From the Torture Chambers of the Economic War

New US sanctions against Russia and China in planning with serious consequences for the EU.

BERLIN/WASHINGTON (Own report) - A European foreign policy think tank warns of a dramatic expansion of the US economic war at the expense of Germany and the EU. According to a current analysis of the European Council on Foreign Relations (ECFR), the recent US bill on sanctions against Nord Stream 2 leaves no doubt that, for Washington, there are no more "taboos" in its economic war. The law that could be enacted within a few months would also provide for coercive measures against German officials. The ECFR is drawing attention to sanctions recommendations, coming particularly from Republicans, which would seriously affect the German economy. Not only should Russia be declared a "state sponsor of terrorism," it should also be cut off from the financial messaging company SWIFT and additional sanctions should be imposed on China. Congressional representatives want to thwart the EU's attempts to undermine US sanctions against Iran with the "Instrument in Support of Trade Exchanges" (INSTEX) and propose "financial exercises."

No Longer a Taboo

In an analysis published yesterday, the European Council on Foreign Relations (ECFR) warns about the considerable expansion of the US' economic war the extensive repercussions for Germany and the EU. The warning is based on a new US bill on sanctions, the "Protecting Europe's Energy Security Clarification Act" (PEESCA), recently introduced in the House of Representatives, which, according to its current status, could be enacted together with the National Defense Authorization Act (NDAA) and become effective in a few months. PEESCA is aimed at preventing the completion of the Nord Stream 2 gas pipeline, allowing, for the first time, the imposition of sanctions on German officials. ( reported.[1]) Up to now, it was "simply unimaginable" that the United States would apply such measures against its allies, the ECFR notes, but now "the US is breaking one taboo after the other."[2] This is all the more alarming since a group of Congressional Republicans have just published a comprehensive report aimed at escalating the economic war. The report includes various demands, which, directly or indirectly, would seriously affect Germany and the EU.

Cut off from the Financial System

This includes, for example, Russia's exclusion from the financial messaging company SWIFT (Society for Worldwide Interbank Financial Telecommunication) and thereby cutting it off from the global financial system. Given the fact that it is based in Belgium, the United States cannot directly control SWIFT, the Republicans note in their report. Washington could, however, impose sanctions on SWIFT that would only be lifted if it expels Russia. This strategy was successfully applied against Iran.[3] SWIFT had, in fact, excluded Iran in November 2018, due to massive US pressure. Already last year, the ECFR had calculated the trade volume that would be disrupted between the EU and Russia to be at around €190 billon.[4] The ECFR pointed out that even though Russia and China had begun to seek independence from SWIFT in 2014 and have, in the meantime been successful at the national level - with other states having expressed interest in joining them - this, however, would not be an option for the EU, because of the close transatlantic economic relations.

Prevent Exports

The ECFR is particularly worried that the United States may use its option of tightening controls of its exports. These have an extraterritorial effect: Washington reserves the right to forbid the export to certain countries - even of foreign products - if 25 percent of the components of the product are of US fabrication. For some products, the percentage of US components is even less. The ECFR now points out that Washington is expanding the definition of products that could, at least theoretically, have military application and, therefore, fall under US export restrictions. The most recent expansion of the relevant definition, according to the think tank, went into effect last week. The Trump administration is constantly adding new foreign companies to its official sanctions list ("entity list"). In May 33 Chinese companies were added and "probably more will follow," predicts the ECFR. That directly affects German manufacturers using US components. In addition, experts even have difficulty comprehending the labyrinth of US sanctions, which, particularly for smaller companies, increases the risk - and ultimately leads them to abandon attempts to make shipments to China altogether. The ECFR points out that the authority of US sanctions is outside the reach of German companies' influence.

Break Resistance

The group of Congressional Republicans is also taking aim at Berlin and the EU's attempts to protect companies in the Union's member countries from US sanctions. To transact trade with Iran, in spite of the extraterritorial reach of US sanctions against that country, the EU has founded the Instrument in Support of Trade Exchanges (INSTEX) financial vehicle, which transacts trade on the basis of the barter system and seeks to make it independent of the US-dominated financial system.[5] Until now, INSTEX has been unsuccessful. Only a single aid delivery in the fight against the Covid-19 pandemic has been transacted that would not have fallen under US sanctions. Nevertheless, the Republicans are planning ahead. Back in February, a member of the group of Republicans tabled a bill in the House of Representatives calling for authorizing the Secretary of the Treasury to impose sanctions on any financial institution conducting a "significant" transaction in connection with INSTEX.[6] This is primarily meant to teach the Europeans a lesson, concludes the ECFR.

Apply Pressure with IMF Help

The Republican Congressional group is also launching a plea to recruit the help of the IMF to implement US objectives worldwide. Therefore, Washington should ask the monetary fund to cancel the means for a loan to Lebanon, as long as Hezbollah has influence. Back in January, members of the group of Republicans had introduced the "Promoting Secure 5G Act" bill in Congress, stipulating that financial subsidies by the IMF and other financial institutions be allowed to countries only if "security" 5G technology is used - a reference to exclusion of the Chinese company Huawei participation.[7] That may, under certain circumstances, also greatly affect EU member countries.

Financial Exercises

The ECFR also points out that there is no indication that the sanctions proposals will be enacted. This pertains as well to calls to designate Russia a "State Sponsor of Terrorism," to ban members of the Chinese government and other officials, including their families from entering the USA, and to mandate "regular public financial exercises" that "demonstrate the United States and its allies would seize and freeze assets in the event of [Russian] aggression."[8] According to the ECFR, these - and other - measures in the US economic war cannot be ruled out.


[1] See also Transatlantische Konflikte (II).

[2] Zitate hier und im Folgenden: Jonathan Hackenbroich: How the US could ramp up its economic war on China. 08.07.2020.

[3] The RSC National Security Strategy: Strengthening America & Countering Global Threats.

[4] Mark Leonard, Jeremy Shapiro (ed): Strategic Sovereignty: How Europe Can Regain the Capacity to Act. Published by the European Council on Foreign Relations. Berlin/London/Madrid/Paris/Rom/Sofia/Warsaw, June 2019.

[5] See also Sanktionskrieg um Iran (II).

[6] H.R.6015 - Stop Evasion of Iran Sanctions Act of 2020.

[7] H.R.5698 - Promoting Secure 5G Act of 2020.

[8] The RSC National Security Strategy: Strengthening America & Countering Global Threats.