EU’s Juncker Flexes Muscles Over US Sanctions

By Jorge Valero

(EurActiv) — European Commission President Jean-Claude Juncker insisted on Wednesday (26 July) that the EU is ready to retaliate “within days” if European companies are impacted by a US Congress decision to pass a bill that will punish firms that work with Russia on energy projects.

“The US bill could have unintended unilateral effects that impact the EU’s energy security interests,” Juncker said in a statement.

“This is why the Commission concluded today that if our concerns are not taken into account sufficiently, we stand ready to act appropriately within a matter of days,” he added.

Paraphrasing US President Donald Trump’s slogan during the campaign, he stated that “America first cannot mean that Europe’s interests come last.”

The bill foresees the imposition of sanctions on any company (including European) which contributes to the development, maintenance, modernisation or repair of energy export pipelines by Russia.

EU diplomats succeeded in introducing key changes to the draft text. As a result, the threshold of Russian participation in a sanctionable project was raised from 10% to 33%.

But EU officials told EURACTIV that further clarity is needed on an amendment that states that the US president would consult America’s allies about sanctions.

Officials also maintained a cautious stance given that the bill is still in the legislative pipeline and it could be amended in the Senate.

The College of Commissioners today discussed the bill. Despite Juncker and Vice-President Jyrki Katainen highlighting that diplomatic efforts bore fruit, they said that some concerns still remain and “Europe is ready to act”, sources familiar with the discussion revealed.

Climate and Energy commissioner Miguel Arias Cañete’s team prepared a list of projects that could be hit by the bill.

In order to start preparing the response, the college discussed what tools Europe has at its disposal. However, there was no discussion on an specific list of US projects or sectors that could be punished in return.

Europe will maintain its diplomatic efforts in order to minimise the impact of the bill on the European energy sector. But if the US passes the text as it is and moves against EU energy interests, the bloc could activate retaliatory measures under WTO rules and use its trade defence instruments.

The Commission would also add the US bill to the EU’s ‘blocking statute’ regulation. Accordingly, no decision based on extraterritorial US laws will be enforceable in the EU.

In addition, companies affected by the US sanctions could claim any damages incurred in a European court. The restitution could take the form of the seizure of goods held by the entities that caused the damage.

How imminent?

The EU will wait to react until the bill is adopted and implemented. But officials explained that the executive could respond before a specific energy project is punished if there is a need to protect the EU’s energy interests.

Some officials were more sceptical about an imminent response from the EU side. They commented that today’s strong wording, in line with the tough stance of the last few days on the US threat is part of a political manoeuvring to shield especially Nord Stream 2, a controversial pipeline that would bring gas from Russia to Germany.

Eastern countries, especially Poland, opposed the project given that it will increase energy dependency on Russia and would reduce gas transit revenues.

The US has been opposing Nord Stream 2 since the Obama administration. EU officials recalled that when the Commission passed the ‘hot potato’ to the member states to decide what to do with the pipeline, the US mission in Brussels heavily lobbied national governments to place the new project under the EU’s Third Energy Package, a decision that could block its construction.

Diplomats and EU officials said that Berlin, the main backer of the project, was the instigator behind the decision to flex its muscles toward the US. But sources close to Juncker indicated that the response goes beyond a single project as the EU’s interests are at stake.

The Commission noted that the US bill could also affect the maintenance and upgrade of pipelines in Russia that feed the Ukraine gas transit system. It could also have an impact on projects crucial to the EU’s diversification objectives such as the Baltic Liquefied Natural Gas project.

Retaliation from Moscow

Russia also warned it was edging closer to retaliation against Washington.

“This is rather sad news from the point of view of Russia-U.S. ties,” Dmitry Peskov, a Kremlin spokesman reportedly said. “We are talking about an extremely unfriendly act.”

He said President Vladimir Putin would decide if and how Moscow would retaliate once the fresh sanctions became law, while Russia’s deputy foreign minister warned the move was taking bilateral relations into uncharted waters, killing off any hope of improving them in the near future.

Russian Deputy Foreign Minister Sergei Ryabkov told the Interfax news agency that relations were now entering “uncharted territory in a political and diplomatic sense”.