“Get out now or risk the consequences“ – Next round in the trade conflict between the USA and Europe

Now the situation is coming to a head: On July 15, the US State Department announced further amendments to the CAATSA (Countering American Adversaries Through Sanctions Act), and US Secretary of State, Mike Pompeo, also explained the reasons for these amendments in his press conference on the same day.

The European project NORD STREAM 2 is to be prevented and therefore previous exemptions of CAASTA for this project have been cancelled. Originally, energy projects that were started before August 2017 were exempt from CAASTA sanctions.

With immediate effect, all activities both for NORD STREAM 2 and for the second line of the project TurkStream can now be sanctioned by the USA.

Pompeo threatened European companies with the phrase “Get out now or risk the consequences”, thus making it clear how dangerous it can be for European companies to participate in these projects, as every company involved now runs the risk of being sanctioned by the USA.

In the now published Guidelines the changes made by CAATSA are presented. One focus of the tightening relates to financial investments, which are also defined in the FAQ under point 7 with the interpretation on “Investments”.

This intensifies the trade conflict between the USA and Europe, particularly for Germany. The German Minister of foreign affairs, Heiko Maas, has also strongly criticized this tightening of sanctions as a disregard for European sovereignty and has made it clear that extraterritorial sanctions are rejected.

The accusation also remains that the USA is following its own economic interests and is using its own sanctions law for this purpose – das the USA has a great interest in selling its liquid gas in Europe.

All companies concerned will now have to examine their further involvement in the projects and weigh up the risks of US sanctions. These sanctions may include bans on entry into the US, loss of assets in the US and withdrawal of US and other business partners who strictly obey to US laws, even though they are extraterritorial.

Unfortunately, it also remains questionable how effective protection against US sanctions for participating companies can and should be guaranteed by the European Union and Germany.

This procedure has not been successful in the past, and as important as this could be for the future – it would probably also further exacerbate the trade conflict with the USA.