Trump Hardball: Europe Pressured to Cancel Russia Pipeline to Avoid Trade War

More Hardball: President Trump Presses Germany to Drop Russian Pipeline for Trade Deal.

The officials said Mr. Trump told German Chancellor Angela Merkel in April that Germany should drop support for Nord Stream 2, an offshore pipeline that would bring gas directly from Russia via the Baltic Sea. This would be in exchange for the U.S. starting talks with the European Union on a new trade deal.

Raising the pressure further, Sandra Oudkirk, a senior U.S. diplomat, told journalists in Berlin on Thursday that as a Russian energy project the pipeline could face U.S. sanctions, putting any company participating in it at risk.

Mr. Trump has publicly criticized the Nord Stream 2 pipeline, saying at a meeting with Baltic State leaders at the White House this year that “Germany hooks up a pipeline into Russia, where Germany is going to be paying billions of dollars for energy into Russia…That’s not right.”

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Not Right?!

Excuse me for asking but what's wrong with it?

If individuals want to voluntarily make trade deals it's nearly impossible for anything to be wrong with it.

Notice that I said "individuals". Free trade ultimately is between individuals, not countries.

US LNG a Bad Deal For Europe

Liquefied gas from the U.S. needs to be shipped over the Atlantic and would be considerably more expensive than Russian gas delivered via pipelines. A senior EU official working on energy regulation said Russian gas would be at least 20% cheaper.

“Trump’s strategy seems to be to force us to buy their more expensive gas, but as long as LNG is not competitive, Europe will not agree to some sort of racket and pay extortionate prices,” an EU official said.

Yet, there are signs Germany is wavering.

Merkel Caving Already?

A senior German official said “We are in principle open to that, but the question is what quantities the Americans can provide, and at what price.”

But with fresh pressure from Washington and with Germany’s lucrative U.S. trade relationship at risk, Ms. Merkel is traveling to Russia on Friday to meet Mr. Putin in a bid to broker a compromise that would satisfy the U.S. and her European partners.

Anyone who thinks Trump will make a deal and stick with it has holes in the head.

Everything is subject to negotiation, renegotiation, and cancellation at a whim.

Not Germany's Decision

Curiously, this is not Germany's decision to make.

A U.S.-German agreement on Nord Stream 2 may not be enough to resolve trans-Atlantic trade tensions. For trade talks to start, members of the EU would have to give the EU bureaucracy a mandate to start formal negotiations with Washington and not all members are interested in a new deal

German government officials say that since all the permits for Nord Stream 2 have been issued, there is no legal way to stop the project, which is run by Gazprom , the Russian energy giant, under financing agreements with international companies such as Engie, OMV, Shell, Uniper and Wintershall.

Convoluted Story

This story is amazingly convoluted.

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Merkel is traveling to Russia looking for a compromise that is well outside her scope to make. And it would force Europe to overpay for US LNG.

This reminds me of the decision Merkel made on immigration (also not hers to make), welcoming immigrants with open arms. That mistake blew up in her face in short order.

What a pathetic EU and German response to Trump's demands!

Note that a German-Russian compromise would not even pave the way for US trade talks. That's an EU-wide decision.

Moreover, it's crystal clear that Trump like bilateral trade agreements, not multilateral ones.

Finally, there is no reason to believe that Trump would not seek to renegotiate any deal down the road.

Who Wins?

Trump has gone bonkers.

In the NAFTA dispute, he wants to set minimum wages in Mexico, but not the US; He reversed on ZTE (See ZTE Back From the Dead After Trump Reverses Sanctions), and now this.

Regarding ZTE, Angry Bear had some interesting comments.

The whiplash that many observers have felt on learning of President Trump’s about-face on China’s ZTE telecom company from condemning it as violating US national security and violating sanctions rules by selling to North Korea and Iran has been pretty easily explained by our soon thereafter learning that China has provided a mere half a billion dollars to a project in Indonesia where Trump interests are deeply involved. This is probably the most blatant violation of the Emoluments Clause of the US constitution yet, but do not hold your breath that anything formal will come of it, despite widespread outrage. Rather his backers will accept that this is necessary for obtaining Chinese support in dealing with Kim Jong-In in the possible forthcoming summit. This is supposed to trump all other considerations.

It is the hypocrisy that while Trump seems to be blithely forgiving ZTE for breaking already in-place sanctions against Iran, he and members of his administration such as John Bolton have been unyielding to the Europeans that all of their companies must cease any economic dealings with Iran ASAP now that Trump has scuttled US participation in the deal, even though it is widely accepted in Europe that Iran is in full compliance with the deal. The spectacle of the freshly arrived US ambassador issuing an immediate “order” to German companies to immediately comply with US demands on this has raised especial hackles.

If you think Trump tactics will benefit the US, think again. Global trade wars will not benefit anyone.

For further discussion, please consider What's Trump's Real Trade Target: China or Europe?