US Aggressive Subsidies Package Amid The Crisis Hurts Europe And Could Divide West

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Written by Uriel Araujo, researcher with a focus on international and ethnic conflicts

Jakob Hanke and Barbara Moens, writing for Politico, argue that Europe’s industry is “on emergency footing” and that this is due to the rising energy and gas prices but also Washington’s new subsidies for American companies. US President Joe Biden, under the Inflation Reduction Act, announced in August, is now allocating $369 billion (in industrial subsidies) to the green industry.

Former US vice president Al Gore this week described the Act as “the most significant climate legislation ever passed by any country”. Not everyone is so impressed, though. The catch is that this new piece of legislation requires that much of the tech (such as electric cars’s batteries and so on) be made in North America. This of course has terrible implications for Europe.

The issue is so serious that French President Emmanuel Macron, who had a meeting with Joe Biden at the White House on Thursday, warned his US counterpart the matter could “fragment the West”, while describing the subsidies as “hyper aggressive” towards European companies.

Although Gore earlier this week urged Europeans to “not fight” the US on this issue but rather to “join” it, there is indeed an ongoing trade spat between Washington and the EU.

For one thing, European officials have accused the US of profiting from the current Russo-Ukrainian conflict, while the Europeans themselves suffer the most. The US liquefied natural gas (LNG) industry is certainly enjoying massive gains while the European continent is preparing for the coming winter and buying lots of it – while LNG shipping rates are skyrocketing.

It’s a well known fact that Washington has a record of betraying its most devoted allies. European leaders certainly have not forgotten then assistant US secretary of state, Victoria Nuland, disdainful words about the EU in the 2014 leaked phone call, when she used the F-word. If that leak exposed a certain Washington attitude  towards its European allies, such an  attitude does not seem to have changed much.

In the difficult situation now faced by Europe, amid the escalation of military conflict in Eurasia, geopolitical and geoeconomic issues are intertwined. Whether one likes or not Vladimir Putin and its latest decisions, the hard truth is that the ongoing conflict in Ukraine actually started 8 years ago, with a long-ignored humanitarian disaster in Donbass and repeated Ukrainian offensives against the civilian population there. This conflict in turn has its roots in the US-led NATO’s enlargement and encirclement policies against Russia. However, beyond the geopolitical-military question there is also a geoeconomic dispute and an energy angle.

In December 2020 I wrote on this angle and on how Washington has always wanted to have Europeans buying plenty of American LNG (which is more expensive, in fact), even though Russia is at the “doorstep” of Europe. The US has thus always actively worked against any Russian-European gas cooperation through a series of legislative measures and sanctions – and here, as often happens, government corruption and private interests intertwine with US geopolitics and geoeconomics.

Although the current conflict in Ukraine escalated the dramatic rise in European energy prices, this rise started before the end of 2020 – and it is a well known fact that it could have been at least partly avoided if Nord Stream 2 had not been delayed.

The Nord Stream pipeline however is gone for good, possibly as the result of an act of sabotage, something which Biden himself promised would happen (on January 7). I’ve written on how post-Nord Stream Europe and the UK now face inflation,  deindustrialization and a possible depression. So, this is the general context one should keep in mind when looking at the current subsidy and trade war that seems to be unfolding now.

The aforementioned Politico’s journalists write that, according to two senior EU officials, the EU is preparing a huge subsidy initiative to counter  the American one, in an attempt to prevent its industry from being “wiped out by American rivals.” EU industry chief Thierry Breton went so far as to say that Biden’s newest subsidy package actually poses an “existential challenge” to the European economy and industry. One EU diplomat is even quoted by the aforementioned Politico piece as saying that the Inflation Reduction Act “has changed everything” to the point of making some voices in Europe ask “is Washington DC still our ally or not?”. This in fact might be one the most fundamental geopolitical questions for the current century.

It remains to be seen how European leaders will respond to yet another American aggression. While a new Cold War is taking place, emerging powers around the world are increasingly building on multi-alignment, non-alignment and multilateralism, pursuing mutually beneficial relations with Moscow and Beijing while balancing their relationship with Washington, as exemplified by the recent Egyptian Russian-built nuclear plant. In Europe, however, for a long time Hungary’s Viktor Orban had been the lone voice of reason on this matter.

With the post-Nord Stream reality, the coming winter, sanctions backfiring, the so-called “Ukraine’s fatigue” and the energy and economy crises, however, things might be changing. This would be an opportunity for Europe to finally assert its sovereignty. The problem is that the continent is still heavily dependent on Washington for security and committed to NATO expanding structures – and this is the core of the Atlantic partnership. Breaking such a cycle would not be easy, obviously. But all the signs of a declining relationship are there.

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