Russia-Government Funded Think Tank: The Hidden Target Of The New Round Of U.S. Sanctions Is To Undermine The German Economy

On August 2, 2017, President Donald Trump reluctantly signed the bill that imposes new sanctions on Russia.[1] In a White House statement, Trump expressed his concerns about the new round of sanctions, and called the bill "seriously flawed." Trump's statement read: "Since this bill was first introduced, I have expressed my concerns to Congress about the many ways it improperly encroaches on Executive power, disadvantages American companies, and hurts the interests of our European allies. My Administration has attempted to work with Congress to make this bill better. We have made progress and improved the language to give the Treasury Department greater flexibility in granting routine licenses to American businesses, people, and companies. The improved language also reflects feedback from our European allies – who have been steadfast partners on Russia sanctions – regarding the energy sanctions provided for in the legislation. The new language also ensures our agencies can delay sanctions on the intelligence and defense sectors, because those sanctions could negatively affect American companies and those of our allies.

"Still, the bill remains seriously flawed – particularly because it encroaches on the executive branch’s authority to negotiate.  Congress could not even negotiate a healthcare bill after seven years of talking. By limiting the Executive’s flexibility, this bill makes it harder for the United States to strike good deals for the American people, and will drive China, Russia, and North Korea much closer together. The Framers of our Constitution put foreign affairs in the hands of the President. This bill will prove the wisdom of that choice.

"Yet despite its problems, I am signing this bill for the sake of national unity. It represents the will of the American people to see Russia take steps to improve relations with the United States. We hope there will be cooperation between our two countries on major global issues so that these sanctions will no longer be necessary… I built a truly great company worth many billions of dollars. That is a big part of the reason I was elected. As President, I can make far better deals with foreign countries than Congress."[2]

The bill raised concerns in the major European capitals. As the Tass news agency explained: "The document says that the U.S government should push ahead with its efforts to counter the construction of the Nord Stream-2 pipeline. It asserts that the project has a harmful effect on the European Union’s energy security, the development of the gas market of the Central and Eastern Europe and energy reforms in Ukraine. The bill also states that the U.S. government should prioritize exports of U.S. energy resources to Europe to create jobs in its economy."[3]

Commenting on the sanctions, German Foreign Minister Sigmar Gabriel said: "We will under no circumstances accept an extraterritorial application of these U.S. sanctions against European companies. Sanctions policy is neither a suitable nor an adequate instrument to advance the interests of national exports and the domestic energy sector."[4]

On July 25, the Russian Institute for Strategic Studies (RISS), a think tank established by the Russian President, published an analysis, titled "Hidden Targets Of The New US Anti-Russian Sanctions–Not The Least Of Which Is To Undermine The German Economy," by Vyacheslav Kholodkov, chief of the international economic organizations sector at the Economic Studies Center. In the article, Kholodkov stated that one of the hidden targets of the new round of U.S. sanctions is to target the German economy and undermine Germany's energy security that Russia had provided. Kholodkov is a veteran trade expert, who in Soviet times worked for the ministry of foreign trade and in Japan as part of the Soviet Union's trade delegation and served in the Russian presidential administration as an economic development expert.

The following are excerpts from Kholodkov's article:[5] The original English text has been edited by MEMRI for readability by faithfully referring back to the original Russian version.

Vyacheslav Kholodkov (Source: Riss.ru.tv)

'The Growing Economic Superiority Of Germany Is The Basis Of Obvious Controversies Between Trump And Merkel'

"It is obviously that new sanctions against Russia will be adopted soon, and most experts believe that the American establishment is primarily pursuing two groups of objectives:

1. "Political – to punish a recalcitrant Russia, which challenges Washington's right to extend American understanding of freedom, human rights, and democracy throughout the entire world, aggravate the material status of broad sectors of the Russian population, stimulate protest moods in Russian society in the hope of changing the current regime and eliminating from the political scene a Russian leader who represents that regime;
2. –"Economic – to squeeze out our country from the European gas market in order to supplant it and reduce the trade deficit by increasing the exports of [American] energy products.

"Apparently behind the targets mentioned There are also some hidden not so widely advertised targets of the new U.S. anti-Russian sanctions. Not the least of them – undermining Germany’s economic growth and political ambitions, which became especially noticeable against the background of the progressive weakness of the U.S. economy.

"Globalization for the United States has resulted in a growing atrophy of the industry, deindustrialization of many states, and the growing of financial imbalances. Germany, unlike the U.S., which has a chronic trade deficit (502 billion dollars in 2016), in the balance of payments on current account (469 billion dollars), budget (4.4 % of GDP), has been maintaining surpluses for many years (respectively 295 billion dollars, 294,3 billion dollars, 0.8 % of GDP).

"Structure of mutual trade shows the superiority of the German industry, as well as the direction of investment flows. Germany’s direct production investment in the United States in 2016 (255,5 billion dollars) is higher than the U.S. investments in Germany (108,1 billion dollars), and the turnover of German affiliates in the United States (466,4 billion dollars) is higher than the turnover of U.S. corporate subsidiaries in Germany (365,5 billion dollars).

"The growing economic superiority of Germany is the basis of obvious controversies between Trump and [German Chancellor Angela] Merkel, that result in mutual accusations and suspicions which are eroding the so-called transatlantic solidarity. Trump’s statement at the NATO summit that Germany is not fulfilling its financial obligations to the Alliance, owes it "a huge sum of money," his demand to increase defense spending to 2 % of GDP, [the U.S.] withdrawal from the Paris Climate agreement, the fierce debates over the principles of free trade and protectionism – here is a partial list of sore points and irritants between Washington and Berlin. The mass media widely quoted the words of Merkel that Europe can no longer rely on the United States and it should 'take its destiny into its own hands,' although Merkel publicly rejects suggestions made in the press that Germany should assume the role of the new leader of the Western community....

"Trump sharply criticizes Germany for 'aggressive' trade policies, a huge surplus in bilateral trade, which in 2016 amounted to 67 billion dollars, unfair methods of competition, deliberate undervaluation of the euro. He openly threatens to impose prohibitive duties on the import of German cars and steel.

"But protectionism is not the only weapon of the United States in the fight against the growing German power. One competitive advantage of American industry is cheap energy. The most important reason behind the prolonged government ban on oil and gas exports from the United States was not only the intention of ensuring energy security, but also the desire to maintain low prices domestically for hydrocarbon fuels and electricity. Hydrocarbons’ low cost in the United States confers substantial competitive advantages for energy-intensive sectors of American industry: petrochemicals, nonferrous and ferrous metallurgy.

"Trump has set the goal of using the 'shale revolution' to transform the U.S. into 'a great energy empire' and the leading exporter of hydrocarbons. Gas production over the past 10 years has increased by 40 %, and the United States in 2013 went from third to first place in the world, overtaking Russia. The displacement of cheap Russian gas from the German market (in 2016, Gazprom supplied Germany with almost 50 billion cubic meters) and its replacement with expensive American LNG would lead to a reduction in the U.S. trade imbalance with Germany and the loss of competitiveness in German industry.

"In addition, gradually achieving a dominant position in the oil and gas market in Germany will strengthen the Americans' ability to control the 'best friend's' foreign and defense policy. There is no doubt that if it is necessary, Washington will not hesitate to reduce or completely stop the export of gas and oil to this country. The energy boom will not only strengthen the American economy, but will give Washington new tools for conducting foreign policy. The United States will gain a lever that can be used not only against Russia or Germany, but also against other 'unfriendly' regimes, in particular Iran and Venezuela (sanctions against these countries are developing now)."