Newsletter April 5, 2018

 

Having lived and worked in Washington I can say with accuracy that the national capitol is a seething mass of rumor and gossip. I was there very recently, visiting old friends, and the talk amongst those who could be considered connected dealt with only one topic: the eccentricities of the president.

There are many stories about this subject, some of which are obvious inventions by erratic bloggers but many more from reputable sources. These show a clear pattern of dysfunctional behavior that is very easily classified as pre-Alzheimer’s in nature. One day the President makes a firm policy statement and the next day, makes an opposite statement. He will hire competent people for his staff and one day, because they do not agree with a strange idea of his, fire them. It is quite true that the President lives in fear of being poisoned and regularly goes out with a retinue of Secret Service agents to a random MacDonalds fast food restaurant for his food. It is also true that he had locked the Secret Service agents out of his bedroom and watches three large television sets throughout the night. Aware of his persona, the CIA caters to it. For example, the CIA feels that Russia is a convenient enemy because of its vast untapped natural resources. These, the CIA believes, ought to be developed by their corporate friends, not the Russians. Because there is a growing movement in Europe for Germany and France to develop working business methods with Russia, the CIA is desperate to stop this and feeds the paranoid president with suggestive stories to bolster their plans to disrupt any Russian legitimate business endeavors. The CIA is notoriously short-sighted and their meddling in European business affairs will eventually cost the American public a great deal of money and reputation.”

 

Trump is firmly opposed to the Nord Stream 2 natural gas pipeline from Russia to Germany. This project is firmly opposed by the Central Intelligence Agency who strongly object to anything that is profitable to Russia. To quote from a report, the pipeline “is undermining Europe’s overall energy security and stability.”

The new pipeline — which, together with the original Nord Stream, will have the capacity to provide a quarter of Europe’s annual natural gas imports — was a specific target of U.S. sanctions on Russia which were adopted by Congress in August of 2017.

This position  has put the United States at odds with both Russia and Germany but, in the end, Washington’s rejection of Nord Stream is a pointless piece of posturing and damaging to American interests.

The United States needs to carefully choose its battles with its allies in Europe; it should oppose policies of its European allies only on vital issues and where it can win. Here, it is important to understand that Nord Stream doesn’t only have strong support in Moscow, but also in Berlin. Washington is unlikely to succeed in swaying the German government’s decision, since the pipeline and expanded direct gas trade with Russia enjoy broad political support.

In 1981, the Ronald Reagan administration sanctioned both U.S. and European companies engaged in building gas pipelines from the Soviet Union to France and West Germany, creating a large rift with Europe. It eventually backed down when it was clear Europe would forge ahead despite American opposition.

, Europe needs more gas imports from all sources, including Russia. In the last two years, Europe’s gas imports have increased significantly. If economic growth in Europe continues on the current trajectory, together with declining domestic European gas production, gas imports will grow even more. While the portion of renewables in Europe’s fuel mix is growing, coal consumption remains very high, especially as Europe closes more nuclear energy facilities. Germany’s demand for gas is expected to soar after the closure of its last nuclear plant in 2022.

Russian gas cannot be replaced by and large by U.S. liquefied natural gas (LNG) exports. Washington’s attempt to pressure Russia to route its gas through Ukraine undermines European energy security. Gas supplies to Europe have been disrupted a number of times over the past two decades, caught up in the conflicts between Russia and Ukraine, including over Kiev’s lack of payments for its gas imports.

The expansion of the Nord Stream pipeline would indeed mean that the far more stable Germany would replace Ukraine as a transit state for some of Russia’s

German-Russian trade and cooperation is important for stability in Europe and is a cornerstone for building more cooperative East-West relations. Washington should coordinate with Berlin as it plays that role — not try to undermine it.

In order to obstruct the Nord Stream 2 project, policymakers in Brussels, backed by voices in Washington, are considering demanding that EU energy trade rules be applied not only in Europe but also on the portions of import pipelines located outside of Europe. In the long run, this would hurt Europe’s security of supply and deter producers who seek to export to the European market.

Washington has been successful when it championed policies in coordination with Europe, and not when it tried to impose a vision on Europe of what was best for