Europe accuses the US of profiting from the war

“The fact is, if you look at it soberly, the country that is profiting 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 European official told Politico. “.

The explosive comments, backed publicly and unofficially by officials, diplomats and ministers elsewhere, show growing anger in Europe over US subsidies that threaten to destroy European industry. The Kremlin is likely to welcome the “poisoning of the atmosphere” among Western allies.

“We are truly at a historic moment,” the senior EU official said, arguing that the double whammy of trade disputes over US subsidies and high energy prices risked turning public opinion against both the military effort and the transatlantic alliance. “America needs to realize that public opinion is changing in many EU countries.”

EU foreign policy chief Josep Borrell urged Washington to respond to Europe’s concerns. “Americans – our friends – make decisions that have an economic impact on us,” he said in an interview with Politico.

The main point of tension on both sides of the Atlantic in recent weeks has been Biden’s green subsidies and taxes, which Brussels says unfairly hinder trade with the EU and threaten to destroy European industry. Despite official objections from Europe, Washington has so far shown no signs of backing down.

At the same time, the turmoil caused by Putin’s invasion of Ukraine is sending European economies into recession, with inflation soaring and a devastating contraction in energy supplies threatening blackouts and other energy restrictions this winter.

As they try to reduce their dependence on Russian energy, EU countries are turning to US gas instead, but the price Europeans pay is almost four times higher than the cost of the same fuel in America itself. Against this backdrop, there is a likely surge in orders for American-made military goods as European armies face shortages after arms are sent to Ukraine.

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

Ministers and diplomats from other countries in the bloc have expressed frustration at the way the Biden government is simply ignoring the impact of its domestic economic policies on European allies.

When EU leaders asked Biden about high US gas prices at the G20 meeting in Bali last week, the US president simply didn’t seem aware of the issue, according to the senior official quoted above. Other EU officials and diplomats agreed that American indifference to the consequences for Europe was a major problem.

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

Officials on both sides of the Atlantic acknowledge the risks the increasingly toxic atmosphere poses to the Western alliance. Quarrels are exactly what Putin would like. EU and US diplomats are united on this issue.

The growing controversy over Biden’s Inflation Reduction Act (IRA) has put fears of a transatlantic trade war back at the top of the political agenda. Trade ministers gathered to discuss their response on Friday as officials in Brussels draw up plans for an emergency military subsidy package to save European industries from collapse.

“The law to reduce inflation is very worrying,” said Dutch Trade Minister Liese Schreinemacher. “The potential impact on the European economy is very large.

“The US is pursuing its domestic agenda, which is unfortunately protectionist and discriminatory against US allies,” said Tonino Pizzula, MEP responsible for transatlantic relations.

A US official emphasized that the price setting for European gas buyers reflects the decisions of the private market and is not the result of US government policy or action. “American companies are transparent and reliable suppliers of natural gas to Europe,” the official said. Export capacity was also limited by an accident in June that forced the shutdown of a key facility.

In most cases, the official added, the difference between export and import prices does not go to US exporters of liquefied natural gas (LNG), but to companies that resell it in the EU. The largest European holder of long-term contracts for American LNG is, for example, France’s Total Energy.

This is not a new argument from the American side, but it does not seem to be convincing to the Europeans. “The United States sells us its gas four times more expensive when it crosses the Atlantic,” European Internal Market Commissioner Thierry Breton told French television on Wednesday. “Of course the Americans are our allies… but when something goes wrong, it’s necessary for the allies to talk.”

Cheaper energy quickly became a huge competitive advantage for American companies as well. Businesses are planning new investments in the US or even moving their existing business away from Europe to US factories. Just this week, multinational chemical company Solvay announced it was choosing the US over Europe for new investment, in the latest in a series of similar announcements from key EU industrial giants.

Allies or not?

Despite the energy disagreement, Brussels only panicked when Washington announced a $369 billion industrial subsidy scheme to support green industries under the Deflation Act.

“The deflation law changed everything,” said an EU diplomat. “Is Washington still our ally or not?”

For Biden, the legislation is a historic climate achievement, but the EU sees it differently. An official from France’s foreign ministry said the diagnosis was clear: these are “discriminatory subsidies that will distort competition”. French Economy Minister Bruno Le Maire this week even accused the US of going down the path of China’s economic isolationism, calling on Brussels to replicate a similar approach. “Europe must not be the last of the Mohicans,” he said.

The EU is preparing its responses, such as a large subsidy package, to prevent the destruction of European industry by American competitors. “We are experiencing a creeping crisis of confidence on trade issues,” said German MEP Reinhard Butikofer.

“At some point you have to assert yourself,” said French MEP Marie-Pierre Vedrin. “We’re in a world of power struggles. When you fight with your arms, if they’re not muscular, if you’re not prepared both physically and mentally, you lose.”

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

The US is the largest provider of military aid to Ukraine, supplying more than $15.2 billion worth of weapons and equipment since the war began. So far, the EU has provided about 8 billion euros in military equipment to Ukraine, according to Borrell.

According to a senior official in a European capital, some sophisticated weapons could take “years” to restore due to problems in the supply chain and chip production. This fueled fears that the US defense industry could gain even more from the war.

The Pentagon is already developing a road map to speed up arms sales as pressure from allies to meet greater demands for weapons and equipment mounts.

Another EU diplomat argued that “the money they make from guns” could help Americans understand that making “all that gas money” might be “a little too much”.

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