Trump forbids russian pipeline. europe pushes back – bloomberg when was gas 99 cents in california

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U.S. exports are so tiny because because transportation costs make American LNG more expensive than energy from the Middle East. It’s also at least 20 percent more costly than pipeline gas from the Russian producer Gazprom. And even if the price differential were eliminated, Germany needs all the gas it can get from any source as it phases out nuclear and coal power plants.

Chancellor Angela Merkel realizes that Nord Stream 2 is politically problematic. As an offshore project, it’s not covered by European Union energy legislation, and that bothers officials in Brussels. Some Eastern Europeans, especially Poles, are dead set against the pipeline because they see it as a way for Russia to increase its influence. Also, their experience with Gazprom has been largely negative. But Merkel has focused on the Ukraine aspect as the morally trickiest: The impoverished nation stands to lose at least $2 billion a year in transit fees if Gazprom bypasses it and only uses the Nord Stream and Turkish Stream pipelines, as it has threatened to do.

German Economy Minister Peter Altmaier has traveled to Kiev and Moscow in recent weeks to try to hammer out a deal that would allow both Nord Stream 2 and the Ukrainian gas transit system to function. There have been no leaks from his talks, but they must have been successful enough, as Merkel traveled to the Black Sea resort of Sochi on Friday to meet with President Vladimir Putin, where Putin promised to continue the transit of gas through Ukraine “if it’s economically viable.” This departure from previous Russian rhetoric opens a path to a deal.

“It’s especially important to me that we don’t get into a wholly unplanned and unstructured contest on three, four, five fronts around higher tariffs, higher sanctions and mutual mistrust,” Altmaier told ARD TV on Friday. “When the U.S. says ‘America first, we’ll put our economic interests in the foreground,’ we should also consider that Europeans must also define our economic interests.”

The EU has already taken a tough stance on Trump’s tariffs. “We will not negotiate with the sword of Damocles hanging over our heads,” European Commission President Jean-Claude Juncker said on Thursday. At a summit in Sofia, EU national leaders agreed on a similarly intractable position on preserving the nuclear deal with Iran that the U.S. is exiting. The EU is activating a so-called blocking statute to protect European companies from exterritorial U.S. sanctions for doing business with Iran.

In addition to these conflicts, the U.S. has threatened sanctions on European companies involved with Nord Stream 2, including powerful multinationals such as Royal Dutch Shell, Austria’s OMV, France’s Engie and Germany’s Uniper and Wintershall. Now, even EU officials and national leaders who have no particular love for Nord Stream 2 are on the side of Germany. Meanwhile, the German government shows no fear of U.S. sanctions, just growing aggravation. “This is a further burden for the trans-Atlantic relationship,” Peter Beyer, the Foreign Ministry official is in charge of coordinating that relationship, said on Friday.

If the U.S. really cares about Ukraine and European energy security, it should let Germany and its EU partners hammer out a deal with Russia and Ukraine. The Europeans are grown-up enough not to hurt themselves, and they are perfectly capable of dealing with Gazprom, which derives 62 percent of its revenue from Europe. And European countries are even more interested in a stable Ukraine than the U.S. is: The country is on the EU’s border, and its citizens enjoy visa-free travel to Europe.

The Trump administration, however, seems happy to multiply disputes with European allies, expecting them to cave on all contentious issues. But even though the EU has often appeared weak and ineffectual, it can also be stubborn, and the more pressure Trump brings to bear, the more it will push back.