March 4, 2014

U.S. Energy Department Has A Weapon To Use Against Russia

By: Kaavya Ramesh

As the drums of war beat on in Crimea, we should consider the central role of energy security.

Energy has long been a strategic asset for Russia – tracing back through history, the Nobel Brothers’ capitalization on oil in Baku, Azerbaijan in the nineteenth century provided a counterweight to the dominance of Standard Oil. This trend largely continued throughout the next hundred years, and today, Gazprom plays a vital role in both Putin’s geopolitical maneuvering and in Russia’s economy.

Consider the last two major crises between Russia and Ukraine. In 2006, Moscow claimed that Kiev had not been paying for Russian natural gas and had been using gas intended for European markets for domestic purposes instead. The conflict intensified, ultimately resulting in Russia cutting off gas supplies. The cut-off deprived both Ukraine and more than a dozen European countries of stable energy.

In 2009, Russian gas giant Gazprom refused to conclude a supply contract with Ukrainian gas company Naftogaz, claiming that Naftogaz had not paid its debts from prior gas contracts. The result, once again, was a Russian gas cutoff that lasted thirteen days and deprived Ukraine and many other European countries of vital natural gas.

This crisis has some of its roots in Russian natural gas supplies as well. A substantial portion of Putin’s aid package to the Yanukovich government that fueled the protests was comprised of lower natural gas rates (a price discount which Moscow is now canceling). In fact, many former Soviet countries have been hamstrung by dependence on Russian gas. Belarus, Lithuania, Moldova, and Azerbaijan have all faced the specter of a natural gas cutoff when toying with the idea of more pro-European Union policies over the last several years. Western Europe is affected as well. Europe’s supply of gas, in large part, comes from pipelines through the East and North whose origin is Russia. The implication is clear – gas, for Moscow, is not merely an economic commodity. It is also a geopolitical weapon.

One way Washington could counter the force of this weapon is to use its own – natural gas produced by the recent shale boom. Currently, U.S. companies need the Department of Energy’s permission in order to export liquefied natural gas (LNG) to countries that do not have a free trade agreement (FTA) with the U.S., such as European Union nations. Proposals for LNG exports also need to pass a Federal Energy Regulatory Commission (FERC) environmental and safety assessment. The Department of Energy, though, has only approved six applications since 2010, and it is currently reviewing at least 24, many of which have been in the docket for review for years.

This unnecessarily bureaucratic process for exporting natural gas only solidifies the Russian gas weapon. If Moscow doesn’t have to compete with another major supplier to Europe, it is free to threaten gas cutoffs whenever European countries do not play ball. It is time we fight fire with fire, and use one of the best tools for aiding our allies at our disposal – natural gas.

 Follow Kaavya Ramesh on Twitter. Natural gas drilling site image courtesy of Big Stock Photo.