Authored by Tom Luongo,

The latest twist of the Nordstream 2 Saga is the U.S. is now threatening to sanction the European companies acting as Gazprom’s financier’s for the pipeline. This threat has been there since President Trump signed the sanctions bill spearheaded by a dying John McCain last summer.

But, don’t let appearances fool you. Trump wasn’t reluctant about signing that bill. He welcomed it. He went to the Three Seas Summit with “European Energy Security” on his lips and trade tariffs/barriers in his heart.

He knew where this would lead. And so did we. The recent report from RT linked above reveals just how desperate the U.S. is to stopping Nordstream 2, and, frankly, it’s pathetic.

“Everything is on the table. The administration is taking a whole-of-government approach to stopping the Nord Stream project,” the source said, as cited by the media. Last summer, Congress approved the so-called Countering America’s Adversaries Through Sanctions Act (CAATSA). The legislation allows the White House to introduce punitive measures against the participants of the energy project, investing over $5 million in those enterprises. “We have been clear that firms working in the Russian energy export pipeline sector are engaging in a line of business that carries sanctions risk,” a State Department spokeswoman told the media.

Trump and his increasingly erratic foreign policy inner circle continue to up the stakes for European companies and countries that do not go along with his plans to remake the world in his image.

Nordstream, along with Turkish Stream and potentially a revived Southstream into Bulgaria represent an existential threat to U.S. control over European politics and its economy.

Losing Face

So, it’s no wonder why the U.S. is taking such a hard-line approach to Nordstream 2.

But even if sanctions against companies like Royal Dutch Shell, OMV, Uniper, Engie and Germany’s Wintershall, the investors in Nordstream 2, pressure them to call their loans to Gazprom, if that’s even possible without significant losses, that won’t stop the pipeline from being built.

Because, it’s not like Russia doesn’t have the resources to reroute to Gazprom and offer ruble-denominated loans to cover any pull-out. It does.

Moreover, all legal challenges to the pipeline have failed. Permits have been issued. Oil prices are high so Russian government coffers are in good shape. Russian banks are carrying just 1.3% non-performing loans on their books and the Bank of Russia is, slowly, lowering interest rates.

So, at this point, you have to wonder what the point is of continuing the charade that Nordstream 2 can be stopped?

To my mind, the biggest issue is one of saving face at this point. The U.S. has invested so much political capital in stopping Nordstream 2, losing out and watching it get built is a monument to its lost influence in Europe.

Remember, Trump went, practically hat in hand, and tried to bribe German Chancellor Angela Merkel to stop Nordstream 2 last month when she was in Washington to get him to not leave the JCPOA.

Neither budged. Trump wants Merkel to spend 3% of GDP on NATO. She moved it up to 1.5%. He slapped steel and aluminum tariffs on. He’s mulling banning German luxury car imports. Bullies bully because they are weak.

Merkel visited Putin twice and resurrected an EU law that punishes companies for bending to foreign government demands.

But, as I’ve been saying for over a year now, Europe is staring a sovereign debt crisis in the face. Merkel’s position as Chancellor in Germany is weak and could collapse by the end of Trump’s first term.

Third Wave of Opposition

It is possible that Gazprom could run afoul of the EU’s Third Energy Package over the part of the pipeline that crosses Germany’s territorial waters if its European financiers pull out thanks to Trump’s sanctions threats. But, even then, the worries over that are about tariff structure of delivered gas, not about ownership.

A deal can be worked out once the pipeline begins shipping gas, around the same time that a new deal with Ukraine’s Naftogaz will be needed. Those two issues are linked but very solvable.

The Third Energy Package is why Southstream was originally canceled because the EU included a clause demanding the pipeline’s owner and operator be unbundled. This means that Gazprom gets to build the pipeline but can only own 50% of it.

The U.S. put heavy pressure on the Bulgarian government to stop it as well, which ultimately cost them their jobs.

Nordstream 2 was designed to be a joint venture between Gazprom (50% ownership) and a 10% stake by the five companies I listed above. Poland nixed the JV in January of 2016, prompting the current arrangement with those five companies loaning their stake to Nordstream 2, a wholly owned subsidiary of Gazprom, to build the pipeline.

The terms aren’t as good this way, but it was the only way to get the pipeline off the ground. By having these companies from core EU countries invested, Nordstream 2 was a brilliant piece of political maneuvering, which would always lead us to the current situation.

Reality Strikes Back

Trump is fighting against the economic tide with his opposition to Nordstream 2. He won’t be able to stop Turkish Stream from bringing gas into Eastern Europe, the very countries he’s trying to bolster with his opposition to Nordstream.

It is Poland and the Baltics who stand to lose the most over Nordstream 2. The Neocons that infest Trump’s cabinet are still convinced they can pressure Russia into a mistake in Ukraine, dumping billions into a sinking ship to goad Putin into invading on behalf of the separatists in the Donbass.

He hasn’t done it yet in nearly four years, it isn’t likely to happen now, especially with UAF desertions rising catastrophically, no matter how many anti-tank guns we ‘sell’ them or hospitals they bomb.

They still dream of putting missile ‘defense’ systems on Russia’s border to intimidate Putin into submission. They are, to paraphrase Darth Vader, as clumsy as they are stupid.

But, with the Russia inching closer to putting its hyper-sonic weapons into the field and Europe vulnerable financially and politically, this is the last chance they have to stop Eurasian integration and continue the Empire.

Trump is threatening people he has transitory leverage over in the EU. Nordstream 2 is a path to EU independence, not slavery to Russia. The EU’s politics are not controlled by Russian imperatives. So, all talk of “European Energy Security” is complete nonsense.

This is about maintaining the post-WWII institutional control the U.S. and the U.K. have had for the past three generations. But, the rest of the world has had it. Europeans have had it with their leaders doing Washington’s and Wall St.’s bidding.

This is where the populism is coming from. And if Merkel wants to last out her full term she has to stand up to Trump over Nordstream 2, back the companies she’s supposed to protect from foreign influence and come up with a better way.

The rest of the world is ready to switch to euros and yuan to settle their trade. Iran, China and Russia are inviting Trump to act like he is. They want him to burn bridges, make unreasonable demands and transparently push policies against his allies’ best interests.

It makes it easier for them to break down the barriers to new relationships. To end frozen conflicts like a divided Korea, an intractable Iran/Israel divide and a Russian/Japanese state of war.

If he pushes the world into a full-on trade war the subsequent debt deflation (beginning now) will not be controllable the way it was in previous iterations of strong dollar ‘diplomacy.’ And it may provide the perfect opportunity for Europe to find out just who its friends truly are.

* * *

Please support the production of independent and alternative political and financial commentary by joining my Patreon and subscribing to the Gold Goats ‘n Guns Investment Newsletter for just $12/month.