Washington, D.C. is universally known as a town divided, a place where compromise and dialogue are often sacrificed at the altar of competing agendas. But on one issue, at least, there is consensus: the 764-mile Nord Stream 2 pipeline that will pump Russian natural gas into Germany is a project that must be stopped. And the United States needs to use all of the economic and diplomatic tools at its disposal to do it.
In both congressional testimony and in meetings with Nato allies, U.S. Secretary of State Antony Blinken has reiterated the official U.S. view that Nord Stream 2 is ‘a bad deal’ for Europe, a potential cash windfall for Russia, and a potential geopolitical coup for Vladimir Putin.
‘President (Joe) Biden has been very clear,’ Blinken said during his meetings in Europe last month. ‘He believes the pipeline is a bad idea, bad for Europe, bad for the United States, ultimately it is in contradiction to the EU’s own security goals.’
Lawmakers on Capitol Hill have been tougher in their rhetoric, with even Biden’s own supporters urging the administration to sanction any foreign entities even remotely involved in the pipeline’s construction. Senator Ted Cruz stalled the confirmation process of veteran diplomat William Burns, Biden’s nominee for CIA Director, on the issue. He only lifted his objections when Blinken issued a written statement in his own name assuring lawmakers that the administration would enact sanctions on any firm connected to the project.
Nord Stream 2, however, is a classic instance where hype and panic are clouding reason and good judgment. While ceasing construction of the pipeline would no doubt be an embarrassing setback for Moscow, it would also come at the cost of more turbulence to a U.S.-Germany relationship Biden views as central to his transatlantic agenda. As Daniel Benjamin, a former senior State Department official in the Obama and Clinton administrations, wrote recently, ‘whatever damage a new round of sanctions implementation will inflict on Russia will be relatively minor compared to the harm to the U.S.-German bilateral relationship at a genuinely critical moment.’ After all, why would the largest economy in Europe do Washington any favours on other strategic issues (cooperating in a united front against China, to take the most obvious) if Washington destroys a natural gas pipeline Germany believes is in its own energy interests?
Given the geopolitical stakes involved, it’s a reasonable question to ask. Yet U.S. lawmakers and policymakers can’t be bothered to consider it.
There are also economic dimensions the United States needs to account for. The common refrain in Washington is that the benefits of killing Nord Stream 2 vastly outweigh the costs. Those in the U.S. Congress advocating for a more aggressive U.S. sanctions push against firms and banks touching the pipeline are proceeding as if their proposals are cost-free. Forced to choose between an $11bn (£8bn) gas project and the $21 trillion (£15 trillion) U.S. economy, they argue, surely the Europeans would choose the latter?
This, however, may be beside the point. For if a win on Nord Stream 2 comes at the cost of undermining the durability of the U.S. financial system, the victory would be a hollow one.
Already the European Union is unhappy about the rhetoric coming out of the States. If the U.S. continues to persist with treating sanctions as a hammer rather than a scalpel, the EU will at some point go beyond rhetoric to register their disapproval. The Trump administration’s addiction to the secondary sanctions tool has already convinced the continent that the U.S., despite its constant gushing about the rules-based international order, is more than willing to leverage the U.S. dollar and banking system to get what it wants.
The situation with Iran is instructive; after U.S. sanctions on the Iranian economy forced European firms like Airbus, Siemens, and Total to abandon projects and cut ties with Tehran, the EU set up a special purpose vehicle in an attempt to get around U.S. banking channels. Sure, the vehicle ultimately failed. But the fact that Washington’s closest allies were willing to explore the option, let alone implement it, should be a wake-up call to U.S. officials that pulling the economic pressure strings will only take you so far.
The Biden administration is reportedly mulling the appointment of a special envoy to deal with Nord Stream 2. The aim, presumably, is to find a diplomatic way out of Washington’s current conundrum – stopping the project without throwing egg in Germany’s face. But regardless of whether Washington pulls a rabbit out of its hat, this ignores the real problem here: if the U.S. doesn’t exhibit some self-control and become more restrained about when and how it uses its sanctions power, it may eventually find that very power diminished and risk alienating its closest allies in the process.
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