Online Commentary

Jul 07, 2021

Could the US Create Laws to Protect Latin America?


Senior U.S. government officials regularly warn their counterparts in Latin America about China's growing economic presence. This leads, according to his speech, to China's dependence and growing influence on the policies of Latin American governments.

At the same time, the United States is exerting political and economic pressure on Latin American governments to exclude, for example, Chinese companies from 5G licensing. This interference in the sovereign rights of independent states is nothing new to Latin America as the traditional "backyard" of the northern power. But now this interference is also evident in Europe.

Under President Joe Biden, the United States, like European governments, is once again advocating for a liberal world order based on rules that apply to everyone equally. But at the same time, the United States claims the privilege of ignoring these rules at will.

This is exactly what happens with the extraterritorial and unilateral sanctions against the construction of a natural gas pipeline between Russia and Germany that runs through the Baltic Sea. The Nord Stream 2 pipeline — which will reinforce Nord Stream 1 in operation since 2012 — is 1,230 kilometers long and at the end of March was only 121 kilometers away. However, the United States had set itself the goal of preventing the last tranche from being completed with sanctions targeting companies related to the project.

The sanctions are based on an act of the US Congress that aims to protect Europe's energy security. If it were not about Europe, we could almost talk about a neo-colonialist law. The United States defines and unilaterally decides how Europe will preserve its energy security vis-reaching Russia and claims the right to impose sanctions on European companies. One is tempted to say that, with friends like these, who needs enemies?

Sanctions on companies specializing in pipe laying were initially implemented under the Trump administration and expanded in 2021 to a growing spectrum of companies involved in pipeline construction, including companies involved in project financing, insurers and certifiers.

Both President Biden and his secretary of state, Antony Blinken, have taken a clear stand against the project. Since May, there has been a slight change of course in U.S. politics. For reasons of national security, President Biden waived the imposition of sanctions against the nord stream 2 operating company.

This less aggressive policy can have several reasons. On the one hand, the construction of the pipeline has progressed even further despite the sanctions. Russia announced in early June that the first of the two submarine tubes had been completed.

On the other hand, in his efforts to build a common front against China, President Biden wants to avoid conflicts with important allies. America's obsession with China as its main adversary could also encourage a more pragmatic stance toward Russia.

But laws allowing sanctions against Nord Stream 2 are still in place, and the US Congress can demand stricter enforcement at any time.

The German Government considers extraterritorial US sanctions illegal and are not legitimised by international law. For the United States to impose fines on European companies that do business legitimately is a violation of European sovereignty. Moreover, the U.S. wants to take economic advantage of sanctions and outsource the costs of its policy against Russia.

A decision by the German government not to proceed with the project could prove costly. The companies involved in the project could legally claim compensation estimated at around 10,000 million euros.

As an alternative to Russian gas, the Trump administration was promoting U.S. liquefied natural gas (LNG), dubbed "freedom gas," the price of which is not usually competitive with Russian gas. And, while the United States is concerned about Europe's energy dependence, Bloomberg reported that according to its calculations Russian oil shipments to the United States reached a record last year.

Russia even overtook Saudi Arabia to become america's third-largest oil supplier. Putin's foreign exchange earnings — in US dollars — appear to be less worrisome to the US than his income from selling natural gas to Europe.

The pipeline will not increase energy dependence on Russia, in the long term the demand for natural gas will decrease due to the transition to renewable energies in Europe. It would be a smarter and less confrontational U.S. strategy to help speed up this process. And as an intermediate phase, natural gas, however, is greener than coal.

If the final stretch of Nord Stream 2 is disrupted, Russia could extort money from Ukraine by transporting less (or in the extreme case no) gas through the pipelines that pass through and supply the neighboring country. These side effects can be addressed in other ways (as has already happened with guarantees for Ukraine) and do not necessarily require nord stream 2 to be stopped.

Admittedly, there are also objections to the gas pipeline in Germany and other European countries. It is debatable whether Nord Stream 2 would be rebuilt today from an ecological point of view. Sanctions may be justified under certain conditions, but they must not undermine the very international legal order that it seeks to protect.

The law cannot be applied retroactively to European companies that committed themselves to the project under other conditions, contracts must be respected — Russia has fulfilled its contractual obligations to Germany in the past — and national laws must not apply to third-country companies that behave in accordance with local laws.

If Europe cannot protect its companies from illegal US sanctions, then what will happen to the much-vaing strategic autonomy? Perhaps future EU-LAC summits should put the issue of US transgressions on the agenda and adopt a common position; especially since the issue is not new in Latin America.

Perhaps at some point it will occur to some U.S. senator to create a law to protect Latin America from China and sanction companies that do business with the Asian country.

Does that seem like an exaggeration? If the United States succeeds in imposing its legislation even in Europe, what should prevent it from doing so in Latin America? Caution should be exercised when the United States declares its intention to protect its friends.

Bibliographic data

This text was first written in Spanish for Latinoamerica21 and published, amongst others, by Clarín on June 24, 2021