For the next two weeks my task will be to provide further research on the positions of the US and UK. This post focuses on the US perspective.

SUMMARY: The US is opposed to the pipeline because Trump views LNG exports as an important pathway to reduce trade deficits (and energy exports positively affect his base), and due to concerns over growing Russian influence in the region, particularly given that the US is the largest NATO member. However, at this time they have not taken concrete steps, and threats of sanctions have not been followed through with.

Current Energy Strategy

Though there are some consistencies between the Trump and Obama administrations’ energy policies, there are also marked differences in their approaches, particularly with regards to the environmental components (as evidenced by the US’ withdrawal from the Paris Agreement).

Trump’s energy policy is outlined in his America First Energy Plan, which is deeply rooted in his campaign promises, and focused on three main areas:

1. Expanding the extraction of low-cost fossil fuels, with the intention to create jobs and achieve energy independence. The Trump administration is pursuing an “all of the above” energy strategy, with reliance on both renewables and fossil fuels.
2. Reviving the coal industry.
3. Undoing the Obama administration’s climate policies.

A keystone of the plan is the promotion of increased LNG exports. This is linked to several factors:

1. Trump views LNG as an important pathway to reduce trade deficits.
2. Natural gas production, which has reached record-high levels in recent years (moving the US from a net importer to exporter), is heavily concentrated in states that are key political areas for Trump. Indeed, “five states – Texas, Pennsylvania, Oklahoma, Wyoming, and Louisiana – accounted for 65 percent of total US dry natural gas production in 2015, all five of which are traditional Republican strongholds and backed Trump in 2016.”
3. Given that, any impact on the price of oil, gas, or coal is felt most strongly and immediately by members of his base.

The US has been vocal about its opposition to NS2. In recent months, there has been active effort on the part of the Trump administration to create new strategic partnerships with central European countries, Poland, and Ukraine on the basis of opposing the NS2 pipeline, shoring up domestic energy capabilities, and creating agreements for the importation of additional US LNG.

Grounds for Pipeline Opposition

There are clear incentives for the US to oppose the Nord Stream 2 project. They mainly center in three areas: economic, geopolitical, and security.

1. Given that the United States is on the path to being the world’s third largest LNG producer by next year, gas exports to Europe will be of economic benefit to the U.S. energy sector, trade balance, and the economy overall. Russian gas is a significant competitor in this area, particularly given the higher cost for US supply.
   1. It is important to note, however, that US LNG will still likely be a key part of the European energy mix, if only to keep the peace with the US, assure access to US markets, and help calm Trump’s concerns about trade imbalances. For example, Germany is currently building LNG import facilities “as a gesture to American friends.”
2. There are fears of increased Russian influence in the region. The US insists it is not looking to keep that influence to itself by exporting LNG. However, it is clear that reducing energy relationships between European countries and Russia would weaken existing ties, potentially in the US interest.
3. As the largest NATO power and a key security guarantor, the US does have an interest in ensuring Europe’s security, and views energy diversification as key. The concern stems from Russia’s history of using energy as a coercive tool through supply cuts and price increases.

Recent Developments

The US has shown it is willing to be forceful in asserting its opposition to the Nord Stream 2 project. They have threatened sanctions against German companies constructing the pipeline, as well potentially against secondary contractors from smaller companies based in other countries such as Switzerland and Italy. This is relevant, because some of these companies are specialists which would be difficult to replace. However, such sanctions would be considered unacceptable interference from the European position, and there is technically still an agreement in place that the US shall not impose gas-related sanctions. Additionally, even if the sanctions did go into place within Europe, it is possible they would backfire due to being seen as too much interference on the part of the US, causing public resentment and political alienation.

The US has also threatened additional sanctions against Russia. While there have been public calls from the Senate to consider a resolution against Nord Stream 2, and there are existing sanctions against Russia, the bill passed this week imposing additional sanctions on Russia has no specific sanctions against Nord Stream 2.