Is Washington Using the Ukraine Crisis to Push Natural Gas Exports to Asia?
Since Russia began flexing its muscles in the Crimea and threatening Ukrainian sovereignty, policymakers in Washington, D.C., have called for some kind of action to punish President Vladimir Putin’s power grab.
There’s been talk of imposing economic sanctions against Russia, providing Ukraine with financial help, and even going after the foreign assets of Russian officials.
More recently, many Republicans have argued that one way to blunt Russia’s strength in the region, if not also Europe, would be to use gas—not the kind used in warfare, but the kind that supplies heat.
Natural gas is a major export of Russia’s, which was the world’s No. 1 producer of this natural resource until recently. It provides Ukraine with 60% of its natural gas supplies, and in a country where the winters are freezing, the importance of this trade relationship cannot be understated.
The Kremlin has been happy to use its natural gas exports to Ukraine as leverage whenever the former Soviet republic has gotten out of line in the eyes of Russian officials. Russia has even threatened to cut off this supply altogether during previous troubles between the two countries.
Russia also sells a lot of natural gas to Europe. In fact, its biggest customer is Germany, which buys more Russian natural gas than any other nation. Other European powers also purchase substantial amounts of the resource, including Italy, France and the United Kingdom.
This fact helps to explain why most European leaders have been muted in their discussion of the Ukrainian crisis. British Prime Minister David Cameron publicly stated that his government would not back the U.S. in imposing trade sanctions against Russia, possibly out of concern for how such a move would impact his country’s natural resource needs.
Nevertheless, Republicans on Capitol Hill have been hotly pushing the natural gas debate, arguing it is time for the U.S. to flex its own export muscles.
Thanks to the development of hydraulic fracturing (aka fracking), the U.S. these days is producing more natural gas than ever before—and has eclipsed Russia as the top producer globally.
This abundance has American companies wanting to sell their surpluses overseas. But because the U.S. has never before exported this resource, special plants and facilities need to be constructed at ports along the Gulf of Mexico, which require licenses from the federal government.
That’s why House Speaker John Boehner has been calling on the Obama administration to expedite the approval of said licenses. Doing so would put the U.S. in a position to start selling natural gas to Ukraine and Europe and cut into Russia’s power position vis-à-vis this vital trade, according to Boehner and other GOP lawmakers.
House Republicans aren’t the only ones talking gas in Washington. The Obama administration also has jumped on the bandwagon, according to Coral Davenport and Steven Erlanger of The New York Times, who wrote: “The crisis in Crimea is heralding the rise of a new era of American energy diplomacy, as the Obama administration tries to deploy the vast new supply of natural gas in the United States as a weapon to undercut the influence of the Russian president, Vladimir V. Putin, over Ukraine and Europe.”
However, neither Republicans nor the administration have said exactly how this export strategy would work. And that’s because it can’t.
It’s not like the U.S. has a trans-Atlantic pipeline ready to go for shipping natural gas to the other side of the world.
Or as Max Ehrenfreund noted at The Washington Post’s Wonkblog: The “gas would presumably get to Europe via the White House’s secret magical natural-gas teleportation machine, which can transport billions of cubic feet per day across the Atlantic using nothing but fairy dust and smiles.”
There is a way to sell and ship natural gas from U.S. drilling fields to other nations. But the process is expensive, complex and time-consuming—and in no way can it be done in a matter of weeks or even months to help Ukrainians.
To export natural gas, companies first have to convert it into a liquid to facilitate transporting it. Once it becomes Liquefied Natural Gas (LNG), it can be loaded onto special tankers and shipped across the Atlantic (or the Pacific, more on this in a moment).
But once it gets delivered to some far-flung port, LNG has to be reconverted into a gas to make it usable. That means the country receiving American LNG exports has to have a regasification plant.
Ukraine currently has zero regasification terminals (there’s talk of building one in the port city of Yuzhny, near Odessa, but it’s just talk).
So even if the U.S. had ships loaded with LNG ready to depart, which it doesn’t, there wouldn’t be any point in sending it to Ukraine because it couldn’t do anything with it.
So why is Boehner, not to mention Exxon Mobil, bringing up LNG export licenses in the Ukraine debate? Because there’s money to be made in Asia, where demand for LNG is very high.
Japan has been especially hungry for LNG since the 2011 earthquake and tsunami that devastated its nuclear power industry, forcing it to rely more on natural gas imports.
Asia’s demand for LNG is the real reason why Washington wants to ramp up U.S. exports, leaving Ukraine still at the mercy of Russia’s natural gas powerhouse, Gazprom.
To Learn More:
U.S. Hopes Boom in Natural Gas Can Curb Putin (by Coral Davenport and Steven Erlanger, New York Times)
John Boehner’s Misleading Argument on Natural Gas and Ukraine (by Max Ehrenfreund, Washington Post)
Ukraine Seen Building Support for U.S. Natural Gas Export (by Brian Wingfield and Christine Buurma, Bloomberg)
U.S. Senator Launches Bill to Go Slow on LNG Exports Despite Ukraine (by Timothy Gardner, Reuters)
World LNG Report - 2013 Edition (International Gas Union)
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