Germany is right to flout Russian sanctions

Germany has rallied Europe in support of Ukraine-related sanctions against Russia, but has been less diligent in their implementation. German leaders back these ineffectual measures primarily to humor the U.S. and are rightly unwilling to suffer too much for them. In a recent speech to her CDU party, which ended with a nine-minute standing ovation, Chancellor Angela Merkel said of the sanctions:
It was the right reaction, no matter how much we'd like to keep a good relationship with Russia. We must adhere to our principles.
How, then, to explain the Deutsche Bank internal review that found $10 billion worth of suspicious transactions in its Russian operation? These appear to have been meant to help Russian business people move their money overseas. President Vladimir Putin's friends, Arkady and Boris Rotenberg, who are under sanctions and should therefore be off limits to banks that operate in the U.S. and Europe, are said to be among the clients. Up to $1 billion of the deals -- including "mirror trades," where securities are bought in one market and sold in another to move money to a different jurisdiction -- took place in 2014 and 2015, when sanctions were in effect.
Yet Germany's regulators appear even less interested in this apparent transgression than Russia's. The Russian central bank has fined Deutsche about $5,000 for the trades, while the German authorities have so far ignored them. It's the U.S. Department of Justice that has been investigating the issue and is pressuring the German bank to do more digging around internally.
Similarly, there has been no German government response to reports that a Russian company 65 percent owned by the German engineering giant Siemens has been contracted to produce gas turbines for power plants in Crimea. These plants would overcome the annexed peninsula's energy dependence on Ukraine, but EU companies aren't supposed to supply energy equipment to Crimea. Technically, the contract is in compliance with sanctions, because the turbines would be supplied to Taman, a Russian town on the Sea of Azov. Russia would then move them to Crimea. Plus, Siemens Tekhnologii Gazovykh Turbin is a Russian-registered company, not a German one -- despite the Siemens-heavy ownership split.
These are transparent ruses. For a German com­pany to supply Crimea with equipment is not in line with the spirit of the sanctions.
Then there's the contract between state-controlled Russian natural gas supplier, Gazprom, and European companies, such as the German-based E.ON and BASF, to expand the Nord Stream pipeline into Germany. The deal was signed in September and, if implemented, will allow Russia to bypass Ukraine for most of its gas supplies to Europe.
Late last year, Russia was forced to cancel another pipeline project, South Stream, which would have carried Russian gas directly to Southern Europe across the Black Sea. Countries such as Bulgaria, Italy and Austria strongly advocated the project, hoping it would bring them cheaper energy and transit fees. Yet the  European Commission, whose energy department was at the time headed by a German national, found the project in violation of EU rules that don't allow a gas supplier to own pipelines or have the monopoly right to fill them -- both conditions of the Gazprom project. The Commission began an infringement procedure against Bulgaria to force a halt to construction.
Nord Stream 2 is similarly suspect. Gazprom originally was supposed to hold a 51 percent stake in the project's Swiss-registered operating company and was meant to be the sole supplier of the gas that would run through it. Now, mindful of possible problems with the EU, Gazprom intends to sell 1 percent of the project to one of its fellow shareholders, the French company Engie. In theory, it could let other Russian natural gas producers into the pipeline if required. Even so, the project runs counter to the spirit of the EU energy rules that seek to diversify the bloc's fuel sources. Gazprom already delivers 38 percent of the natural gas used in Germany. "There is a strong indication that Nord Stream 2 contradicts the aims of the agreed European policy," European Council President Donald Tusk recently said.
Southern European nations, denied their own Russian pipeline, are up in arms. Because of Nord Stream 2, Italy demanded a discussion before it could support an extension of Russian sanctions into next year. Italian Prime Minister Matteo Renzi repeated to the Financial Times what he told Merkel during that discussion:
So we say no to South Stream and then all of a sudden, quietly, we discover that there’s Nord Stream. Who decided? Is that an EU energy policy choice? At the table, when I raised it, only Germany and Holland defended it.

Bloomberg.com

Germany is right to flout Russian sanctions

Germany has rallied Europe in support of Ukraine-related sanctions against Russia, but has been less diligent in their implementation. German leaders back these ineffectual measures primarily to humor the U.S. and are rightly unwilling to suffer too much for them. In a recent speech to her CDU party, which ended with a nine-minute standing ovation, Chancellor Angela Merkel said of the sanctions: It was the right reaction, no matter how much wed like to keep a good relationship with Russia. We must adhere to our principles. How, then, to explain the Deutsche Bank internal review that found $10 billion worth of suspicious transactions in its Russian operation? These appear to have been meant to help Russian business people move their money overseas. President Vladimir Putins friends, Arkady and Boris Rotenberg, who are under sanctions and should therefore be off limits to banks that operate in the U.S. and Europe, are said to be among the clients. Up to $1 billion of the deals -- including mirror trades, where securities are bought in one market and sold in another to move money to a different jurisdiction -- took place in 2014 and 2015, when sanctions were in effect. Yet Germanys regulators appear even less interested in this apparent transgression than Russias. The Russian central bank has fined Deutsche about $5,000 for the trades, while the German authorities have so far ignored them. Its the U.S. Department of Justice that has been investigating the issue and is pressuring the German bank to do more digging around internally. Similarly, there has been no German government response to reports that a Russian company 65 percent owned by the German engineering giant Siemens has been contracted to produce gas turbines for power plants in Crimea. These plants would overcome the annexed peninsulas energy dependence on Ukraine, but EU companies arent supposed to supply energy equipment to Crimea. Technically, the contract is in compliance with sanctions, because the turbines would be supplied to Taman, a Russian town on the Sea of Azov. Russia would then move them to Crimea. Plus, Siemens Tekhnologii Gazovykh Turbin is a Russian-registered company, not a German one -- despite the Siemens-heavy ownership split. These are transparent ruses. For a German company to supply Crimea with equipment is not in line with the spirit of the sanctions. Then theres the contract between state-controlled Russian natural gas supplier, Gazprom, and European companies, such as the German-based E.ON and BASF, to expand the Nord Stream pipeline into Germany. The deal was signed in September and, if implemented, will allow Russia to bypass Ukraine for most of its gas supplies to Europe. Late last year, Russia was forced to cancel another pipeline project, South Stream, which would have carried Russian gas directly to Southern Europe across the Black Sea. Countries such as Bulgaria, Italy and Austria strongly advocated the project, hoping it would bring them cheaper energy and transit fees. Yet the European Commission, whose energy department was at the time headed by a German national, found the project in violation of EU rules that dont allow a gas supplier to own pipelines or have the monopoly right to fill them -- both conditions of the Gazprom project. The Commission began an infringement procedure against Bulgaria to force a halt to construction. Nord Stream 2 is similarly suspect. Gazprom originally was supposed to hold a 51 percent stake in the projects Swiss-registered operating company and was meant to be the sole supplier of the gas that would run through it. Now, mindful of possible problems with the EU, Gazprom intends to sell 1 percent of the project to one of its fellow shareholders, the French company Engie. In theory, it could let other Russian natural gas producers into the pipeline if required. Even so, the project runs counter to the spirit of the EU energy rules that seek to diversify the blocs fuel sources. Gazprom already delivers 38 percent of the natural gas used in Germany. There is a strong indication that Nord Stream 2 contradicts the aims of the agreed European policy, European Council President Donald Tusk recently said. Southern European nations, denied their own Russian pipeline, are up in arms. Because of Nord Stream 2, Italy demanded a discussion before it could support an extension of Russian sanctions into next year. Italian Prime Minister Matteo Renzi repeated to the Financial Times what he told Merkel during that discussion: So we say no to South Stream and then all of a sudden, quietly, we discover that theres Nord Stream. Who decided? Is that an EU energy policy choice? At the table, when I raised it, only Germany and Holland defended it. Bloomberg.com