Trump Gives Merkel An Ultimatum: Drop Russian Gas Pipeline Or Trade War Begins

It became clear just how important it is to the US for Russia's Nord Stream 2 gas pipeline project to fail two months ago when, as we described in "US Threatens Sanctions For European Firms Participating In Russian Gas Pipeline Project", the U.S. State Department warned European corporations that they will likely face penalties and sanctions if they participate in the construction of Russia's Nord Stream 2 on the grounds that "the project undermines energy security in Europe", when in reality Russia has for decades been a quasi-monopolist on European energy supplies and thus has unprecedented leverage over European politics, at least behind the scenes.

As many people know, we oppose the Nord Stream 2 project, the US government does,” State Department spokeswoman, Heather Nauert said during a late March press briefing adding that "the Nord Stream 2 project would undermine Europe's overall energy security and stability. It would provide Russia [with] another tool to pressure European countries, especially countries such as Ukraine." And speaking of Ukraine, recall that in 2014, shortly after the US State Department facilitated the presidential coup in Ukraine, Joe Biden's son Hunter joined the board of directors of Burisma, Ukraine's largest oil and gas company. Surely that was merely a coincidence.

Nauert also said that Washington may introduce punitive measures against participants in the pipeline project - which could be implemented using a provision in the Countering America's Adversaries Through Sanctions Act (CAATSA).

Fast forward to today, when the dreadfully named CAATSA act just made a repeat appearance; around the time Europe made it clear it would openly defy Trump's Iran sanctions, the WSJ reported that Trump told Merkel that if she wants to avoid a trans-Atlantic trade war, the price would be to pull the break on Nord Stream 2, according to German, U.S. and European sources.

The officials said Mr. Trump told German Chancellor Angela Merkel in April that Germany should drop support for Nord Stream 2, an offshore pipeline that would bring gas directly from Russia via the Baltic Sea. This would be in exchange for the U.S. starting talks with the European Union on a new trade deal.

While it had long been suspected that Trump would push hard to dismantle Nord Stream 2 just so US nat gas exporters could grab a slice of the European market pie, the aggressive push comes as a surprise, and as the WSJ notes, "the White House pressure reflects its hard ball tactics on trade, moves that have contributed to rising tensions between Europe and the U.S. and raised fears in export-dependent Germany of a tit-for-tat on tariffs that could engulf its car industry."

The Nord Stream II (or NS2) project was started in 2015 is a joint venture between Russia's Gazprom and European partners, including German Uniper, Austria's OMV, France's Engie, Wintershall and the British-Dutch multinational Royal Dutch Shell. The pipeline is set to run from Russia to Germany under the Baltic Sea - doubling the existing pipeline's capacity of 55 cubic meters per year, and is therefore critical for Europe's future energy needs.

NS2 is the second phase of an existing pipeline that already channels smaller amount of gas from Russia to Germany. Construction for the second phase started this week in Germany, after investors committed €5 billion ($5.9 billion) to the venture.

Trump has publicly criticized the Nord Stream 2 pipeline, saying at a meeting with Baltic State leaders at the White House this year that “Germany hooks up a pipeline into Russia, where Germany is going to be paying billions of dollars for energy into Russia…That’s not right.”

“Donald Trump is a deal maker...there is a deal to be made if someone (in Germany) stood up and said ‘Help us protect our auto industry a little bit more, because we’re great at it and we’re going to help you on Nord Stream 2’,” said one U.S. official, who was present at the April meeting between Ms. Merkel and Mr. Trump.

Raising the pressure further, Sandra Oudkirk, a senior U.S. diplomat, told journalists in Berlin on Thursday that as a Russian energy project the pipeline could face U.S. sanctions, putting any company participating in it at risk.

* * *

The Kremlin shot back immediately as spokesman Dmitry Peskov called the U.S. efforts “a crude effort to hinder an international energy project that has an important role in energy security.”

“The Americans are simply trying crudely to promote their own gas producers,” he said.

He is, of course, right, even if the official explanation is that Washington opposes the pipeline because it would make Ukraine—currently the main transit route for Russian gas headed west—and other U.S. allies in the EU more vulnerable to Russian pressure. German officials also say the U.S. is eager to displace Russia as a provider of gas to Europe, hence confirming with the Russian said.

Of course, in the end it's all a question of leverage, and who has more, and right now Trump believes that by threatening European auto exports hostage, he has all of it.

* * *

Still, that Trump thinks he can interject after three years of trade negotiations with an abrupt demand while providing no alternatives, is rather stunning, but understandable. As Alex Gorka of the Strategic Culture Foundation wrote, on March 15, a bipartisan group of 39 senators led by John Barrasso (R-WY) sent a letter to the Treasury Department. 

They oppose NS2 and are calling on the administration to bury it. Why? They don’t want Russia to be in a position to influence Europe, which would be “detrimental,” as they put it.  And, as Gorka wrote, their preferred tool to implement this obstructionist policy is the use of sanctions, precisely what we are seeing currently.

To be sure, 39 out of 100 is a number no president can ignore as powerful pressure emanating from US corporations and lobbies was being applied on the administration. Even before the senators wrote their letter, Kurt Volker, the US envoy to Ukraine, had claimed that NS2 was a purely political, not commercial, project.

As we said in March, "No doubt other steps to ratchet up the pressure on Europe will follow." Little did we know that less than 2 months later, the US and Europe would be embroiled in a bruising trade war in which the fate of NS2 is suddenly the key variable.

* * *

So will Trump win, and will US LNG replace Russian exports?

While Merkel hasn’t yet dropped her support for the pipeline, she said on Thursday the EU had agreed at a summit Wednesday night to offer the U.S. “closer cooperation” in the field of gas in exchange for a permanent exemption from the steel and aluminum tariffs, suggesting that Nord Stream 2 may soon be a trade war casualty.

Should Europe fold, it should expect a surge in energy inflation: Liquefied gas from the U.S. needs to be shipped over the Atlantic and would be considerably more expensive than Russian gas delivered via pipelines. A senior EU official working on energy regulation said Russian gas would be at least 20% cheaper.

"Trump’s strategy seems to be to force us to buy their more expensive gas, but as long as LNG is not competitive, Europe will not agree to some sort of racket and pay extortionate prices," an EU official said.

Which, amusingly, is precisely what Trump's brute trade overture is: an global racket.

Germany’s pipeline plan has long been controversial with Ukraine, as well as several EU countries on the bloc’s eastern edge who fear it gives Russian President Vladimir Putin power over gas deliveries—which Berlin has so far largely ignored.

Trump has been pushing for better access for U.S. companies to an EU market he has criticized as over-protected. Barring an EU offer to address Mr. Trump’s grievances, the U.S. will hit Europe with punitive steel and aluminum tariffs on June 1. The EU has promised retaliatory tariffs.

* * *

So now that the ball is in Merkel's court, how will she respond?  On Friday, the German chancellor is traveling to Russia on Friday to meet Vladimir Putin in hopes of brokering a compromise that would satisfy the U.S. and her European partners.

She will ask Mr. Putin for a deal that would preserve the lucrative transit trade—Ukraine gets a fee for letting Russian gas through its territory on the way to eastern Europe—even after Nord Stream 2 comes online in 2019, a German official said.

Meanwhile, German government officials say that since all the permits for Nord Stream 2 have been issued, the WSJ notes that there is no legal way to stop the project, which is run by Gazprom , the Russian energy giant, under financing agreements with international companies such as Engie, OMV, Shell, Uniper and Wintershall.

Comments

JimmyJones Pandelis Thu, 05/17/2018 - 15:35 Permalink

You see what Trump is doing right?  He is going to force the breakup of the EU and Nato. While dee- bogiemaning Russia in the process.   This will lead to the my guess the central Banking cabal coming under fire as well.

In reply to by Pandelis

JimmyJones eforce Thu, 05/17/2018 - 15:38 Permalink

Its not, if the US loses reserve currency status the money for the BS programs dries up over night.  The US can only money print to infinity because of the Reserve currency status, all those Social programs can no longer be funded.  Social engineering comes to a halt.

In reply to by eforce

philipat Give Me Some Truth Thu, 05/17/2018 - 23:24 Permalink

“Germany hooks up a pipeline into Russia, where Germany is going to be paying billions of dollars for energy into Russia…That’s not right.”

No worries Donald, they will NOT be paying in Dollars. Problem solved??

And as a proponent of "Free markets" shouldn't the US be the first to welcome the competition from Russian gas? The US already has access to European markets for US LNG so why not just let the markets decide which to choose?

In reply to by Give Me Some Truth

null espirit Fri, 05/18/2018 - 09:23 Permalink

Russia is a great Country and has slowly gotten better and better ... certainly has an excellent leader. But ...

Buying Russian gas would be equivalent to buying a rose for five dollars from a panhandler ... but realistically, it’s more like giving the guy washing your window at the intersection a dollar to leave you alone.

Plus, those bases would not even be there if the Russians were not constantly Provoked by the EU circle-jerks.

 

In reply to by espirit

veritas semper… RationalLuddite Thu, 05/17/2018 - 19:41 Permalink

 The Donald is a Mafia , a gangster boss . Same methods . The American Imperialist Empire ,aligned with the Zionist Empire and the Wahhabi Terrorist Empire = the Beast .

 What business has  US to tell other countries what economic deals they can have or not ? WTF  US thinks it is to tell EU not to do business with Russia and Iran ?

 The US is done. For the EU this is the moment and opportunity to part ways with the sinking American Titanic and become independent.  The petro-f*cking-dollar is done .

 To better understand this ,study this list ( from C!A  site , they know) :https://www.cia.gov/library/publications/the-world-factbook/rankorder/2…

See where US and UK are on that C!A list . Self explanatory.

OT : another embarrassing moment for the Donald's bimbo at State Department , Heather Nauert ; she was commenting on the Crimea bridge inaugurated yesterday  ,and she said ( I kid you not,she is that stupid) : Russia built that bridge without asking Ukraine ' s permission . 

   The bridge  by the way is awesome and the opening ceremony was done by Mr. Putin driving a truck .

 Bwahahah !

 

 

In reply to by RationalLuddite

lucitanian dirty fingernails Fri, 05/18/2018 - 09:12 Permalink

Plus, EU is supposed to be frightened of Russian pressure to use energy as a political tool suffering under the threat of foreign powers manipulating, but in actual fact that is exactly what Washington is doing already. Why fear the hypothetical future when we have the US giving us orders on who and how we buy our energy supplies.

Fuck Trump, Fuck the US, and Fuck their LNG. Fuck NATO while your at it..... Enough of Europe being a tool for the Empire and its Zionist Mafia. Time to let the petrodollar and its cotangent subsidy to the MIC die a natural death and cooperate in mutually beneficial groups of sovereign states on a multi-polar basis rather than be dictated to and oppressed by US/Zionist hegemony. 

In reply to by dirty fingernails

brushhog revolla Thu, 05/17/2018 - 16:24 Permalink

This is what Trump is supposed to do. He's the president of the USA and he's supposed t push for American interests. Merkel is supposed to push for German interests. Thats what representatives are supposed to do, its just been so long since the USA had a leader that actually acted on behalf of the interests of Americans rather than global cabals, that people are taken aback by it.

In reply to by revolla

dirty fingernails brushhog Thu, 05/17/2018 - 16:45 Permalink

You are wrong and right. You are right that leaders are supposed to promote their country's interests. You are wrong about nobody promoting US interests before OJ. Dumbass is trying to have his cake and eat it, too. You can't export $1.86T per year and also export huge amounts of goods. It's one or the other and everybody else chose the cash. Trump is trying for both because the printing game is coming to an end. Pushing trade wars with allies because they aren't buying products you approve of is extortion, meddling in another country's affairs, and self-defeating at this stage of collapse. It's a boneheaded move but when the only tool you have is a hammer...

In reply to by brushhog

lucitanian dirty fingernails Fri, 05/18/2018 - 09:26 Permalink

Exactly... the rest of the world is forced to export to earn the petrodollar, while the US prints willy-nilly and subsidies its enforcer MIC, Now the US complains and seeks to control the exports and imports of others to their advantage. Ask yourself, who exactly had the free ride and why the US is unable to be competitive as a manufacturer?

The US has misused the power it got at Breton Woods, and subcontracted the implementation to the Zionist gangsters.

In reply to by dirty fingernails

Rex Andrus revolla Thu, 05/17/2018 - 21:39 Permalink

Trump enabled me to keep about $3000 more of my earnings YTD, plus I just got double that for a bonus, and a raise, the first of both since 2007, while stomping the political criminals I most hate, and giving them Montezuma's revenge, the squirts and dry heaves, as they destroy their own careers, shaming themselves. Fucking awesome! HA HA
I can do some good with this x 100 million productive Americans = The Shit Storm 2018

Call me naive, but don't you think "Stormy" is an occult mockery of "The Storm"? Also in occult purple is symbolic of Death, especially when a caricature is purple, like Bill Gross's Picasso. Green means poison. Look at that Picasso again.

In reply to by revolla

null chiburashka Thu, 05/17/2018 - 16:31 Permalink

Pretty sure he expects the same results as will be produced.

You are not talking about sovereign countries but rather a contraption which is less than the sum of its parts. The problem for the USA, is that the EU contraption caused a ton of sedition and treason since 2015; he has no choice but to kick those enemies of the State to the curb until the EU can maybe address their governance issues.

In reply to by chiburashka

el buitre TheWholeYearInn Thu, 05/17/2018 - 16:11 Permalink

He really jumped the shark on this one.  I am beginning to enjoy his antics.  He will probably ask Kim to send all his nukes to Tennessee along with his wife's hymen preserved in formaldehyde and one of his children if Kim wants to proceed with the peace deal.  Either Trump is amazingly stupid or he wants to destroy the USD which will bring down the empire.  Time will tell.

In reply to by TheWholeYearInn

dirty fingernails el buitre Thu, 05/17/2018 - 16:35 Permalink

He is the product of being born into wealth. He doesn't have much of a clue outside of selling overpriced condos to rich assholes. These problems would be handled pretty much the same way no matter who was in charge because all of DC is the product of the empire stomping around the globe for 70 years without regard for consequences. Since the USSR collapsed there hasn't been much regard for diplomacy because we were the dominant empire. Just look at the commenters who still don't grasp the reality of the US and/or the possibility of the US losing the uni-polar status (which is already gone). As a nation, we are fucked.

In reply to by el buitre

RationalLuddite dirty fingernails Thu, 05/17/2018 - 18:16 Permalink

Precisely.  A culture and political class used to bullying and extortion largely without consequences simply doesn't psychologically integrate the idea of reciprocity. Unfortunately  (because there are a minority of mature terrific people in the USA too) the exemptionals are going to be learning the hard way that they're not exceptional in the ways they thought 

In reply to by dirty fingernails

veritas semper… el buitre Thu, 05/17/2018 - 20:56 Permalink

The Donald is stupid : cue , see his vocabulary. He thinks that extortion methods that he applied in his business ,which survived because he  made an alliance pact with the Kosher Nostra , will be successful in politics . Wrong.

 The international pie is shrinking and now , it is every country for itself. And ,when a country has to chose between prosperity without Murka and self destruction with Murka , guess what choice it will choose ?

 And he does not need to destroy the USD because the petro-f8cking-dollar is done . He is just speeding up the process , with the sanctions against Russia and Iran .

 

In reply to by el buitre

FBaggins Truther Thu, 05/17/2018 - 16:20 Permalink

He is desperate. Europe knows the US is not prepared for any really serious ground war against Russia in Eurasia or even in the Middle East, and it looks like most European nations are saying 'enough bullshit and bluster, we have to face reality despite what the Rothschild banksters and the Zionists want in their continued efforts to bankrupt Russia'. Russia is the mainstay of the movement telling the entitlement-minded Rothschild private central-bank empire to FO, plus it  has nationalized its oil and kicked out the  cabal billionaires. The Zio crowd have to stop running the Trump administration for their special interests and hegemony, and let Trump instead serve the best interests of his own nation if in fact it is still the USA.

 

In reply to by Truther