America not to blame for Europe’s problems


[01-12-2022 10:56 AM]
Dr. Amal Mudallali

The weather forecast predicts a not-so-frosty winter for Europe. But the transatlantic relationship is already threatened with deep freeze if the disputes over high gas prices and trade are not resolved in the same spirit of solidarity that Europe and the US have exhibited since the Russian invasion of Ukraine.

Winter is here. Temperatures are falling in Europe and the thermometer has already recorded zero degrees in Poland this week. The anxious Europeans are fretting over a winter that will leave them not only shivering from cold, but boiling in anger and frustration with their American ally over the gas heating bill.

When President Joe Biden was elected, Europe was elated to have a president in the White House who values the European-American relationship. He assured them “America is back,” to sighs of relief in Europe’s capitals. But today, two years on and with a major war in their backyard, the Europeans are asking, “is the US still our ally or not?” It is the Ukraine war again and its consequences that are testing the relationship.

The Europeans are accusing the US of charging high gas prices, four times higher than on this side of the Atlantic, they say. They see this as profiteering at the expense of Europe at a very vulnerable moment in its history. The American newspaper Politico quoted a “furious” European official dumping on the US: “The country that is most profiting from this war is the US because they are selling more gas and at higher prices, and because they are selling more weapons.” He warned that “America needs to realize that public opinion is shifting in many EU countries.”

Leading German and French officials have also weighed in, with French President Emmanuel Macron quoted as saying the high American prices were “unfriendly.” The Germans have suggested Washington had shown a retreat from the solidarity it showed at the beginning of the war in Ukraine. A German MEP described a “creeping crisis of trust on trade issues.” The unity among the transatlantic allies seems shaky for the first time since the beginning of the war. Both sides worry that this is not the message they should be sending to Russian President Vladimir Putin.

After Russian gas stopped flowing into European storage tanks, a torrent of American gas started arriving on ships to help the Europeans offset the worst energy crisis they have faced since the Second World War and strengthen their stand as they help Ukraine in its war with Russia. The US gas replenished gas-starved Europe and filled its storage tanks to prepare for winter, helping countries diversify and free themselves of dependency on Russian gas. This led EU nations to reduce the overall share of Russian natural gas imports to the bloc from 40 percent before the invasion to about 7 percent now, according to The Associated Press.

Some Europeans acknowledge that and give the US credit for replacing the Russian gas, but the skyrocketing prices have changed people’s attitude.

The White House denied US responsibility for the high gas prices, with a National Security Council spokesman saying: “The rise in gas prices in Europe is caused by Putin’s invasion of Ukraine and Putin’s energy war against Europe, period.”

American officials and experts point to energy market dynamics as the reason for the rise in gas prices and insist this is not the result of any intentional US policy or action.

The Europeans and the Americans sound like two ships passing in the night, each accusing the other of not understanding them. The Europeans complain that the US does not understand what they are going through and does not consult with them. Experts in America express astonishment at the Europeans, saying they “do not understand how the energy market works in the US.” One expert was more blunt, saying that the “US is not a charitable organization” and it needs to sell its gas according to what the market dictates. He pointed to the fact that there are middlemen, reselling by companies in Europe and other factors that affect the price, not government policy.

But the problem is bigger than the price of natural gas, it goes deeper to the heart and health of the transatlantic relationship. Europeans are worried about what they call America’s new economic nationalism, protectionism and trade and economic policies. They are worried that America will push them out of the global market with its new economic policies.

What changed everything and is worrying to the Europeans is America’s new Inflation Reduction Act, which Congress passed in August. This act, Biden’s biggest achievement as he seeks to tame inflation and boost the green economy, has become Europe’s nightmare. It contains hundreds of billions of dollars in industrial subsidies, especially support for green industries and manufacturing. The EU’s trade ministers, during their last meeting, called the act “discriminatory.” Other Europeans have said it distorts competition, likened it to “China’s economic isolationism,” and threatened to retaliate.

This is shaping up to be Europe’s winter of discontent. It is facing a war, an energy crisis and now the prospect of a trade war with the US, while its leaders are divided over their energy policies.

Officials in Europe say the combination of high gas prices and the new American subsidies are threatening European industries and making them uncompetitive. Some companies are already either shipping operations to the US or relocating entirely and hoping to benefit from the subsidies, leading to fears of “mass deindustrialization,” as The Economist described it. The German chemical manufacturing giant BASF was reported as saying that it would be “permanently” downsizing in Europe, giving the high energy prices as the principal reason. The Wall Street Journal also reported that Tesla “is pausing its plans to make battery cells in Germany as it looks at qualifying for tax credits under the Inflation Reduction Act.”

There are efforts to contain the crisis and the EU-US Trade and Technology Council will meet on Dec. 5, raising hopes that the two sides can iron out their differences, especially to allay Europe’s fears of what it calls “unfair” competition. The Europeans want to at least be treated like Canada and Mexico and benefit under the new act.

The problem for Europe, however, is within the continent and not across the Atlantic. The Europeans are divided, with the last meeting of EU energy ministers revealing deep and “almost irreconcilable” divisions, according to AP. The ministers were trying to agree on a price cap for gas but their “heated” discussions led to more divisions. They are slated to meet again in December, but if they do not do the heavy lifting before the meeting to bridge the gap in their positions, the energy crisis might turn into a political one.

Europe is at a critical juncture in its history and in its relationship with the US. The longer it remains bogged down in the protracted war between Ukraine and Russia, the deeper its problems will become. Only a peaceful end to this conflict, and soon, can give the Europeans a chance to recover and put their economies and lives on a better trajectory than the one they are on now. Blaming the US will not solve Europe’s problems. The US is doing what is in its interests.




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