Article initialement publié sur http://eyes-on-europe.eu/ le 23 août 2017

On the 2nd of August, Donald Trump signed the bipartisan Countering America’s Adversaries Through Sanctions Act. It enacts new sanctions against three countries including Russia for alleged interference in the 2016 US election, among other reasons. Before and after the vote, several EU member states and actors responded to this decision. But why could these new sanctions against Russia hurt Europe? And how may the EU respond to this?

The EU member states criticised the US by claiming those sanctions were illegal and by expressing concern about the impact that the new measures could have on European businesses. Even Trump acknowledged this, and  Jean-Claude Juncker stated that the EU “should stand ready to act within days” if European interests occurred to be hurt because of those new US penalizations (Heath, 2017).

Why could it hurt European businesses?

The Countering America’s Adversaries Through Sanctions Act (CAATSA) includes a section forbidding EU companies to make big investments in the Russian energy sector. It targets any moral or physical person that “contributes to the Russian energy export pipelines, goods, services, technology, information, or support” (US Congress, 2017). For instance, this means that any European companies working with Russia (such as British-Dutch Shell or French Engie) in the physical or chemical resources energy sector, even legally under EU law, would be penalized by the US. The punishments would be fining them or limiting their access to US banks.

The angriest EU member state seems to be Germany, to which Russia is a crucial business and energy partner. Indeed, several EU companies, including big German ones (BASF and Uniper), are currently working with Russia on the Nord Stream 2 natural-gas pipeline (J.M., 2017). This duct will be directly linking Germany to Russia through the Baltic Sea, without passing first by other countries as it is currently the case (Erlanger & MacFarquhar, 2017), hence being a big economic interest for Germany. But now, because of the newly implemented sanctions, the construction of the pipeline may be compromised.

The consequences of the CAATSA spread far beyond the energy sector. According to an internal EU memo, those American measures may have an impact on many European companies “doing legitimate business under EU measures with Russian entities in the railways, financial, shipping or mining sectors, among others” (Brunsden & Weaver, 2017). European leaders, such as Austrian Chancellor Christian Kern, also claimed that the CAATSA will jeopardize their energy security,  hurt the economies of the EU and put thousands of jobs at stake (RFE/RL, 2017).

The German Committee on East European Economic Relations has even accused the US of trying to boost their own energy exports  – mostly their new export liquefied natural gas (LNG) – to Europe by undermining Russian fuel exportation with the new sanctions (Clements, 2017).  This leads to another issue: the future place of the US in the international oil and gas exporter landscape. The US is indeed allegedly going to become 100% energy independent under Trump. The country aims at becoming the new “Saudi Arabia” of fossil fuel exportation, especially since the authorisation to export the LNG and Trump’s government’s commitment to make the United States “the dominant LNG exporter in the world” (US DoE, 2017). So, would this be the beginning of a potential energy and industrial war by compromising EU’s access to Russian gas so the US can sell their own?

How could the EU respond?

Like German Foreign Ministry spokesman Martin Schaefer told at a press meeting, “sanctions against Russia should not become a tool of industrial policy [pursued] in the US interests” (Twisdale, 2017). To this extent, what could the EU do to reciprocate if this assumption were to prove to be true?

Above all, it seems important to point out that the EU does not have a common approach to this issue in the first place. The 28-nation bloc is divided: countries with closer economic ties to Russia or more dependent to Russian oil and gas, such as France, Germany, Austria and the Netherlands (BBC, 2017), want to consider retaliation. German Economics Minister Brigitte Zypries hinted at a possible trade war, making clear that this has to be avoided but that countermeasures should also be taken in case European interests were negatively impacted (RFE/RL, loc. cit.). On the other hand, central European countries and several ex-Soviet countries are more eager and ready to restrict the EU’s dependence on Russian oil and gas, therefore accepting the new anti-Russia sanctions (Erlanger & MacFarquhar, loc.cit.).

Concretely, if the new US measures have a negative impact on EU businesses, the European Commission has so far considered three ways for the EU to respond:

1.  The EU may seek an official declaration from the U.S. administration specifying that anti-Russian measures would not be used against European companies, as President Barack Obama handed over in 2014 for the first Crimea-related sanctions;
2. The EU may also use the Blocking Statute of 1996, i.e. an EU regulation which states that decisions based on extraterritorial foreign laws (including the US thus) are unlawful and therefore not valid within the EU (Council Regulation 2771/96, 1996);
3. Eventually, the EU may complain at the World Trade Organization and seek counter sanctions to protect its legitimate interests (Heath, loc. cit.).

Finally, we can try to think of other possibles reprisals, such as proportional countermeasures against US businesses and companies as direct retaliation. Or the member states could use article 51, 1, b) of the Responsibility of States for Internationally Wrongful Act and ask to negotiate with the US to find a common ground to resolve the situation. On top of that, one can even think of the decrease of EU sanctions against Russia’s energy sector to turn the back to the US and cooperate more deeply with Russia, but this is very unlikely to happen in a close future for some well-known reasons.

Conclusion

No matter what dreadful actions one country can take, the sanctions against it cannot directly impact other uninvolved countries, in this case, the EU member states. As stated by French Foreign Minister, this is simply illegal under international law (Le Drian, 2017). Brussels answered that, although they were “fully committed to the Russian sanctions regimes”, they were also apt to act promptly if EU trade and businesses with Russia were hurt because of new American sanctions (BBC, 2017[2]). Everything now depends on what the real impacts of these sanctions will be. According to Politico, the last-minute changes to the bill have circumvented its damaging effects on European businesses. (Heath, loc. cit.). Still, we have to wait and see. Will there be unfavorable impacts, and if yes, which ones? Would the European Commission succeed to answer appropriately? And are those US measures indeed just a trade tool in order to boost US export of the more expensive LNG to Europe by limiting European access and cooperation with Russia’s energy sector? If yes, this would be problematic.

Robin Vanholme est étudiant en 1ère année à l’Institut d’études européennes de l’ULB.