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German Town Fears Ruin by U.S. Effort to Stop Russian Pipeline

Sitting on the Baltic Sea, the small eastern German town of Sassnitz has been working for years to revive its enormous port, including taking on a role supporting a Russian pipeline being laid offshore to deliver natural gas to Germany.

But the port, one of the last great infrastructure projects undertaken by the former East Germany, now finds itself caught up in a geopolitical competition between the United States and Russia, a clash that local officials and residents say is threatening the town and region with economic ruin.

At issue are so-called secondary sanctions being proposed by powerful U.S. senators to target companies doing business with Russia and the Kremlin-controlled gas giant Gazprom to finish the pipeline, Nord Stream 2, which is 94 percent complete.

The port would fall under the sanctions because of the role it plays supplying provisions to a Russian pipe-laying ship involved in the project. That sort of supporting work is specifically targeted by the proposed new sanctions.

The penalty, if the sanctions are imposed, would mean being cut off from the United States "commercially and financially," and effectively excluded from the global financial system. The port would essentially be turned into an international pariah, with all its business drying up -- not just its work supplying the Russian ship.

To German officials and residents in Sassnitz, the sanctions against the port and the company that owns it, Fährhafen Sassnitz, are puzzling and infuriating. They threaten to turn Sassnitz into collateral damage as the town struggles to create enough jobs to keep young people from leaving.

"They are firing their cannons at sparrows," said Edgar Taraba, as he unloaded a morning's catch of flounder and sole from his dinghy. "There is nothing left here to take."

The port, called Mukran, is a shadow of its former self, run by a company that is 90 percent owned by the Sassnitz government and the rest by the northeastern state of Mecklenburg-Western Pomerania.

The Trump Administration, supported by Poland and the Baltic nations, has long opposed the pipeline, seeing it as an instrument for Russian leverage over Germany, Ukraine and Central Europe. One U.S. fear is that Russia, which has a history of using gas supplies as a political tool, could cut off energy supplies at will.

But defenders of the project say that Russia is more dependent on the income from the gas than Germany is on its supply, and that Washington is angling to sell Europe its more expensive liquefied natural gas.

Officials in Berlin and Brussels are furious that the Trump administration is using the same type of sanctions employed against companies doing business with North Korea or Iran against an ally and a European project in which American companies play no part.

Even those German officials who are critical of Nord Stream 2 say America is being a counterproductive bully by threatening such secondary sanctions against a close ally's state-owned company, and that the European Union, through existing regulations and diversification, could handle an unexpected Russian cutoff.

Secondary sanctions are a way of turning up the pressure on sanctioned countries and projects by going after those who do business with them. The goal is to isolate the target of the sanctions, but the economic pain inflicted on third parties, like the port at Sassnitz, can be severe.

The senators threatened the port's "board members, corporate officers, shareholders, and employees, to crushing legal and economic sanctions, which our government will be mandated to impose."

In Sassnitz, which Mr. Taraba remembers as a once-thriving fishing community with discos and bars crowded with now-vanished Swedish tourists, attention is focused on the fate of its ailing port and what that means for the town.

Many of the best jobs in the region, like casing pipes for Nord Stream 2 or installing and servicing turbines for offshore wind farms, are linked to the port and would be affected by the sanctions against it.

The Republican senators proposing the sanctions -- Ted Cruz of Texas, Tom Cotton of Arkansas and Ron Johnson of Wisconsin -- sent a letter to the port's owners on Aug. 5 warning of "crushing legal and economic sanctions" if the facility continued to provide "significant goods, services, and support" for the pipeline. Earlier sanctions caused a Swiss-Dutch company to stop laying the last 50 miles of pipes off Denmark.

A senior Republican congressional aide said the new sanctions are narrowly focused to try to stop the completion of the pipeline. They are attached to the National Defense Authorization Act and have bipartisan support. That means they are almost certain to become law whenever Congress votes on it, the aide said, requesting anonymity to talk about proceedings that are still in the legislative process.

The aide said the target of the sanctions was Russia, not Germany, but that allies sometimes had to make choices to gain access to the American market, noting that months of diplomacy with Germany and the European Union had failed to come up with a solution.

"The U.S. administration is disrespecting Europe's right and sovereignty to decide itself where and how we source our energy," said Heiko Maas, the German foreign minister. Germany's Energy Ministry said in an email that it considered secondary sanctions a violation of international law.

The European Union's foreign policy chief, Josep Borrell Fontelles, said he was "deeply concerned at the growing use of sanctions, or the threat of sanctions, by the United States against European companies and interests."

A German legislator, Norbert Röttgen, has opposed the pipeline for much the same reasons as Washington. But he also opposes sanctions against allies, let alone against a tiny port. "Sanctions are for enemies, not for allies, partners and friends," he said.

Christian Odendahl, chief economist at the Centre for European Reform in Berlin, said the United States, given the power of the dollar, "always had this power but never used it so openly, brutally and clumsily," especially on allies and Europeans. "With brute force, you can have some impact, but you do long-term damage to U.S. interests in Europe," he said.

Officials in Sassnitz are hopeful that a new high-speed ferry to Sweden will help compensate for the decline of cargo transport, and bring more tourists, but they fear that jobs could dry up under sanctions, said Stefan Grunau, who sits on both the town council and the port company board.

"This is a structurally weak region that is desperately searching for ways to generate new jobs," Mr. Grunau said.

The senators' letter has also unraveled the good will toward the United States in Sassnitz, Mr. Grunau said. "It has confirmed every stereotype about capitalist Americans that they learned under Communism."

Christian Pegel, energy minister for Mecklenburg-Western Pomerania, called the senators' threat "like something out of the Wild West." The letter "is very abrasive in tone and manner, and it is not clear about where I face a risk today and where risks could arise in the future."

Combined with other measures perceived to be anti-German, like President Trump's recent decision to withdraw troops from regions that depend heavily on U.S. military installations, the reaction to the sanctions in Germany has been one of shock and outrage, said Kirsten Westphal, an analyst with the German Institute for International and Security Affairs.

"It is another step up in escalation, because it exerts massive pressure on German infrastructure and administrations," she said.There is a sense that as with Iran, Washington is substituting sanctions for foreign policy and "weaponizing interdependence,'' she said.

Given European Union regulations governing natural gas imports, supplies and pipelines, as well as a transit agreement with Ukraine, the ability of Russia to influence European politics by cutting off gas supplies is much diminished, Ms. Westphal said.

Daniel Fried, a former American ambassador to Poland who worked on sanctions policy from 2013 to 2017, said that while he opposed Nord Stream 2, now that it is nearly complete it would be better to pass conditional sanctions that would hit Russia hard if it interfered with the flow of gas to Europe. "There's a better way to go than to fight the Germans on this one," he said.

Mr. Fried, now with the Atlantic Council in Washington, said: "We have a Putin problem, we don't have a German problem." It was wrong, he said, to confuse "Putin aggression and a German mistake."

[Source: By Melissa Eddy and Steven Erlanger, The New York Times, Sassnitz, Germany, 25Aug20]

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