BRUSSELS – Biden’s new government is making the European Union happy, talking about renewed cooperation and the suspension of retaliatory tariffs due to an old dispute between Airbus and Boeing.
But despite the warm words and efforts to rebuild confidence, the US remains willing to punish its European allies and impose their sanctions in pursuit of foreign policy goals.
It is an underlying tension, a clear reminder of the asymmetrical power of the United States. This is especially so when it comes to the so-called secondary sanctions. While Iran and Russia, for example, may be the primary target of sanctions, the secondary sanctions punish other countries and companies – often including European ones – that do business with it.
Secondary sanctions are becoming increasingly popular among Congress to force allies to stay in line with any number of issues. In recent years, it has included the Nord Stream 2 natural gas pipeline, the nuclear program of Iran and the socialist governments of Venezuela and Cuba. The big fear is that one day they will use the United States against China – or even the other way around – to put Europe in the middle.
Secondary sanctions cut off access to the US banking system, an effective threat due to the centrality of the system and the global reach of the dollar.
The armament of the US dollar and the treasury is a clear vulnerability for Europe, which is dependent on open markets. It has sparked serious discussions about how Europe and the euro can be defended against Washington’s whims, and it has become a central part of the argument on how to create ‘strategic autonomy’ so that Europe can protect its own interests.
Last month, the European Union announced efforts to strengthen an ‘anti-coercive instrument’ against ‘unfair trade practices’. The main sources of this are China and the self-proclaimed ally and partner of Europe, the United States.
While Europe prefers to use multilateral institutions for trade disputes, “in the meantime we can not afford to stand defenseless”, said Valdis Dombrovskis, the European Union’s Commissioner for Trade. The European Union must be able to defend itself ‘against those who try to benefit from our openness’, he said.
The head of the European Union’s foreign policy, Josep Borrell Fontelles, has condemned Washington’s use of secondary sanctions against European companies doing ‘legal business’.
“I am deeply concerned about the increasing use of sanctions, or the threat of sanctions, by the United States against European companies and interests,” he said. Borrell said.
“Where common foreign and security policy objectives are shared, there is great value in coordinating targeted sanctions with partners,” he said. Where policy differences exist, the European Union is always open to dialogue. But this can not happen against the threat of sanctions. ”
Such objections do not prevent US lawmakers from repeatedly turning to secondary sanctions, especially in the case of the Iran nuclear deal and of Nord Stream 2, the nearly completed natural gas pipeline running from Russia to Germany.
U.S. senators even wrote directly to a small state-owned port in Chancellor Angela Merkel’s Sassnitz, which was a basis for the pipeline of ships built by Nord Stream 2, threatening ‘crushing legal and economic sanctions’.
Jonathan Hackenbroich of the European Council on Foreign Relations in Berlin, who studied the issue as part of a project with senior German and French officials, denied access to the US market and the dollar. which seeks to reduce European vulnerability.
Almost any company that does business in the United States or uses the US banking system or the dollar is going to try to maintain the relationship and stop the business with the goal of sanctions, he said, even to the point of ‘compliance’ ‘.
President Trump’s use of secondary sanctions against Iran, which Europe could not manage, ‘was a real moment of truth for Europeans to realize their weakness’, said Daniela Schwarzer, director of the German Council on Foreign Relations.
“Do Europeans want to trust Biden? Are they ready to trust the US again? Nobody knows what will come after Biden, ‘said me. Schwarzer added. ” And we need to think about what to do if China also uses secondary sanctions so that the debate is lively. ‘
European resentment over US secondary sanctions “relates to our own internal and economic fragility,” said Nathalie Tocci, director of the Italian Institute of International Affairs and adviser to Mr. Borrell, said.
Now that President Trump has used it so lavishly, “the way companies and politicians think will not go back, even if Biden does not use it,” she said.
In December, Mr. Borrell that “we need to develop the international role of the euro, to avoid being forced to break our own laws under the weight of secondary sanctions.”
But few believe that the euro will soon, or perhaps ever, become a competitor of the dollar, given Europe’s slow growth, its internal divisions over how to strengthen and strengthen the euro, and China’s growing power. and the renminbi.
China is starting to take lessons from the US use of sanctions to punish countries like Australia and Sweden. For Europe and Germany, built on exports, ‘you see the rules-based order crumbling, and you are worried about the same kind of blackmail coming from China,’ ‘he said. Hackenbroich said.
German companies in particular are concerned about the growing confrontation between Washington and Beijing. US secondary sanctions that China could impose will create a major problem for Germany, said Stormy-Annika Mildner, who until recently was head of external economic policy for the Federation of German Industries.
Given the small Iranian economy, the impact of sanctions on German companies was small. However, Mildner said that “the prospect of severe sanctions and secondary sanctions against China ‘of’ having to choose between the US and Chinese markets ‘would be ugly, and that is what people are worried about.’
China is already starting to control export controls, which could eventually push European companies between US, European and Chinese laws.
“If you have to choose between your two largest markets, America and China, that’s half your wealth,” he said. Hackenbroich said. “In ten years, China will be increasingly central to economic networks – perhaps not as central as the United States, but to get there.”
In Iran alone, the cost of US secondary sanctions was significant. French energy giant Total abandoned a major investment in Iran as soon as President Trump withdrew the 2015 agreement with Iran and reintroduced US sanctions against Iran. It costs about $ 2 billion, while Siemens loses a $ 1.5 billion rail contract and Airbus loses $ 19 billion.
President Biden has said he will rejoin the Iran deal, but will not lift sanctions until Iran complies with them. Although most diplomats accept that Washington and Tehran will work out some sort of order, European companies remain reluctant.
Guntram Wolff, director of Bruegel, an economic research institution, will retaliate for the best way to prevent others from using secondary sanctions. “To be credible, you need reciprocity, and retaliation is the only way to do that,” he said.
“But politics is harder,” he added, given the asymmetric power of the US Treasury and the global role of the dollar. “The reality is that there is no united European power that can project power on the scale.”
Even if many Europeans do not like Nord Stream 2, they are driven to defend it by Washington’s use of secondary sanctions to punish European companies and even cities like Sassnitz. Wolff said. “The EU sees this as an attack not only on a city, but also on the EU as a whole.”
“With silent diplomacy, one could achieve much more than now,” he said. Wolff said. This is a lesson that Mr. Biden apparently accepted, and wants to get the matter right and move on to better relations with powerful Germany – if Congress allows it.
But the debate over how Europe can project its own power and protect itself against larger and more powerful countries, whether allies or competitors, will not go away.