Dr Robert M Cutler Energy Security

U.S. Passes New Geopolitical Energy Legislation

In the rush of activity at the end of last year, in preparation for adjournment, the U.S. Congress approved and President Donald Trump signed legislation including provisions for American foreign economic policy, and energy policy in particular.

The one that has got perhaps more attention was the Eastern Mediterranean Security and Energy Partnership Act of 2019, which was incorporated into, and passed as a part of, the Further Consolidated Appropriations Act 2020. This bill is designed to give support to the emerging political entente among Cyprus, Greece, and Israel. It is not limited to questions of energy development, although these figure significantly in the legislation.

The Act supports the completion of the Trans-Adriatic Pipeline (TAP) and the development of the East Mediterranean pipeline as well as the development of terminals for liquefied natural gas (LNG) across the region. The goal is to diversify regional energy needs away from the Russian Federation. However, the bill does not specifically include the appropriation of any funds for such a purpose.

This bill requires the creation of a United States-Eastern Mediterranean Energy Center for the purpose of promoting the involvement of American business and investment in energy exploration and development in the region. The Center, which would have to be based in the United States, would have a wide scope, including institutions of higher education and the private sector, in order to promote technological innovation across a range of pertinent applied sciences.

Although this is not mentioned in the legislation, the Center could presumably cooperate with the Eastern Mediterranean Gas Forum, in which Egyptian, Italian, and Jordanian officials have participated alonside the Cyprus-Greece-Israel triangle. France has just asked to join the Forum in January, while the U.S. has requested status as a permanent observer.

Whatever form that the Forum takes, Egypt will acquire a central position on the regional energy map. Israel started supplying gas to Jordan in January for domestic consumption, just as Egypt has begun to import it for possible re-export as LNG to Europe or Asia. Participants see it as the catalyst for a regional gas market, although this will be slow to develop. The Forum gives itself the vocation to become a genuine international institution, and its secretariat is already established in Cairo.

The other legislation of interest that was passed in December is the European Energy Security and Diversification Act of 2019. This also has as its goal to reduce the “energy dependence [used] for undue political influence, such as the Russian Federation”. As the name of the legislation indicates (passed as Title XX of the Further Consolidated Appropriations Act 2020), it targets European countries; but also, it specifically adds “Eurasian” countries. There is no list that limits, by name, which countries are or are not Eurasian.

The language of this bill is very clearly targets for support, the Projects of Common Interest (PCIs) identified by the European Commission. It provides for diplomatic and political support, early-stage project support, and late-stage project support. (The meanings of these terms, for the purpose of the bill, are laid out in the bill itself.) In addition the legislation authorizes and appropriates funds for those purposes, through the Trade and Development Agency and the Countering Russian Influence Fund.

These provisions mean that U.S. support becomes available for natural gas projects of the Southern Gas Corridor, including the Trans-Caspian Gas Pipeline (which the EU is already officially supporting) and arguably also the White Stream pipeline.  The U.S. International Development Finance Corporation (DFC), which is the new institution replacing the old Overseas Private Investment Corporation (OPIC), is also mentioned specifically in the bill.

The purpose this European (and Eurasian) energy security bill is to enhance commercial opportunities for American industries providing goods and services in the energy and associated sectors. Interestingly, it does not have the explicitly political-strategic component that is a part of the bill on East Mediterranean energy security.

The latter bill, in turn, does not specify government support for increase commercial opportunities. This could be introduced in subsequent legislation, but also it is clear that the flagship project that it mentions, the East Mediterranean pipeline for natural gas, will remain on the drawing-boards still for years if not decades to come. That is because all observers acknowledge that it is simply too long, too deep, and too expensive to be commercially competitive in the European market with other sources of natural gas.

The difference between the two bills is clear from the titles, where the East Mediterranean one concerns “security and energy partnership” (note that security is placed ahead of energy), whereas the European (and Eurasian) one concerns “energy security and diversification” (note that energy is the only concern). They represent an American initiative to promote energy development in the regions concerned, and limited (even in the East Mediterranean case) to the goal of enhancing commercial opportunities for American business. This represents an official reversal of the abandonment of interest that characterized the preceding Administration in Washington.

Given the divisions within the European Union and Germany’s plodding insistence on the connection to Russia, the U.S. sanctions against the NordStream Two pipeline that were adopted at the end of last year paradoxically represent one of Europe’s last hopes against gas overdependence on single sources. Likewise, the just-mentioned European Energy Security and Diversification Act offers a possibility to source gas from the Caspian Sea region beyond Azerbaijan, in Central Asia.

The new European Commission (EC) looks like forsaking “diversification” for “saturation”, according to which concept, sufficient quantities of Russian gas would make further diversification unnecessary. Such a policy would mean abandoning the strategic dimensions connected with new supply sources, even if they are economically viable and offer positive price competition. This is difficult to understand in light of the norm for a self-proclaimed new “geopolitical Commission” for the EU.

In the case of TCP/White Stream, such an attitude would ignore the strategic significance of bringing Central Asia closer to the Europe. It would renounce the unique and indispensable chances for improving the situation of Eastern Partnership countries, notably for strengthening of the independence of Azerbaijan and Georgia, and for supplying Armenia with Turkmen gas through Georgia: not to mention the significance of Romania’s participation the White Stream project for the Balkans and Eastern Europe.

Some in the EU criticize the domestic political system in Turkmenistan, saying that this presents substantial divergence from the EU’s core values. This is presented as an additional justification against the TCGP; however, such arguments are never used against Russian gas.

A number of developments on the American side, however, suggest that diversification has now become a higher priority for the U.S. First, the TurkStream issue was mentioned at the level of the Under Secretary of State for Political Affairs David Hale. Second, the Trans-Caspian gas link was mentioned in President Trump’s communications with Presidents Aliyev and Berdimuhamedov. Third, the U.S. is apparently working on the Strategy document for Central Asia. And fourth, as mentioned, the European Energy Security and Diversification Act of 2019 was passed and signed in December 2019.

Photo via Wikimedia Commons

Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada.

Robert M. Cutler
Robert M. Cutler earned his doctorate at The University of Michigan after receiving two Bachelor's degrees from the Massachusetts Institute of Technology. After over a dozen years in leading universities in Canada, France, Russia, Switzerland and the United States, he expanded into policy analysis and consulting as an Energy Security and Geo-economics Specialist. He has over 20 years' experience in international energy diplomacy: advising energy firms, governments, international institutions and NGOs; framing policy and research issues and leading teams to address them, and producing briefings and analytical bulletins. He has published scores of refereed academic articles, policy articles and book chapters. He is Fellow, Canadian Energy Research Institute; Fellow, Canadian Global Affairs Institute; and Practitioner Member, Waterloo Institute for Complexity and Innovation, University of Waterloo. He is fluent in English, French and Russian. He can be reached at rmc@alum.mit.edu and tweets from @RobertMCutler.