"A Dangerous Precedent"

Just a Question of Time

Over the past few days, the fierce conflict over completing the Nord Stream 2 gas pipeline has escalated. On July 15, US Secretary of State Mike Pompeo announced that Washington has lifted an exemption provision from its 2017 sanctions package (Countering America's Adversaries Through Sanctions Act, CAATSA) and can, therefore, now apply concrete coercive measures at any time against persons and companies involved in the construction of the pipeline.[1] On Monday, the US House of Representatives passed the Protecting Europe's Energy Security Clarification Act (PEESCA) as an amendment to the National Defense Authorization Act (NDAA), also comprising sanctions against the Nord Stream 2 pipeline.[2] Once final disagreements between the House of Representatives and the Senate regarding the NDAA have been resolved and President Donald Trump has signed the NDAA, the PEESCA coercive measures will go into effect. In addition, up to twelve representatives of three US ministries have held separate talks with European companies threatening them with repercussions, if they do not withdraw from Nord Stream 2, it was reported on Sunday.[3] The German foreign ministry has confirmed that it has "knowledge" of the talks.

"Effective Countermeasures"

Last week, German businesses increased its pressure on the German government and the EU to resolutely reject the sanctions. According to the German Eastern Business Association (OAOEV), nearly 120 enterprises from 12 EU countries would be affected - including five major energy companies, and possibly even banks. Should the construction of Nord Stream 2 remain unfinished, the direct damage could reach twelve billion euros. "Up until now, we warned against harsh retaliatory measures regarding the United States, because we don’t want to find ourselves embroiled into the spiral of sanctions," the OAOEV managing director Michael Harms declared last week. "Now we have a different opinion."[4] It is "disconcerting" that the US Embassy in Berlin has even begun to individually threaten companies involved in Nord Stream 2. The OAOEV is actively working on proposals ranging "from clear diplomatic statements and compensation for local firms to protective retaliatory sanctions." The EU also must take "effective countermeasures," Harms demands; otherwise this could set a "dangerous precedent."

US Sanctions (I)

Whereas it remains unclear how Berlin and Brussels intend to respond to these sanctions, the OAOEV points out that US coercive measures have accompanied the history of the German-Soviet and the German-Russian relations in the area of energy resources, from the beginning. West German enterprises first established contacts to the Soviet energy sector back in 1958. At the time, pipes for pipelines, which, until then, were not allowed to be sold to socialist countries, had been taken off the embargo list of the Coordinating Committee for East-West Trade Policy (CoCom). Immediately thereafter, West German companies began supplying the Soviet Union with pipes. To prevent an expansion of energy sector relations, the USA had the NATO Council pass a decision, on November 21, 1962, declaring the sale of pipeline pipes to be undesirable. The West German government successfully had that decision repealed in 1966. Soon thereafter, negotiations began on the first major "gas for pipes deal." This foresaw the delivery of Soviet natural gas to the Federal Republic of Germany through pipelines to be supplied by West German companies, and pre-financed by West German banks. The contract sealing this deal was signed February 1, 1970, and its implementation began almost immediately.[5]

US Sanctions (II)

Ten years later, Moscow's offer to pipe natural gas - just previously discovered from northwest Siberia's Jamal Peninsula - to West Germany, was again torpedoed by Washington. Bonn had a great interest in this deal - not least of all because of the 1973 and 1979 oil crises. Beginning in 1980, the West German government had entered into intensive negotiations with Soviet leaders on the project. The United States was pulling all levers to try to prevent the realization of this project. On the one hand, all products necessary for building the pipelines were banned from export to the Soviet Union, if their production carried a US license. Harsh penalties on the US market were envisaged for this ban's violation. This was the first time the USA had "extended its embargo regulations exterritorialy to the other allies," according to a study of West German trade with Eastern Europe.[6] At the same time, for its part, the United States offered to satisfy its Western European allies' energy needs. It was even suggested, as reported by the OAOEV, "the liquefaction of Alaskan natural gas" and its "transport to Europe in submarine tankers."[7]

West Germany Prevails

West German and Soviet enterprises ultimately signed the new "gas for pipes deal" contract on November 20, 1981, in spite of the intense pressure being applied by Washington. The contract promised large supplies of northwest Siberian Jamal Peninsula natural gas. The conflict then escalated. Following bitter disputes, including the imposition of US sanctions on enterprises in various Western European countries, Bonn ultimately prevailed. The United States lifted its sanctions on November 13, 1982. The decisive factors, from the OAOEV's perspective, were that the West German business community had supported their government's confrontation course, and that the Bonn government enjoyed the backing of the European Economic Community (EEC) - along with the fact that it had been possible to mobilize influential US companies to oppose their own government, because their business interests were seriously blocked by US sanctions.[8] This was the second time, since the success in the 60s, that West Germany had been able to effectively impose its will over that of the United States. The third power struggle with the United States over German-Russian relations pertaining to energy resources is still in progress.

[1] See also Transatlantische Konflikte (III).

[2] U.S. House Approves More Sanctions Related To Nord Stream 2. rferl.org 21.07.2020.

[3] Daniel Wetzel: USA drohen deutschen Auftragnehmern von Nord Stream 2. welt.de 26.07.2020.

[4] Ost-Ausschuss für Maßnahmen gegen Nord-Stream 2-Sanktionsdrohungen. hasepost.de 22.07.2020.

[5], [6] Sven Jüngerkes: Diplomaten der Wirtschaft. Die Geschichte des Ost-Ausschusses der Deutschen Wirtschaft. Osnabrück 2012.

[7], [8] 50 Jahre Röhren gegen Gas: Deutsch-russisches Jahrhundertgeschäft und deutsch-amerikanischer Wirtschaftskrimi. Ost-Ausschuss - Osteuropaverein der Deutschen Wirtschaft e.V. Jahrbuch 2020. S. 20-36.