Germany, Austria Tell US Not to Interfere in EU Energy

(Bloomberg) -- Germany and Austria condemned a proposed expansion of U.S. sanctions on Russia, saying the measures sought to bolster U.S. economic interests and included an unacceptable intervention in the region’s energy sector.

“Europe’s energy supply is a matter for Europe, not the United States of America,’’ German Foreign Minister Sigmar Gabriel and Austrian Chancellor Christian Kern said in a joint statement. “Instruments for political sanctions should not be tied to economic interests.”

At the center of the criticism is the planned $10 billion Nord Stream 2 gas pipeline from Russia to Germany, that to some extent would compete with U.S. exports of liquefied natural gas to Europe. The 1,220 kilometer (758-mile) link, designed to cut Russia’s reliance on gas transit through Ukraine, would double the capacity of an existing route to Europe’s biggest economy.

The Nord Stream 2 pipeline will have “detrimental impacts on the European Union’s energy security,” and on reforms in Ukraine, the U.S. Senate said after voting in favor of tightening curbs against Russia on Wednesday. The U.S. will “continue to oppose the link,” according to the bill posted on the Senate website. The Senate was poised to pass the measure on Thursday after voting to add the Russia provisions a day earlier. The measure still must be considered by the House, where it may be revised.

Germany’s BASF SE and Uniper SE, as well as Austria’s OMV AG are among five European Union companies that planned to join the Nord Stream 2 project run by the Kremlin-backed Gazprom PJSC before the deal was scuppered last year when Poland’s competition watchdog objected to the joint venture.

Eastern Opposition

BASF’s Wintershall unit, Uniper, OMV together with Royal Dutch Shell Plc and Engie SA agreed in April to provide loans for Nord Stream 2 to see it ready by the end of 2019. The project meanwhile is still opposed by politicians in Poland, Ukraine, Slovakia and the Baltic States.

Gazprom shares erased earlier losses, trading little changed at 115.46 rubles at 6:05 p.m. in Moscow. Uniper, Engie and Shell were little changed, while OMV slid 3.7 percent.

Gabriel and Kern said they “can’t accept” proposed U.S. sanctions targeting European energy companies as part of measures against Russia, according to the statement published Thursday.

The Senate’s proposals are a way for the U.S. “to try to favor its own gas” in Europe, Isabelle Kocher, the chief executive officer of Engie, France’s former gas monopoly, told reporters in Paris Thursday. “I don’t think at all that the United States can stop this project.”

The bill approved by the Senate says the U.S. government “should prioritize the export of United States energy resources in order to create American jobs, help United States allies and partners, and strengthen United States foreign policy.”

Under the bill, the president gets the right to impose sanctions against companies that make investments or sell goods or services to Russia’s export pipelines of $5 million or more during a year.

Gazprom, which supplies about a third of the European Union’s gas, has shrugged off the prospect of U.S. liquefied natural gas in Europe for years. While most analysts expected increased U.S.-Russia gas rivalry last year, only a few cargoes from North America have reached southern Europe.

The Moscow-based exporter sees no impact from U.S. curbs on its link. Nord Stream 2 is a European project, developed in partnership with European companies that had already provided over 1 billion euros ($1.1 billion) in funding before the latest U.S. bill was approved, according to Alexander Medvedev, the deputy chief executive officer of Gazprom. The project is in compliance with all existing EU regulations, he said.

Gazprom also sees the U.S. move as an attempt to secure more exports to Europe, Medvedev said.

“If the senators believe that they can block Russian-American cooperation in energy and as a whole -- God is their judge,” he said at a conference in Berlin. Trade and political ties between the countries have already dropped “to a very low level.”

With assistance from Francois de Beaupuy and Adam M. Taylor. To contact the reporters on this story: Elena Mazneva in Moscow at emazneva@bloomberg.net; Patrick Donahue in Berlin at pdonahue1@bloomberg.net; Anna Shiryaevskaya in London at ashiryaevska@bloomberg.net. To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Andrew Reierson.

Copyright 2017 Bloomberg News.

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