President Trump (and alternatively Congress) has been threatening sanctions against the Nordstream 2 pipeline for years, so color us surprised when the euro started to sell off on a flashing-red headline from Bloomberg that Trump is considering sanctions... again!
“We’re protecting Germany from Russia and Russia is getting billions and billions of dollars in money from Germany” for its gas, Trump complained to reporters at the White House during a meeting with Polish President Andrzej Duda.
He didn’t say whom the U.S. might sanction to block the pipeline.
However, the algos seem unaware of that fact and are sending the euro lower...
Why does it matter? Simple, as Tom Luongo recently noted, the Nordstream 2 pipeline represents the last stand of U.S. influence over the internal affairs of Europe.
Once finished it will stand as a testament to the fundamental split between the European Union and the United States.
Europe will see this as its first successful defense of its newly-declared independence. And the U.S. will have to come to terms with no longer having control overseas.
This is a theme repeating itself all around the world right now.
Your view of Nordstream 2 depends on who you are.
If you are the U.S. it is a massive rebuke of the post-WWII institutional order mostly paid for by the U.S. to rebuild Europe and protecting it from the scourge of the U.S.S.R.
From Europe’s perspective it’s, “Job well done and all that but Russia isn’t a threat anymore and it is time for us to come out from underneath the U.S.’s shadow.”
And if you are Russia Nordtream 2 is the wedge driving these two adversaries apart while improving national security on your western border.
Europe has imperial ambitions of its own and Nordstream 2 is a very important part of that. Those ambitions, however, are not in line with those in the U.S., particularly under the “leadership” of Donald Trump.
Trump has staked so much of his overall strategy on the U.S. as a powerful petroleum exporter. He needs markets for that gas.
Europe and China are two obvious ones but Russia has him outflanked now on both.
The end of this interminably shallow expansion brings the U.S. face to face with an unsustainable fracking boom as debt-servicing spikes demand for the dollar sparking a sharp rise in interest rates.
The shale market will break again.