Gas Diplomacy

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gas pumpBy Chris Faulkner – The United States produces more natural gas than any nation in the world. Yet Russia leads the world in natural-gas exports, using energy to advance its domestic repression and its foreign aggression.

It might be tempting to think that as the United States escalates its sanctions on Russia, President Obama should consider penalizing Vladimir Putin’s energy sector.


But such sanctions could backfire, undermining America’s long-term economic opportunities and foreign policy goals.

Obama’s reluctance to tighten the screws on the Kremlin’s oil and gas companies has been widely attributed to concerns about the impact on Europe’s economic recovery, given the region’s reliance on Russian energy. But it’s also worth noting that if the Kremlin can’t peddle its ample energy to Europe, it would likely to pursue alternative markets in Brazil, India and China — its three peers in the so-called “BRIC” block.

Giving Russia greater incentive to penetrate these developing energy markets would be profoundly short-sighted. BRIC countries represent an incredible economic opportunity for whichever country builds export relationships there first. And given its bountiful supply of natural gas, the United States is perfectly positioned to win in these emerging markets.

Forecasts project demand for energy in BRIC nations escalating quickly. In 2005, these countries accounted for 27 percent of the world’s overall demand for primary energy — but by 2025, that will rise to about 38 percent, according to the U.S. Energy Information Administration. In particular, both China and India are already struggling to meet the needs of their country, a problem that will only become more pronounced as they become wealthier.

In China, the energy situation has already flirted with crisis. Heavy reliance on coal, as well as a surge in automobile use, have resulted in “airpocalypses” — days when dense pollution shrouds large regions. The smog has closed highways, cut life expectancies, hospitalized thousands of children, and led to massive public discontent.

India has also experienced energy catastrophes. In the summer of 2012, short supply of energy resulted in historic blackouts — the lights went out for more than 700 million people in July 2012, impacting all but eight of India’s 28 states and prompting concerns about massive unrest.

If the United States began sending its liquefied natural gas (LNG) abroad, it could alleviate the growing problems in both China and India. It would also make the air cleaner, as natural gas produces far fewer emissions than coal and oil. Best of all, American natural gas could offer a solution to the energy problems in China and India without hindering the life-changing economic progress that has lifted millions out of hand-to-mouth poverty in the developing world.

Though the potential is huge, the United States must take urgent action to ensure it beats out international competitors. And while the United States has abundant energy resources, it woefully lacks the infrastructure to begin large-scale exports of natural gas. A ridiculous amount of red tape awaits anyone seeking to invest in American energy by building these much-needed LNG-export facilities.

The Department of Energy subjects permit applications to extensive review. In the last three years, though 31 separate proposals for LNG export facilities were submitted to the DOE, only one was green-lighted, while six received merely conditional approval. The rest have languished. Furthermore, federal approval just begins the process, and constructing the facilities will take years, too. Even if approval were expedited, American LNG wouldn’t make it to foreign shores until 2015 at the very earliest.

Russian regulators have no qualms about barreling forward, and with their economy in a rut, they want to grow their global share in the energy marketplace even further. Already, the Kremlin is trying to negotiate 20-year contracts to supply energy to Europe. And since the West began imposing sanctions, Russia and China have only strengthened their economic relationship.

Sanctioning Russian energy may cause some short-term headaches for Putin and his oligarchic domestic allies, but it also ignites the Kremlin’s competitive ire, pushing it to expand into alternative markets in the developing world. But Putin has already used energy to bully Europe. Giving him the opportunity and incentive to wreak chaos elsewhere is a terrible idea.

Energy plays an increasingly critical role in the international order, and LNG makes an adept ambassador for American foreign policy. Rather than focusing on petty sanctions, the United States should look at the big picture, preparing so we can best use our energy as a diplomatic resource.

Chris Faulkner is chief executive officer of Breitling Energy Corporation and author of the upcoming book The Fracking Truth.