House Speaker Paul Ryan just bragged the House passed “one of the most expansive sanction packages in history.” The bill places sanctions on Russia, Iran, and North Korea.

The bill passed by a veto-proof margin 419-3. The three members of Congress who are on the right side of the debate (all Republicans) are Rep. Justin Amash of Michigan, Rep. Tom Massie of Kentucky and Rep. John Duncan of Tennessee.

The wheels are in motion. All that needs to happen is for the Senate to go along. That’s likely because the Senate passed its own measure.

Republicans are at odds with Trump as the Wall Street Journal explains in House Passes Bill to Impose New Sanctions on Russia.

In a rare, overwhelmingly bipartisan vote, the House on Tuesday passed new sanctions that would punish Russia, after the U.S. intelligence community concluded that Moscow had sought to interfere in the 2016 presidential election.

The provision the White House has objected to would require the president to consult with Congress before relaxing any sanctions against Moscow or restoring Russia’s control over diplomatic compounds in the U.S. that the Obama administration had seized.

The measure must now pass the Senate, which approved a different version of the bill last month that also included the congressional oversight language.

According to a January report from the U.S. intelligence agencies, Russia’s interference was directed from the highest levels of its government. Its tactics included hacking state election systems; infiltrating and leaking information from party committees and political strategists; and disseminating through social media and other outlets negative stories about Democratic nominee Hillary Clinton and positive ones about Mr. Trump, the report said.

The Evidence?

Can we please see the evidence on Russia?

ZeroHedge explains Meet The Awan Brothers – The (Not-Russian) IT Staff Who Allegedly Hacked Congress’ Computer Systems.

Even if there is evidence, unless the US is willing to stop meddling abroad, what’s good for the goose should be good for the gander.

If we cannot keep our filthy hands to ourselves, why should we expect anyone else to?

Philosophical discussions aside, let’s get down to the nitty gritty.

What the Bill is Really About

This bill is not about Russian meddling. Euroiontelligence explains.

The bill is aimed specifically at the Nord Stream 2 project, with BP and Shell as the largest European partners, and which the US considers as detrimental to its interests. [Note: BP does not appear on the project list but Shell does.]

We reported on the 97-3 vote in the US Senate in favour of new legislation to step up sanctions against Russia, by including third-country companies that trade with Russia – in other words, European companies. The EU was relatively relaxed about this because it was far less clear whether the House of Representatives would support the Senate version of the bill. And ultimately there was hope that President Donald Trump would veto it. Both of these expectations appeared to be wrong.

What concerns the European Commission in particular is the impact of the decision on the controversial Nord Stream 2 project, which plans to get Russian gas directly to Germany through the Baltic Sea, bypassing the existing central and eastern European channels. The two companies most affected would be Shell and BP, two of the project’s main funders.

According to FAZ, the European Commission follows the developments with concern because US policy goes against EU interest, and because it divides the western alliance in its response to Russia.

The concern is particularly strong in Germany. Sigmar Gabriel is talking about extraterritorial sanctions that are illegal under international law.

Winand von Petersdorff notes in a comment in FAZ that the bill is consistent with an overarching goal of successive US administrations to block the Nord Stream 2 project. There are two reasons why the US is particularly focused on this pipeline: it weakens Poland and Ukraine, both of which have a strong lobby in Washington. And it benefits US exporters of liquefied gas. The draft legislation does not hide that part of the motivation is to create US jobs. Von Petersdorff notes that US legislators have rarely expressed with such clarity the view that they prioritize US commercial interests over its political partnership with the EU. There is still some residual hope that the final draft of the bill will be weaker than feared by the Europeans, but a presidential veto now seems unlikely.

EU to Hit Back

Politico reports Brussels Prepares to Bite Back at US Over Russia Sanctions.

The European Commission plans to hit back “within days” at the United States if possible new sanctions against Russia, which could be finalized by the end of the month, are agreed upon and leave European energy and other companies vulnerable to U.S. interference.

According to an internal note prepared for commissioners, and seen by POLITICO, Commission President Jean-Claude Juncker is particularly concerned about energy-related measures in the sanctions, which he believes could be used unfairly against European energy companies.

The biggest affected interest would be the mooted Nord Stream 2 gas pipeline from Russia to Germany, itself a source of political controversy in the EU, though the Commission note says “the impact would in reality be much wider.” Germany and Austria lashed out at the proposed sanctions in June, accusing the U.S. of politicizing its economic interest in selling shipments of liquefied natural gas to Europe, which would compete with projects like Nord Stream 2 or the Southern Gas Corridor from the Caspian.

The European Commission’s mitigation approach would be split into three strands:

  1. Seeking a public declaration from the U.S. administration, as President Barack Obama provided in 2014, that discretionary powers would not be used against European companies.
  2. Making use of the EU “Blocking Statute,” an EU regulation (Council Regulation 2771/96) that says no decision based on extraterritorial U.S. laws is enforceable in the EU.
  3. Possible World Trade Organization retaliatory measures.

How Trade Wars Start

Public declarations are useless, especially from Trump. He can and does change his mind in minutes.

Points two and three provide mechanisms for the start of huge counterproductive trade wars. The EU is already in a trade war mess with Russia and now the US is threatening to up the ante.

On top of that, Trump complains about the German trade surplus with the US.

For their part, the EU hypocrites have ridiculous crop subsidy supports and plans to punish the UK over Brexit.

Factotr in Trump’s ill-advised threats to raise tariffs on Chinese steel, and we have at hand a protectionist trade war tinder box in search of a match.

Rule of Nothing

As is typically the case, and explained by the “Rule of Nothing”, the best possible outcome is for nothing to happen.

To that end, Congress may go on recess before working out the differences between the House and the Senate versions.

I propose a permanent recess before more damage is done.

Correction

Reader Mark points out that BP is not on the list of Nord Stream 2 Shareholder and Financial Investors as cited by Eurointelligence. The companies are ENGIE, OMV, Shell, Uniper and Wintershall. Shell was cited by Eurointelligence.

Mike Mish Shedlock.