The normally cautious German chancellor went out of her way to back foreign minister Sigmar Gabriel's strongly worded criticism of the US proposals. Her spokesman said she had "the same level of concern" expressed with "the same vehemence".
Ms Merkel's intervention on Friday shows her willingness to go public with criticism of the US after President Donald Trump's outspoken attacks on Germany over defence, trade and international co-operation.
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She appears increasingly ready to risk provoking Mr Trump and his political allies, although she insists she remains strongly committed to the transatlantic alliance because she believes vital German and European interests are at stake.
The prospect that the bilateral tension might overshadow next month's G20 summit in Hamburg no longer seems to be holding back the veteran German chancellor, Europe's most powerful politician.
Ms Merkel's latest broadside is aimed at a bipartisan Senate move to toughen sanctions on Russia over the Kremlin's aggression in Ukraine, nuclear weapons deployment, and alleged interference in the US presidential election. Much of the bill, which is also expected to pass through the House of Representatives, codifies existing sanctions to make it harder for them to be relaxed, amid fears earlier this year that Mr Trump might take a pro-Moscow line.
But the draft includes new measures targeting Moscow's controversial Nord Stream 2 pipeline to the EU, in which German and Austrian companies are investing. As well as hitting Russian entities, the sanctions would cover foreign groups supporting Russian "gas export pipelines".
Berlin has condemned the plan for interfering in European energy affairs and threatening "illegal extraterritorial sanctions against European companies that participate in the development of European energy supply".
Germany is incensed that the bill expands the justification for sanctions beyond Russia's aggression in Ukraine — the original basis of a joint US-EU sanctions policy carefully crafted by Ms Merkel and Mr Trump's predecessor Barack Obama. While Berlin shares American concerns about Russian electoral meddling, it wants to keep Ukraine-linked sanctions focused on Ukraine to encourage Russian president Vladimir Putin to ease the crisis.
German officials are also angry that the draft explicitly calls on the US administration to "prioritise" American energy exports, "create American jobs", and "strengthen" US foreign policy. They argue that this runs counter to the co-operative current joint sanctions regime, as the US is putting its own economic interests above those of its EU allies, even in European energy.
Separately, Berlin rejected a suggestion from US secretary of state Rex Tillerson that the Ukraine crisis might be solved by the Kremlin acting outside the Minsk Agreement — the unimplemented peace deal agreed in 2015 with the support of Russia, Ukraine, France and Germany in the so-called Normandy Format. German officials said Ms Merkel stood by Minsk and by the Normandy format.
Ms Merkel's support for Mr Gabriel in criticising the US does not seem to imply any softening in her long-held scepticism over the Nord Stream 2 project per se. While Mr Gabriel champions the scheme on economic grounds, she has kept her distance in the face of intense of opposition from Poland and other eastern European allies.