Sanctions lifted on Russian pipeline affect China more than Russia

The White House’s decision to waive sanctions against the owner of the controversial Nord Stream 2 pipeline and the senior executives of this company have raised strong bipartisan disapproval in Congress and the concerns of Central and Eastern European allies about the United States’ commitment to energy security in the region.

President BidenJoe BidenPutin backs Belarusian Lukashenko amid international pressure Biden administration to reimpose sanctions on Belarus for hijacked theft Senate passes resolution urging investigation into origins of COVID-19 and its foreign policy team appears to be balancing two fundamental realities: first, the pipeline is already almost complete, and second, the United States needs Germany and other key European partners to help present a united front against the challenge. world of China.

About 120 companies spread over ten European countries are working or have sought to work on the pipeline. Yet the United States has sanctioned only a small subset of Russian-related entities, including pipeline-laying vessels. Fortuna and Akademik Cherskiy and their owners, KVT-Rus and Samara Heat and Energy Property Fund. This strongly suggests that the sanctions imposed to date on pipeline players are largely symbolic.

The story is instructive in understanding the line of conduct of the Biden administration.

France and Germany actively sought to import Soviet gas during the Cold War. In fact, they wanted enough gas to risk a serious breakup in relations with Washington. West German Chancellor Helmut Schmidt words in july 1982 still rings true: “The pipeline will be built and the British, French, Germans and other Europeans will stick to the deal their companies made with the Soviets.”

The balance of interests in 2021 is even more skewed.

Nord Stream 2 is a key strategic priority for Russia, but also an important target for Germany and other Western European countries where it can provide a reliable and low-carbon energy supply. But the pipeline is only a tertiary strategic priority for the United States. Instead, Washington is deepening its ongoing “pivot” to Asia.

China’s concerns now even permeate interactions between the United States and key European security partners. Consider the NATO Defense Ministers meeting in February 2021 where “an increasingly aggressive ChinaWas a key item on the agenda and after which the US Secretary of Defense Lloyd AustinLloyd AustinPentagon Hits $ 5 Billion Budget With Cuts to Older Weapons Biden Tells Troops They Are America’s ‘Backbone’ A More Diverse Public Service A National Security Imperative MORE called China “our main rhythm challenge.

Against this backdrop, it is increasingly plausible to view the restriction of U.S. sanctions on Nord Stream 2 as a tactical compromise by a White House seeking greater transatlantic unity to address China’s global strategic economic and political challenges. A lag on Nord Stream 2 would coincide well with an increase European apprehensions on China’s economic, climatic, political and military practices that now increasingly align with long-standing US concerns about many of these same areas of interest.

Europe is deeply concerned about Chinese companies competing in critical markets with their European counterparts and in the pursuit of global technological supremacy, often using mercantilist and state aid. And while China talks green, it burns more than 4 billion tonnes of coal per year, threatening European climate initiatives and the position of European companies in the market vis-à-vis their Chinese-based competitors, backed by cheap but carbon dioxide-intensive energy.

EU institutions are also resenting China’s gradual escalation to manipulate thought and opinion on key value issues. This month alone, the European Parliament has overwhelmingly voted not to ratify the comprehensive investment deal between the EU and China until Beijing lifts sanctions it has imposed on prominent MEPs and other officials and academics for their opposition to the genocide campaign culture in Xinjiang. China is also seeking to manipulate European politics, including cultivating leaders into democratic backsliders such as Hungary and Serbia.

Western Europeans, in particular, see the challenge from russia all the more manageable. This opens the door to the construction of a three-dimensional modus vivendi. The United States responds to Western Europe’s desires to source gas directly from Russia, helps facilitate resilient gas supply policies, and integrates European powers more deeply into the emerging coalition of democracies than the Biden administration hopes to rally against the Chinese authoritarian threat.

Russian gas is mainly problematic if the Russian energy company Gazprom has a monopoly position that can be exploited for commercial or geopolitical purposes. Western Europe is already well protected, with competitive gas markets which are very liquid, very price conscious and fundamentally blind to the source. In contrast, Central and Eastern Europe has, in general, not yet reached this eminently desirable end state, although important steps have been taken to diversify the offer. This is a unique opportunity for the United States to advance two policy initiatives to minimize the potentially deleterious strategic effects of Nord Stream 2 while building a more united front in Europe vis-à-vis China.

First, Washington should step up its diplomatic support for the EU’s rigorous application of the third energy package to Nord Stream 2. The package was modified by the European Parliament in 2019 and covers all gas pipelines to and from non-EU countries, including Nord Stream 2. It formally imposes requirements to protect market integrity and EU consumers – for example, access by third parties as well as, probably the most problematic in the case of Nord Stream 2 – separation of gas ownership and gas transport, or unbundling.

Second, the United States should lead an effort to financially support major gas infrastructure projects in Europe – a policy we call “gas geoeconomics. “This could support and accelerate the construction of vital gas pipeline interconnections and liquefied natural gas import options across the region, allowing Central and Eastern European countries to import gas from a larger area. large number of sources and promote further market liberalization.The geoeconomy of gas could thus weaken Russia’s ability to militarize gas exports and strengthen the resilience of key European partners in the face of Russian energy coercion for decades to come up.

While Russia still matters to US foreign policy, it is secondary to China. Sound policy would recognize this reality and take advantage of the increasing availability of internationally traded gas supplies as the basis for market-based policies that help deter Russian energy coercion and support affordable supplies for consumers. Europeans. Forward-looking US policy can simultaneously mend barriers with key European allies, improve the security of gas supply in Central and Eastern Europe, and help persuade European countries to participate more actively in a global coalition of democracies. .

Anna Mikulska is a Non-Resident Fellow at the Center for Energy Studies at the Baker Institute for Public Policy at Rice University and a Senior Fellow at the Kleinman Center for Energy Policy and Foreign Policy Research Institute.

Gabriel Collins is the Baker Botts Fellow in Energy and Environmental Regulatory Affairs at the Baker Institute at Rice University.

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