provide diversified sources, supplies, and routes.” So far, so collegial.

Where the problems start is when the bill asserts its opposition to Nord Stream 2, the planned pipeline that would transport gas from Russia directly to Germany, bypassing the main route through Ukraine. NS2 is seen by the House to have “detrimental impacts on the European Union’s energy security, gas market development in Central and Eastern Europe, and energy reform in Ukraine.”

Now, there are legitimate energy security reasons to be wary of Nord Stream 2. In the end, however, it should be the Europeans that have the last word on whether to go ahead with the project. Instead of singling out NS2 by name, it would have been more constructive if the bill had called instead for the completion of the European Energy Union, which will play an important role in encouraging the EU to strike a better balance between commercial and strategic concerns and become a strong geoeconomic actor in matters of energy policy.

While some critical European voices have also been irked by the language in the bill that seems to confirm their worst fears about the Trump administration’s mercantilist inclinations in trade policy (“the United States should prioritize the export of United States energy resources in order to create American jobs”), this is a red herring. The very next wording says such steps should also be done to “help United States allies and partners.”

Clearly, imports of U.S. liquefied natural gas are going to play an increasing role in Europe’s energy diversification and security of supply. It should go without saying that there is no zero-sum game at work between the understandable attempt by the United States to become a major energy exporter and European economic and political well-being.

The views expressed are those of the author(s) alone. They do not necessarily reflect the views of the American Institute for Contemporary German Studies.

Peter S. Rashish

Senior Fellow; Director, Geoeconomics Program

Peter S. Rashish, who counts over 25 years of experience counseling corporations, think tanks, foundations, and international organizations on transatlantic trade and economic strategy, is a Senior Fellow and Director of the Geoeconomics Program at AICGS. He also writes The Wider Atlantic blog.

Mr. Rashish serves as a Senior Advisor to Transnational Strategy Group LLC, a Washington-based international business and government affairs consultancy, and to the Brussels-based European Policy Centre. He has served as Vice President for Europe and Eurasia at the U.S. Chamber of Commerce, where he spearheaded the Chamber’s advocacy for an ambitious and comprehensive trade agreement between the United States and the European Union, which was officially launched as the “Transatlantic Trade and Investment Partnership,” and developed new engagements in the continent’s emerging markets.

Previously, Mr. Rashish was a Senior Advisor for Europe at McLarty Associates, and has held positions as Executive Vice President of the European Institute, on the Paris-based staff of the International Energy Agency, and as a consultant to the World Bank, the German Marshall Fund of the United States, the Atlantic Council, the Bertelsmann Foundation, and the United Nations Conference on Trade and Development. Mr. Rashish has testified on the euro zone and U.S.-European economic relations before the House Financial Services Subcommittee on International Monetary Policy and Trade and the House Foreign Affairs Subcommittee on Europe and Eurasia and has advised two U.S. presidential campaigns.

He earned his B.A. from Harvard College and an M.Phil. in international relations from Oxford University. He speaks French, German, Italian, and Spanish.