What Do the New Sanctions on Russia Mean for Europe?

According to CNN, both chambers of United States Congress have approved a bill that imposes new sanctions on Russia for its meddling in the 2016 election, its human rights abuses and its military aggression in Ukraine. In July Donald Trump signed new sanctions into law, imposing penalties also on Iran and North Korea for violation of UN Security Council Resolution. Trump himself called the congressional bill “seriously flawed” and “clearly unconstitutional”. Sanctions against Russia target key Russian officials. Russian president Vladimir Putin had immediately reacted to these measures by expelling 755 US diplomats from Russia.

However, it might seem unclear why some European countries were against the sanctions bill as well. According to Vox, the reason is that sanctions affect any European company cooperating with Russia on building energy export pipelines. At the moment, Nord Stream 2 is under construction and should be put into operation before late 2019. This new export gas pipeline runs from Russia to Germany across the Baltic Sea (Gazprom). New sanctions mean that this project will be postponed which has negative effect both on European and Russian economy. Some European officials have remarked that US might interfere in European gas market for purposes of commercial advantage. By limiting Russian supplies US can increase its own liquefied natural gas exports to Europe. (Financial Times)

In 2016 Gazprom’s share of European gas market was 34 percent, and according to BP it should have risen to 40 percent by 2035. It is difficult for LNG providers to compete with Russian gas, because of the price. “U.S. LNG costs some 30 percent more than Gazprom’s gas in Europe supplied through its “most expensive” route, via Ukraine”. (Bloomberg) The European Union is divided when it comes to dependence on Russian gas. The U.S. bill faced strong opposition in Germany and Austria, where some of Nord Stream 2's biggest financiers – Wintershall, Uniper and OMV – are located. However, some European countries, mostly in eastern Europe, opposed the Norde Stream 2 project in the first place, because it violates “European energy objectives to diversify energy supply, reduce reliance on Russia and keep gas flowing through existing pipelines in Ukraine, which depends heavily on transit revenue paid by Gazprom” (Financial Times).

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