U.S. Can Free Europe from Putin's Gas Grip
The collapse of Moscow's ally in Kiev, Viktor Yanukovych, presents the U.S. with an opportunity to help its friends and allies. But after the celebration subsides over Yanukovych's fall from power, Washington and its allies have much to do in order to turn this opportunity into sustained advantage. Don't expect Russian President Vladimir Putin to quietly accept defeat.
Yanukovych did not fall under Putin's sway because of his charm; Russia still wields real power over Central Europe. Moscow's weapon of first resort is no longer the former KGB, but energy supplies -- especially natural gas. Even though Ukraine gets half of its electric power supply from nuclear reactors, the country is dependent on imported natural gas for other uses. It produces 30 percent of the gas it consumes domestically; the rest comes via pipelines from Russia.
The political and economic leverage this gives Moscow is not just theoretical; Putin has applied it repeatedly. The most recent major dispute occurred in 2009, when Russia cut off gas supplies for nearly three weeks. Officially, the dispute was over the price of gas and outstanding payments. Unofficially, Moscow was seeking to undermine leaders in Ukraine who had reoriented the nation toward the West after the 2004 Orange Revolution.
The shutdown didn't just affect Ukraine. Many U.S. allies unfortunately must consume Russian gas as well, much of which flows through pipelines in Ukraine. The shutoff impacted NATO allies like Poland and the Czech Republic.
Not all of Moscow's levers are as blunt as a fuel cutoff in the dead of winter. When he was the leftwing chancellor of Germany, Gerhard Schroder joined with Russia in an attempt to rally an international coalition against the U.S. and its allies over Iraq. He also pushed hard for a new $4.7 billion gas pipeline that made Germany more dependent on Russian gas, while simultaneously allowing Putin to isolate Ukraine and cut it off without halting gas exports to all customers. After German voters ousted Schroder, Moscow rewarded him with a well-paid sinecure as chairman of the new pipeline company. Russia has been busy behind the scenes.
Most reporters have cited a pending trade agreement between Ukraine and the European Union as the spark for recent crisis. As an alternative, Putin offered Ukraine membership in his own trading bloc and energy concessions -- an offer Yanukovych decided to take, especially since the steadily higher cost of Russian gas was depleting Kiev's foreign currency reserves.
But what finally caused Putin to make his play may have had less to do with the European Union's trade offer, and more with the prospect of Ukraine eroding Russia's monopoly. In December, Ukrainian and Slovakian officials were set to meet and put the final signatures on a deal to get cheaper, more reliable gas supplies from Slovakia. Even though diplomats thought the deal was complete, the Ukrainians unexpectedly skipped the ceremony. In retrospect, it is obvious Moscow was moving not only to preserve its influence, but to turn events dramatically toward its advantage in Ukraine.
Putin's move backfired, but Washington and its allies should not leave this new opportunity for Ukraine and Central Europe to chance.
The goal of the U.S. and its allies should be to free Ukraine and Central Europe from dependence on Russian energy. This will help our NATO allies politically and economically, encourage Ukraine to integrate further with the West and remove resources from Putin's disposal. It can also help our domestic economy.
The rudiments of this potential shift are already in place. They consist of the fracking revolution in North America, which has led to a sustained glut of cheap natural gas, and new energy infrastructure being constructed or contemplated in Central Europe. Most promising is a major terminal nearing completion at the Polish port of Swinoujscie. Once finished next year, the facility will be able to receive liquefied natural gas by ship and regasify 175 billion cubic feet of it annually -- a large chunk of the 640 billion cubic feet Poland consumed last year. Expansion is possible and there is talk about a "North-South Corridor" that would carry gas from ports in Poland in the north and Croatia in the south into Central Europe.
North American and allied governments should see to it that this is just the beginning. Instead of squandering billions of foreign aid on anti-Western hotbeds like Pakistan, we should provide grants, loans and loan guarantees to a broad network of gas infrastructure in Europe -- shipping terminals and pipelines -- that is free from Russian influence.
We can even make money in addition to reaping the political and security benefits of undermining Moscow. At current export-by-ship prices, were the U.S. to provide a quarter of Ukraine and Poland's gas needs, it would earn America's economy $6.6 billion each year and reduce the trade deficit. Money that would have gone to Russia would come here instead.
While some of Swinoujscie's initial gas imports will come from Qatar, Poland's government has expressed an interest in American natural gas. Last November, Foreign Minister Radek Sikorski said: "Poland is one of the countries who think that for the sake of environment and for the sake of our economies in Europe and in Poland, we should explore and produce shale gas, and gas should flow to our [Swinoujscie] terminal also from the United States."
Indeed, shipping liquefied natural gas from Houston to Swinoujscie means traveling 5,392 miles over about 25 days -- a savings of 1,474 miles and four days over the trip from Qatar's terminal in Doha. Furthermore, the trip from America doesn't involve the nuisance, expense and increasing risk of transiting the Suez Canal.
When Sikorski made his pitch for American natural gas, he was standing next to Secretary of State John Kerry. More akin to speaking than listening, Kerry and the administration he serves ignored the idea and its radical implication. From Obama's five-year foot-dragging on the domestic Keystone gas pipeline to Kerry's recent rumination that climate change is the "world's most fearsome weapon of mass destruction," to Hillary Clinton's failed "reset" of relations with Russia, today's Democrats are nothing if not ignorant of energy and its implications for economic and national security.
But it is never too late to stop playing the fool. Washington can approve Keystone, speed natural gas export permits, share U.S. technology and successful regulatory practices to frack oil and gas, bring together North American and Central European governments in an energy partnership and repurpose foreign aid to this partnership in order to improve both our national security and our economy.
Don't expect Putin to take this lying down. Moscow previously looked like it was defeated in Ukraine when the 2004 Orange Revolution swept aside Yanukovych the first time, only to see him rebound. Moscow will continue its attempts to dominate what it considers its "near abroad" in Europe and Asia, including by holding out sweetheart energy deals that only later turn sour. But we can beat Putin at his own game.