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US and Russia Competing for European Energy Supply

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WASHINGTON, DC – March 26, 2019

The Trump administration is working on a new push to help American companies compete in the race to build the next generation of nuclear power plants around the world — a competition the U.S. is currently losing.

In doing so, the administration also aims to push back on the growing dominance of Russia and China in the space, preventing them from expanding their international influence by forging long-lasting nuclear ties with foreign powers.

It is in this context that H.R. 1616, the European Energy Security and Diversification Act which was passed by the House on March 25 with a strong bipartisan vote of 391-24, should be considered.

The bill, introduced by Rep. Adam Kinzinger, R-Channahon, and Rep. Bill Keating, D-Massachusetts, will reportedly help the U.S. and European countries attain “global energy security” while encouraging diversification of energy sources and supply routes.

“I’m glad to see such swift action on the European Energy Security and Diversification Act, and proud to join my colleagues in voting on its passage today. The Russian Federation, led by Vladimir Putin, has long used energy as a weapon to coerce and manipulate European countries. As American energy production continues to rise, we have a prime opportunity to support our allies and provide an alternative to the stronghold Russia employs over energy sources. With U.S. support, we can stop Putin from threatening the security of our European partners and further help our allies increase their own energy security to better defend against these bad actors. This bipartisan, bicameral bill is a major step forward to increase global energy security, and I’m grateful to my colleagues in the House and Senate for their efforts to move this legislation along,”  Congressman Adam Kinzinger (IL-16), who serves as the Ranking Member of the House Foreign Affairs Subcommittee on Europe, Eurasia, Energy, and the Environment, said in his statement.

In addition to serving as the Ranking Member of the House Foreign Affairs Subcommittee on Europe, Eurasia, Energy, and the Environment, Congressman Kinzinger also serves on the House Energy and Commerce Committee, where he has long advocated for stronger energy independence on a local and international level.

According to Kinzinger, this bill provides new tools for the U.S. to combat “malignant Russian influence” in the energy sector in Europe. It also aims at creating economic opportunities for the US, internally and internationally.

The new piece of legislation allows the U.S. Trade and Development Agency, as well as other agencies, to support U.S. private sector investment in energy projects in Central and Eastern Europe starting from Fiscal Year 2019 until 2023.

The projects would primarily be focused on natural gas infrastructure, including storage facilities for liquefied natural gas imports and reverse flow capacity.

For this purpose, it is proposed to allocate funding in the amount of not more than $1 billion to support private investment in projects that contribute to the diversification of energy sources, as well as energy transportation systems in the countries of Central and Eastern Europe.

The bill also provides for the allocation of $5 million to the United States Agency for Trade and Development to assist European countries and to recruit additional staff to deal with these issues.

A Senate companion bill to H.R. 1616 was also introduced last week by Senators Ron Johnson (R-WI), Chris Murphy (D-CT), Cory Gardner (R-CO), Jeanne Shaheen (D-NH), Marco Rubio (R-FL), and Ben Cardin (D-MD).

 For the document to enter into force, it must be approved by the Senate and signed by the President.

Earlier, at the CERAWeek conference in Houston, Secretary of State Mike Pompeo said that Washington did not want American allies in Europe to be dependent on natural gas supplies from Russia as a result of the construction of the Nord Stream 2 pipeline.

He noted that the U.S. intends to "help its friends to ensure the diversification" of energy supplies. In this regard, the State Secretary noted the role of private companies in increasing the export of liquefied natural gas to Poland.

Earlier, in mid-September, Secretary of Energy Rick Perry publicly stated that the U.S. intends to view energy as a means of pressure to punish countries for "uncivilized" behavior. According to him, "the U.S. has the right today to send a signal to countries that do not behave like a civilized member of the world community that they will be punished. There are many ways to do this. The energy industry is one of them."

 Such a change in rhetoric to a more militant one is due to the need to justify the more aggressive political mechanisms of expansion. Due to the increased capabilities of the BRICS and SCO countries, the spectrum of possibilities for the U.S. has significantly narrowed. There is no longer any possibility of conducting a fuzzy, unconcentrated expansion since the resistance of vassals has made the activity of competitors ominously dangerous.

Now it is possible to push the economic decisions needed by the U.S. only by very strong pressure. In this situation, energy becomes a weapon, along with military, financial, informational and reconnaissance-diplomatic influence. Such an addition is required by the U.S. in order to strengthen the limited potential of the listed instruments.

The U.S. openly admitted that they no longer intend to pretend to be peacemakers and henceforth they will establish their dominance by all available means, including energy blackmail.

In reality, the U.S. always put politics at the top. They only talk about advocating free trade and business but in fact only support this freedom when it does not interfere. As for the deterrence of Russia, it is global in nature and is not isolated from individual sectors. All that is most promising for Russia and Europe, the U.S. put at risk.

Now the struggle for the energy market in Europe is breaking out with a new force. And American corporations are clearly at a disadvantage compared to Russia. The thing is that for the time being it is more profitable for Europeans to buy Russian gas than American gas.

Certainly, there are conditions under which liquefied gas from the U.S. will become more desirable on the European market. First is the size of oil prices, which are still oriented to gas prices. The higher the price of oil and energy in general, the more likely it is that part of the liquefied natural gas – not only American but also American – will be able to find buyers in Europe.

It is also possible that due to the economic turmoil of Asia, it will not be necessary to have as much gas as now, and this gas will flow to Europe. Then there will be a real competition between liquefied natural gas and pipeline, although for now, the pipeline is much cheaper. Now, the bulk of U.S. gas goes to Asia, where prices are one and a half times higher than European prices, and since the beginning of American LNG exports through trading companies, only 11% of the total volume of US. gas exports has gone to Europe.

Of course, Europe also has political considerations for diversifying the gas market. Russian natural gas supplies are unreliable: They were interrupted or reduced in 2006, 2009, 2014, and early 2015 by a political decision of the Russian leadership, and not for some technical or financial reasons. Russia is considered unpredictable and is indeed capable of using gas supplies as a weapon of political pressure. It is this idea that is developed by the representative of the U.S. energy lobby. Putting forward energy security considerations, they demand the cessation of the construction of Nord Stream 2.

“This gas pipeline is dangerous because it creates a situation where half of Europe can largely become dependent on one gas supplier," says Brian Whitmore, head of the Russian program at the European Policy Analysis Center in Washington. Nord Stream 2 will make Europe more vulnerable for blackmail from Moscow," he adds.

In addition, in his opinion, Nord Stream 2 also undermines competition in the European energy market, which - in a strictly economic sense - is bad for energy consumers themselves.

Whitmore explains the ambivalent position of Germany on Nord Stream 2: “Of course, there are interested people in Germany, including former Chancellor Gerhardt Schroeder, who benefit from this construction. German Industrialists are also concerned about their continued access to sustainable natural gas supplies, and they now see Russian gas as the cheapest and most reliable option. But this is a risky bet because it counts on the fact that Russia will not abuse its dominant position as soon as it displaces other competitors to the sidelines."

“As more US  LNG enters the market, a clearer alternative to Russian gas will emerge. This will take time, as infrastructure is needed, the same LNG terminals. In the short term, due to the cost of shipping and the creation of this infrastructure, this makes the US LNG more expensive. But it will become more and more competitive. In the medium term, the conditions will change precisely because of LNG, and a more flexible and dynamic global natural gas market will emerge that does not depend on pipeline routes and long-term bilateral contracts,” the expert believes.

Nevertheless, based on current prices combined with other factors, “Russian gas beats American in terms of economic indicators - it is cheaper, so most experts expect that Russia's share in gas supplies to the European Union will not just remain at the current 33 percent until 2040 but it may increase almost to 50 percent.”

In addition, experts say, Russian gas will remain in Europe anyway: “No one complains about dependence on Russian oil, coal or uranium, although their share in Europe is about the same as gas — that is, about a third of consumption. Simply, all EU members have the opportunity to receive these products not only from Russia. If European countries are organizing infrastructure, if there are LNG terminals, pipelines across borders, allowing to quickly transfer gas flows to any point of the European Union, then everyone will forget that Russian gas is a political weapon, and cheap Russian gas will be sold to Europe as oil, uranium and coal, but still be sold."

Author: USA Really