Europe News

EU divided on how to answer new U.S. sanctions against Russia

BRUSSELS (Reuters) - European Commission preparations to retaliate against proposed new U.S. sanctions on Russia that could affect European firms are likely to face resistance within a bloc divided on how to deal with Moscow, diplomats, officials and experts say.

FILE PHOTO: St. Basil's Cathedral is seen through a gate in Red Square in central Moscow, September 18, 2014. REUTERS/Maxim Zmeyev/File Photo

A bill agreed by U.S. Senate and House leaders foresees fines for companies aiding Russia to build energy export pipelines. EU firms involved in Nord Stream 2, a 9.5 billion euro ($11.1 billion) project to carry Russian gas across the Baltic, are likely to be affected.

Both the European Union and the United States imposed broad economic sanctions on Russia’s financial, defense and energy sectors in response to Moscow’s annexation of Crimea from Ukraine in 2014 and its direct support for separatists in eastern Ukraine.

But northern EU states in particular have sought to shield the supplies of Russian gas that they rely on.

Markus Beyrer, director of the EU’s main business lobby, Business Europe, urged Washington to “avoid unilateral actions that would mainly hit the EU, its citizens and its companies”.

The Commission, the EU executive, will discuss next steps on Wednesday, a day after the U.S. House of Representatives votes on the legislation, knowing that the U.S. move threatens to reopen divisions over the bloc’s own Russia sanctions.

Among the European companies involved in Nord Stream 2 are German oil and gas group Wintershall, German energy trading firm Uniper, Anglo-Dutch Royal Dutch Shell, Austria’s OMV and France’s Engie.

The Commission could demand a formal U.S. promise to exclude EU energy companies; use EU laws to block U.S. measures against European entities; or impose outright bans on doing business with certain U.S. companies, an EU official said.

But if no such promise is offered, punitive sanctions such as limiting the access of U.S. companies to EU banks require unanimity from the 28 EU member states.

Ex-Soviet states such as Poland and the Baltic states are unlikely to vote for retaliation to protect a project they have resisted because it would increase EU dependence on Russian gas.


An EU official said most member states saw Nord Stream 2 as “contrary or at least not fully in line with European objectives” of reducing reliance on Russian energy.

Britain, one of the United States’ closest allies, is also wary of challenging the U.S. Congress as it prepares to leave the EU and seeks a trade deal with Washington.

In fact, the EU’s chief executive, Jean-Claude Juncker, has few tools that do not require unanimous support from the bloc’s 28 governments.

The Commission could act alone to file a complaint at the World Trade Organisation. But imposing punitive tariffs on U.S. goods would require detailed proof to be gathered that European companies were being unfairly disadvantaged - a process that would take many months.

Diplomatic protests such as cutting EU official visits to Washington are unlikely to have much effect, since requests by EU commissioners for meetings with members of Trump’s administration have gone unanswered, EU aides say.

As if to highlight the confusion in the EU’s position, two sources in Brussels told Reuters that Germany was urging the EU to add up to four more Russian nationals and companies to the bloc’s own sanctions blacklist, after evidence emerged that gas turbines built by Germany’s Siemens had been delivered to Crimea in contravention of sanctions.

As the EU’s trade with Russia has tumbled, keeping unity to maintain the sanctions has been strained by rival business interests that have been worsened by a perceived lack of U.S. leadership since President Donald Trump entered the White House in January.

However, the White House said on Sunday that Trump was open to signing the bill once it is agreed.

Meanwhile there is little or no sign that the Western sanctions have had any tangible effect in Ukraine, as the Russian-backed rebellion in the country’s industrial east continues unabated.

($1 = 0.8582 euros)

Additional reporting by Alissa de Carbonnel; Editing by Kevin Liffey