Diesel, gas, and paradox

News surfaced a couple weeks ago that the German government offered to pay the Trump administration up to a billion euros in exchange for lifting sanctions on Nord Stream 2. The whistle was blown by a non-profit called Environmental Action Germany (DUH – Deutschland Umwelthilfe), a member of the Brussels’ based European Environmental Bureau.

DUH was founded in 1975 and is one of the many environmental agencies receiving funding from the EU. It became famous a few years ago, when they spearheaded the legal battle against the German car industry (and the German Federal Government, allegedly protecting them) on account of the Dieselgate scandal. The affair was uncovered in 2015, when the US Environmental Protection Agency (EPA) issued a notice of violation to Volkswagen. As it turned out, the company had been presenting fraudulent emission measurements of its cars to comply with test regulations; the readings in real driving conditions greatly surpassed the toxicity threshold, posing a public health risk.

The scandal led to the investigation of many other giants in the car-making industry, mainly but no exclusively German ones. It also served as a wake-up call to the problems of diesel as combustion fuel, which had wild ramifications: France’s diesel tax, which sparked the still ongoing Yellow Vests movement, is a remarkable example. The legal impulses to curb traffic in big cities, and the meteoric rise of electric car makers, such as Tesla, are other related events. After years promoting diesel, suddenly it had to be completely eliminated. The “economic periphery” of the world was most impacted, whether in the American Mid-West, French provinces, or downton London.

DUH demanded that car makers payed for the modification of all vehicles with excessive emissions, including those already in circulation. The financial burden generated by this proposal would be unacceptable. It would severely cripple the German motor industry, which is the crown jewel of the nation’s export machine and thus an important factor of its positive trade balance in relation to the US. Interestingly, the supply chain of this industry includes as key providers of parts notorious Visegrad bad boys such as Poland, Hungary or Slovakia. The existence of German exports is vital for many Central European economies.

As one of the most powerful nations in the European Union, the interests of Germany as a whole are sometimes conflated with those of Brussels. This is obviously a huge simplification, as can be seen by the facts exposed above. After all, the EU Commission has imposed enormous fines on the same carmakers DUH claims are in cahoots with the Bundesrepublik. The EU’s relation to its discolous Visegrad members has also seen better days, to put it shortly.

In any case, the controversial pipeline, now almost complete, is a perfect example of this complexity of interests so characteristic of EU politics. Nord Stream 2 would double the amount of natural gas delivered from Russia to Germany every year. It bypasses Central Europe, which had a small leverage until now thanks to its upstream position in the Russian gas network. Understandably, countries in the region, Poland and Ukraine especially, are frontally opposed to the project. As is known, the Americans support the Central Europeans in their stance, since they aim to sell Liquefied Natural Gas (LNG) in direct competition to Russia.

Thus, the scandal: German Finance Minister Olaf Scholz, of the Social Democrat Party, wrote a personal letter to former US Treasury Secretary Steve Mnuchin, allegedly asking to allow “unhindered construction and operation of Nord Stream 2” in exchange for dedicating up to 1 billion euros to fund the import of American LNG. This alternative source of energy is more expensive, as it requires complicated logistics and processing costs. Flooding Germany with Russian gas and American LNG would turn a country known for its massive investment in green energy into a hydrocarbon powerhouse.

The use of taxpayer money to buy the American government’s complacency to this is a significant realignment, especially when done against what apparently are Brussels’ wishes. Gas politics are one of the last bridges between Europe and Russia, especially after this month’s shaming of High Representative of the EU Josep Borrell (another socialist!) by Russian Foreign Minister Lavrov. If this link is severed, it should not be surprising to see Russia look for friends in other increasingly isolated countries, such as China. Counterintuitive as it is, the US has to favor its trade rivals to prevent the solidification of an Eurasian block. It’s not wise to force all your rivals into the same corner.

Success! You're on the list.
%d bloggers like this: