Europe accuses US of profiteering from war – POLITICO | Popgen Tech
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Nine months after invading Ukraine, Vladimir Putin is starting to break the West.
Top European officials are furious with Joe Biden’s administration and now accuse the Americans of making a fortune from the war, while EU countries suffer.
“The fact is, if you look at it soberly, the country that benefits the most from this war is the U.S. because they sell more gas and at higher prices, and because they sell more weapons,” one senior official told POLITICO .
The explosive comments – backed up publicly and privately by officials, diplomats and ministers elsewhere – follow growing anger in Europe over US subsidies that threaten to destroy European industry. The Kremlin is likely to welcome the poisoning of the atmosphere among Western allies.
“We really are at a historic moment,” the senior EU official said, arguing that the double whammy of trade disruption from US subsidies and high energy prices risks turning public opinion against both the war effort and the transatlantic to prevent alliance. “America needs to realize that public opinion is changing in many EU countries.”
Another top official, the EU’s chief diplomat Josep Borrell, called on Washington to respond to European concerns. “Americans — our friends — make decisions that have an economic impact on us,” he said in an interview with POLITICO.
The US rejected Europe’s complaints. “The rise in gas prices in Europe is being caused by Putin’s invasion of Ukraine and Putin’s energy war against Europe, period,” said a spokesman for Biden’s National Security Council. Exports of liquefied natural gas from the US to Europe “have increased dramatically and enabled Europe to diversify away from Russia,” the NSC spokesman said.
The biggest point of tension in recent weeks has been Biden’s green subsidies and taxes, which Brussels says unfairly tilt trade away from the EU and threaten to destroy European industries. Despite formal objections from Europe, Washington has so far shown no sign of backing down.
At the same time, the disruption caused by Putin’s invasion of Ukraine is sending European economies into recession, with inflation soaring and a devastating squeeze on energy supplies threatening blackouts and rationing this winter.
As they try to reduce their dependence on Russian energy, EU countries are turning to gas from the US instead – but the price Europeans pay is almost four times the cost of the same fuel in America. Then there is the likely surge in orders for American-made military kit, as European armies run short after sending weapons to Ukraine.
It is all too much for top officials in Brussels and other EU capitals. French President Emmanuel Macron said high US gas prices were not “friendly” and Germany’s economy minister called on Washington to show more “solidarity” and help reduce energy costs.
Ministers and diplomats based elsewhere in the bloc have expressed frustration at the way Biden’s government is simply ignoring the impact of its domestic economic policies on European allies.
When EU leaders took on Biden at the G20 meeting in Bali last week over high US gas prices, the US president seemed simply unaware of the issue, according to the senior official quoted above. Other EU officials and diplomats agreed that US ignorance of the consequences for Europe is a major problem.
“The Europeans are noticeably frustrated by the lack of advance information and consultation,” said David Kleimann of the Bruegel think tank.
Officials on both sides of the Atlantic acknowledge the risks the increasingly toxic atmosphere will pose to the Western alliance. The bickering is exactly what Putin would wish for, EU and US diplomats agreed.
The growing dispute over Biden’s Inflation Reduction Act (IRA) – a major tax, climate and health care package – has put fears of a transatlantic trade war back high on the political agenda. EU trade ministers will discuss their response on Friday as officials in Brussels draw up plans for an emergency war chest of subsidies to save European industries from collapse.
“The law on the reduction of inflation is very worrying,” said Liesje Schreinemacher, Minister of Trade. “The potential impact on the European economy is very large.”
“The US is pursuing a domestic agenda, which is unfortunately protectionist and discriminatory against US allies,” said Tonino Picula, the European Parliament’s point person on the transatlantic relationship.
A US official stressed the price setting for European buyers of gas reflects private market decisions and is not the result of any US government policy or action. “American companies have been transparent and reliable suppliers of natural gas to Europe,” the official said. Export capacity was also limited by an accident in June that forced a key facility to close.
In most cases, the official added, the difference between the export and import prices does not go to US LNG exporters, but to companies that resell the gas within the EU. For example, the largest European holder of long-term US gas contracts is France’s TotalEnergies.
The NSC spokesperson quoted above added: “The increase in global LNG supplies, led by the United States, has helped European allies and partners get storage levels to an encouraging place ahead of this winter, and we will continue to work with the EU, its members, and other European countries to ensure that sufficient supplies will be available for the winter and beyond.”
This is not a new argument from the American side, but it does not seem to convince the Europeans. “The United States sells us its gas with a multiplier effect of four when it crosses the Atlantic,” the European Commissioner for the Internal Market, Thierry Breton, said on French TV on Wednesday. “Of course the Americans are our allies… but when something goes wrong, it is also necessary between allies to say so.”
Cheaper energy has also quickly become a major competitive advantage for American companies. Businesses are planning new investments in the US or even moving their existing businesses away from Europe to US factories. Just this week, chemical multinational Solvay announced it was choosing the US over Europe for new investments, in the latest in a series of similar announcements from key EU industrial giants.
Allies or not?
Despite the energy disagreements, it wasn’t until Washington announced a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act that Brussels went into full-scale panic mode.
“The Inflation Reduction Act changed everything,” said one EU diplomat. “Is Washington still our ally or not?”
For Biden, the legislation is a historic climate achievement. “While we understand that some trading partners have concerns about how the [electric vehicle] tax credit provisions in the IRA will operate in practice in relation to their producers, we are committed to continuing to work with them to better understand and do what we can to address their concerns,” said the NSC spokesman said. “This is not a zero-sum game. The IRA will grow the clean energy investment pie, not divide it.
But the EU sees it differently. An official from France’s foreign ministry said the diagnosis was clear: These are “discriminatory subsidies that will distort competition.” French Economy Minister Bruno Le Maire this week even accused the US of following China’s path of economic isolationism, urging Brussels to repeat such an approach: “Europe must not be the last of the Mohicans, ” he said.
The EU is preparing its responses, such as a major subsidy push to prevent European industry from being wiped out by American competitors. “We are experiencing a creeping crisis of confidence on trade issues in this relationship,” said German MEP Reinhard Bütikofer.
“At some point you have to assert yourself,” said French MEP Marie-Pierre Vedrenne. “We’re in a world of power struggles. If you arm wrestle, if you’re not muscular, if you’re not physically and mentally prepared, you lose.”
Behind the scenes, there is also growing irritation about the money flowing into the US defense sector.
The US has been by far the largest provider of military aid to Ukraine, supplying more than $15.2 billion in weapons and equipment since the start of the war. According to Borrell, the EU has so far supplied Ukraine with around €8 billion worth of military equipment.
According to one senior official in a European capital, restocking some sophisticated weapons could take “years” because of problems in the supply chain and the production of chips. This fueled fears that the US defense industry could profit even more from the war.
The Pentagon is already developing a road map to speed up arms sales, as pressure mounts from allies to respond to increased demands for weapons and equipment.
Another EU diplomat argued that “the money they make on weapons” could help Americans understand that spending “all this cash on gas” might be “a bit too much”.
The diplomat argued that a discount on gas prices could help us “keep our public opinions united” and to negotiate gas supplies with third countries. “It’s not good, in terms of optics, to give the impression that your best ally is actually out to make a big profit out of your problems,” the diplomat said.
Giorgio Leali, Stuart Lau, Camille Gijs, Sarah Anne Aarup and Gloria Gonzalez reported.
This article has been updated to include comments from a spokesperson for the NSC.