Europe accuses US of profiting from war – POLITICO

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Nine months after invading Ukraine, Vladimir Putin is beginning to fracture the West.

Top European officials are furious with the Joe Biden administration and now accuse Americans of making their fortunes from war, while EU countries are suffering.

“The fact is, if you look at it soberly, the country that benefits the most from this war is the United States because it sells more gas and at higher prices, and because it sells more weapons,” a senior official told POLITICO.

The bombshell comments – backed in public and private by officials, diplomats and ministers elsewhere – follow growing anger in Europe over US subsidies that threaten to destroy European industry. The Kremlin should rejoice in the poisoning of the atmosphere among the Western allies.

“We are truly at a historic juncture,” the senior EU official said, saying the double whammy of trade disruption from US subsidies and high energy prices risks turning public opinion against him. the war effort and the transatlantic alliance. “America needs to realize that public opinion is changing in many EU countries.”

Another senior official, the head of European diplomacy 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 United States rejected Europe’s complaints. “Rising gas prices in Europe are caused by Putin’s invasion of Ukraine and Putin’s energy war against Europe, period,” a spokesperson for Biden’s National Security Council said. Exports of liquefied natural gas from the United States to Europe “have increased significantly and allowed Europe to diversify away from Russia,” the NSC spokesperson said.

The biggest point of tension in recent weeks has been Biden’s green subsidies and taxes which Brussels says unfairly divert trade from the EU and threaten to destroy European industries. Despite formal objections from Europe, Washington has so far shown no signs of backing down.

Meanwhile, the disruption caused by Putin’s invasion of Ukraine is pushing European economies into recession, with soaring inflation 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 American gas instead, but the price Europeans pay is almost four times higher than the same cost of fuel in America . Then there’s the likely surge in orders for US-made military kits as European armies run out after sending weapons to Ukraine.

This is too much for senior officials in Brussels and other EU capitals. French President Emmanuel Macron said high gas prices in the United States were not “friendly” and Germany’s economy minister called on Washington to show more “solidarity” and help reduce gas prices. energy costs.

Ministers and diplomats based elsewhere in the bloc have expressed frustration at how Biden’s government is simply ignoring the impact of its domestic economic policies on European allies.

When EU leaders approached Biden about high US gas prices at the G20 meeting in Bali last week, the US president seemed to simply ignore the issue, according to the senior official quoted above. above. Other EU officials and diplomats agreed that US ignorance of the consequences for Europe was a major problem.

“Europeans are clearly frustrated by the lack of prior information and consultation,” said David Kleimann of the Bruegel think tank.

Officials on both sides of the Atlantic recognize the risks that the increasingly toxic atmosphere will pose to the Western alliance. Quarrels are exactly what Putin would want, European and American diplomats agreed.

The growing dispute over Biden’s Inflation Reduction Act (IRA) – a huge tax, climate and healthcare package – has once again pushed fears of a transatlantic trade war to the top of the political agenda. . EU trade ministers are due to 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 Inflation Reduction Act is very worrying,” said Dutch Trade Minister Liesje Schreinemacher. “The potential impact on the European economy is very significant.”

“The United States follows a domestic agenda, which is unfortunately protectionist and discriminatory towards American allies,” said Tonino Picula, European Parliament leader on transatlantic relations.

A US official stressed that pricing for European gas buyers reflects private market decisions and is not the result of US government policy or action. “US 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 export and import prices does not go to US LNG exporters, but to companies that resell the gas within the EU. The largest European holder of long-term American gas contracts is, for example, the French company TotalEnergies.

The NSC spokesperson quoted above added: “The increase in global LNG supply, led by the United States, has helped European allies and partners to bring storage levels to an encouraging level before this winter, and we will continue to work with the EU, its members, and other European countries to ensure sufficient supplies are available for the winter and beyond.

This is not a new argument on the American side but it does not seem to convince the Europeans. “The United States sells us their gas with a four-fold multiplier effect when they cross the Atlantic,” EU Internal Market Commissioner Thierry Breton told French television on Wednesday. “Of course, the Americans are our allies… but when something is wrong, it must also be said among allies.”

Cheaper energy has also quickly become a huge competitive advantage for American businesses. Companies are planning new investments in the United States or even relocating their existing operations out of Europe to American factories. Just this week, multinational chemical company Solvay announced it was choosing the US over Europe for new investment, in the latest in a string of similar announcements from key EU industrial giants.

Allies or not?

Despite energy disagreements, it wasn’t until Washington announced a $369 billion industrial subsidy package to support green industries under the Cut Inflation Act that Brussels went into panic mode at full share.

“The Inflation Reduction Act changed everything,” said a European diplomat. “Is Washington still our ally or not?”

For Biden, the legislation is a landmark climate achievement. “While we understand that some trading partners are concerned about how the [electric vehicle] the IRA’s tax credit provisions will work in practice as far as their producers are concerned, we are committed to continuing to work with them to better understand and do what we can to address their concerns,” said the NSC spokesperson: “This is not a zero-sum game. The IRA will make the clean energy investment pie bigger, not divide it.”

But the EU sees this differently. A French Foreign Ministry official said the diagnosis was clear: it is “discriminatory subsidies that will distort competition”. This week, the French Minister of Economy, Bruno Le Maire, even accused the United States of going down the path of Chinese economic isolationism, urging Brussels to replicate such an approach: “Europe must not not be the last of the Mohicans,” he said.

The EU is preparing its responses, such as a big push for subsidies to prevent European industry from being wiped out by US rivals. “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 are in a world of power struggles. When you arm wrestle, if you are not muscular, if you are not physically and mentally prepared, you lose.”

Behind the scenes, there is also growing irritation about the money pouring into the US defense sector.

The United States has been by far the largest supplier of military aid to Ukraine, providing more than $15.2 billion in weapons and equipment since the war began. The EU has so far provided around 8 billion euros worth of military equipment to Ukraine, according to Borrell.

According to a senior official in a European capital, the resupply of some sophisticated weapons can take “years” due to 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 roadmap to accelerate arms sales, as pressure from allies to meet increased demand for weapons and equipment mounts.

Another EU diplomat argued that “the money they make on guns” might help Americans realize that making “all that money on gas” might be “a bit too much”.

The diplomat argued that a rebate on gas prices could help us “keep our public opinion united” and negotiate with third countries on gas supplies. “It’s not good, in terms of optics, to give the impression that your best ally is actually reaping huge profits from your problems,” the diplomat said.

Giorgio Leali, Stuart Lau, Camille Gijs, Sarah Anne Aarup and Gloria Gonzalez contributed reporting.

This article has been updated to include comments from an NSC spokesperson.

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