My Turn: How to respond to Putin? Increase energy exports
America needs to use its energy resources as a strategic weapon in retaliation for Russia’s aggression.
But oil and natural gas are not the only tools we can use. Coal and nuclear technology can accomplish a lot, so we shouldn’t let partisan politics interfere with energy strategy.
Because of the shale revolution, America has become a global energy powerhouse. The dramatic resurgence in U.S. oil and natural gas production provides the perfect foil for countering Russian President Vladimir Putin’s ambitions. Implicit in any U.S. strategy designed to break Russia’s political grip on Europe is for the government to accelerate U.S. energy exports.
Russia’s economy would collapse if its energy business in Europe failed. More than 90 percent of the natural gas that Russia sells to other countries and 80 percent of its oil exports go to Europe. Russia’s reliance on its energy sales is so great that they account for half the revenue needed to meet Russia’s budget.
In this respect, not much has changed since the late 1980s, when the Soviet Union imploded after Saudi Arabia ramped up its oil production by 3 million barrels a day, causing a sharp decline in world oil prices that left the Kremlin without enough revenue to support Russia’s restive population.
Today, the United States is in a position to use its own energy resources for geopolitical purposes. A strong response would have immediate impact. If production of domestic oil, natural gas and coal were to be ramped up and tapped for export, it could hobble Russia, energize the U.S. economy, and strengthen our position in the world.
For starters, reducing Europe’s dependence on Russia’s natural gas is crucial. This is particularly important for countries that currently rely on Russia for 70 to 100 percent of their gas. What’s more, half of that gas is transported by pipeline through Ukraine.
Although the United States is now the world’s biggest producer of natural gas, thanks to the shale revolution, our ability to export gas is limited. Six terminals to export liquefied natural gas have been approved, and 20 applications are pending. But even if every application were approved, it would be another decade before meaningful volumes of LNG will be exported. In fact, the first of these LNG export shipments will not be ready until late 2015 at the earliest and those volumes are already under contract for sale elsewhere in the world. No matter, speeding up approval of the remaining applications would be a signal to Russia that the United States intends to take whatever steps are necessary to improve its position in the global energy market and that Russia’s advantage will be short-lived.
Removing the ban on U.S. exports of crude oil would help our European allies and sustain the boom in domestic oil production that has created jobs and revenue. But lifting the ban won’t do much to foster U.S. interests unless impediments to oil and gas production on public lands are removed. Proposals to open up public lands to hydraulic fracturing for shale gas and “tight oil” are still running into resistance from environmental groups who claim that renewable energy resources and efficiency are enough to meet energy needs. The environmental community ought to recognize that increased energy production will be indispensable if the U.S. hopes to boost the global supply of oil and natural gas.
Coal exports to Europe can be ramped up relatively quickly and at a competitive cost. Notwithstanding criticism from its detractors, coal can be substituted for natural gas in electricity production. The U.S. currently exports around 100 million tons of coal a year, but that amount could be increased if certain environmental restrictions on domestic coal mining were waived or dropped altogether.
Coal is America’s energy mainstay. Increasing its production for export to Europe would give some momentum to the push back against Russian ambitions.
U.S. nuclear technology also has the potential to be used as an effective economic tool. The U.S. Commerce Department estimates that the global market in nuclear power plant components and equipment will be worth as much as $740 billion in this decade. Russia is currently building 37 percent of the world’s reactors, a share that’s larger than that of any other country. China is next with 28 percent of the global market. The United States has only 7 percent of the market.
Streamlining the permitting process for U.S. nuclear companies would help boost U.S. market share. Currently companies must obtain approval to export nuclear technology from three agencies – in addition to the Nuclear Regulatory Commission. This licensing process takes up to a year or more, whereas in other countries permits are issued in a month or less.
Because Russia can’t hold a candle to the United States in nuclear technology, any clear sign that the U.S. intends to boost its exports will reach Moscow. Countries throughout the world have reactors under construction or planned, and even if some of them order reactors designed in the U.S. instead of Russia, Putin will get the message that any further aggression against Ukraine will come with a price.
The case for increased exports of U.S. energy supplies and technology is so overwhelming that everything possible should be done to remove any hurdles. President Obama has a dramatic opportunity to turn the Ukraine crisis to our long-term advantage.
(V.K. Mathur, is professor emeritus in the Department of Chemical Engineering at the University of New Hampshire.)