Could the US Create Laws To Protect Latin America?

The flags of Germany, the U.S. and the European Union are flying on the German Chancellery and Parliament buildings for the visit of U.S. Secretary of State Antony Blinken, who is on a European tour.

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

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

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

This is exactly what is happening with the extraterritorial and unilateral sanctions against the construction of a natural gas pipeline between Russia and Germany across the Baltic Sea. The Nord Stream 2 pipeline, which will reinforce Nord Stream 1, operating since 2012, is 1,230 km long (approximately 770 miles), and only 121 km (approximately 75 miles) from completion at the end of March. However, the U.S. had aimed to prevent the completion of the last stretch with sanctions targeted at companies related to the project.

The sanctions are based on an act of Congress, which has as a self-proclaimed goal the protection of Europe’s energy security. If it were not about Europe, one could almost speak of a neocolonialist act. The U.S. defines and decides unilaterally how Europe will preserve its energy security against Russia and lays claim to the right to impose sanctions on European companies. With friends like these, one may be tempted to say, who needs enemies?

Sanctions on companies specializing in the laying of pipelines were initially imposed under Donald Trump’s administration and were expanded in 2021 to an increasingly broader spectrum of companies related to the construction of the pipeline, including companies participating in the funding of the project, insurers and certifiers.

Both Biden and Blinken have taken clear positions against the project. Since May, there has been a slight change of course in U.S. politics. For national security reasons, Biden waived the imposition of sanctions on the company operating Nord Stream 2.

This less aggressive policy may have several reasons. On the one hand, the pipeline construction has advanced further despite the sanctions. In early June, Russia announced that the first of the two submarine pipes had been completed.

On the other hand, in an effort to build a united front against China, Biden wants to avoid conflicts with important allies. The United States’ obsession with China as its main adversary could also encourage a more pragmatic position toward Russia. But laws allowing sanctions against Nord Stream 2 are still in force, and Congress may demand a more rigorous application at any time.

The German government considers the U.S. extraterritorial sanctions, which are not legitimized by international law, to be illegal. The U.S. imposition of fines on European companies doing business legitimately is a violation of European sovereignty. Besides, the U.S. wants to profit from the sanctions and externalize 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 demand compensation estimated at some 10 billion euros.

As an alternative to Russian gas, the Trump administration promoted U.S. liquefied natural gas, dubbed “freedom gas,” whose price is often not competitive with Russian gas. And while the U.S. is concerned about Europe’s energy dependence, Bloomberg reported that according to its calculations, Russian oil shipments to the U.S. set a new record last year.

Russia even overtook Saudi Arabia, becoming the third largest oil supplier to the United States. Vladimir Putin’s foreign exchange earnings in U.S. dollars seem to be less worrying to the U.S. than his revenues from the sale of 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 toward renewable energy in Europe. It would be a smarter and less controversial strategy for the U.S. to help accelerate this process. And as an intermediate stage, natural gas is more environmentally friendly than coal anyway.

If there is an interruption of the final stretch of Nord Stream 2, Russia could extort money from Ukraine by shipping less gas — or none, in an extreme case — through the pipelines that cross and supply the neighboring country. These secondary effects can be addressed in other ways — as has already happened with guarantees for Ukraine — and do not necessarily require stopping Nord Stream 2.

Admittedly, there are also objections to the pipeline in Germany and other European countries. It is debatable whether Nord Stream 2 would be built again today from an ecological point of view. Sanctions can be justified under certain conditions, but must not undermine the very international law order they aim to protect.

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

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

Perhaps at some point, a U.S. senator will decide to create a law to protect Latin America from China and to sanction companies that do business with the Asian country. Does that sound exaggerated? If the U.S. succeeds in imposing its laws even on Europe, what will prevent it from doing so in Latin America? Caution must be taken when the United States makes its intention to protect its friends public.

Detlef Nolte is a political scientist and research associate at the German Institute of Global and Area Studies (Hamburg, Germany) and the German Council on Foreign Relations. The author was former director and vice president of GIGA.