American Energy Can Stabilize Europe

The crisis in Crimea shows us to what extent Central-Eastern European countries depend on Russia. Yet, there is a solution: American gas could reduce Europe’s dependence on Russian energy.

The Ukraine crisis has shown Central- Eastern European countries the vulnerability of their energy policy — although nicely filled gas tanks and a mild winter make a supply crisis, as was felt in central Eastern Europe in 2006 and 2009, unlikely.

Numerous infrastructure projects of previous years have increased the region’s links with the northern and western European energy grids. Those projects, however, need time. Quite a few Eastern European states are still completely dependent on Russia’s gas.

There is however one other option: American gas for Europe. The “shale gas revolution” has contributed to the United States becoming one of the largest gas producers in the world. Shale gas, which is extracted from rock by introducing water and chemicals into the earth, is estimated to last for another 100 to 200 years.

Gas Is Not Only Tied to Pipelines

This development, anticipated by few, has not led to America being completely independent, but the demand for imported energy will further sink. Accordingly, energy prices in America are incredibly low.

There is more. The progress made when it comes to liquefying gas has permitted the creation of a flexible spot market that only used to exist for oil. Indeed, the transportation of liquefied natural gas (LNG) can now be done with ships.

Gas is no longer purely tied to pipelines — a development that could break the monopoly of the latter, which previously managed the course of pipelines and followed a policy of arbitrary pricing.

Competition Revives Business

This explains the current interest of Central-Eastern European states in American gas imports. If the U.S. would supply them with energy, this would not only reduce their dependence on Russian energy, but would also give them a better starting position when bargaining prices with their Russian suppliers. As we know, competition revives business.

In fact, currently Russia’s bargaining position in energy transactions is already much weaker than it was a few years ago, whereas American firms could obtain higher prices in Europe compared to America.

Prima facie, this appears to be a good deal for Europe and America. However, many in the U.S. still doubt whether it is sustainable to export their own gas, as it would slow down economic recovery because of low energy prices. The consequence: Export licenses have been hesitantly given to Asia, but not Europe.

Washington Is Interested in European Price Stability

The events in Ukraine could change the situation quite quickly. As the world’s biggest oil consumer, the U.S. pays for every single European crisis that leads to a higher oil price, which is the largest part of the bill. Hence, Washington has an undeniable interest in European energy and price stability.

The actual events confirm the strategic logic of the LNG for NATO Act presented by former Sen. Richard Lugar. The latter, one of the most influential supporters of close relations between America and Europe in Congress, proposed in 2012 to permit export of LNG as soon as possible to NATO allies in Central-Eastern Europe by imagining that a free trade agreement has been made between those countries and the U.S.

That would reduce central Eastern Europe’s energy dependence, as opposed to taking other long-term measures. Hence, one is not surprised when many Central-Eastern European NATO states are preparing themselves for LNG exports. LNG terminals are being built in Poland and Lithuania that could soon receive ships with American gas. Latvia, Estonia and Finland are also preparing for LNG.

Solidarity in Non-Military Questions

American energy exports to Europe are no replacement for a constructive relationship with Russia. The great Eurasian power will probably stay Europe’s biggest supplier of energy. Already for that reason, speculations should be left out of the picture; American LNG can neutralize Russia’s leading position on the energy market.

American LNGs for Europe are therefore not a magic bullet. If this, however, led to reducing energy dependence — and thereby the nervousness that an unpredictable Russia is exercising on Central and Eastern Europe’s NATO allies — the Atlantic Alliance would have proven once again that non-military questions can be answered by thinking in terms of solidarity.

Michael Rühle is head of NATO’s political planning department. Julijus Grubliauskas also works for NATO and deals with questions regarding energy security. The writers are conveying their personal opinions.