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America's Natural Gas Could Cut into Russia's Influence Abroad

Irwin M. Stelzer

With the president once again managing to divert attention from a sensible policy to a vulgar tweet, you might not have noticed that this past week has been “Energy Week.” The immediate result has been a lot of speeches, including one by Harold Hamm, the Trump-supporting oil-and-gas man who played a key role in the development of our shale resources, and another from energy secretary Rick Perry. Unfortunately, the former governor of oil- and gas-rich Texas temporarily confused the words “imports” and “exports,” which might have sent chills up the spines of those who know that his Department of Energy is in charge of our nuclear arsenal. That’s for another day—this has been Energy Week, a time for celebration.

Unfortunately, Secretary Perry pasted a typically offensive Trumpian label on an unexceptionable policy: “The path forward is for U.S. energy dominance …,” he told reporters. Fortunately, it will be a benign if also self-serving dominance: “An energy-dominant America will export to markets around the world, increasing our global leadership and influence.”

In practice, this will mean a major increase in exports of liquefied natural gas (LNG): natural gas cooled to -260 degrees Fahrenheit, condensing it to a liquid. Which is good news for Europe and Asia, and bad news for Vladimir Putin, who has not hesitated to use Western Europe’s dependence on Russian gas as a geopolitical bargaining chip. The EU now depends on Russia for 30 percent of its gas. Germany leads the dependency parade: Russia provides 40 percent of its natural gas and is negotiating to make Germany even more dependent on it by building the Nord Stream 2 pipeline to supply natural gas from Russia’s Baltic coast to the German port of Greifswald. So much for Germany’s cooperation in tightening the sanctions on Putin, who knows that when it comes to its interests, as chancellor Angela Merkel understands them, it is Deutschland über alles rather than cooperating with the United States by ratcheting up pressure on Putin to pull his forces out of Ukraine.

It has been a long road since this then-young economist was involved in negotiations to bring the first shipment of LNG to Boston from Algeria in 1968. Fear of supply interruptions due to instability in Algeria, and of an accident that might destroy Boston harbor, dominated discussions. That was then, this is now. We no longer rely on individual point-to-point shipments, but on a global market for LNG. A few months ago an LNG tanker headed from the U.S. to Portugal received a sudden, higher bid for its cargo from Mexico’s power company. “At the Bahamas, the ship made a starboard turn and headed south,” reports the Wall Street Journal. And just a few days ago, a tanker loaded with Qatari LNG, planning to dock at South Hook LNG terminal in Britain, changed course to sail around the Cape of Good Hope to avoid the Suez Canal, controlled by Egypt, now part of an Arab boycott of Qatar.

That flexibility is important. Qatar, a tiny speck with a population of a mere 2.3 million, putting the country right up there with Queens in the number of residents, has stirred the ire of Saudi Arabia and its Arab allies for—get this—supporting terrorism. Never mind that 15 of the 19 hijackers who brought down the World Trade Center were Saudi citizens. Or that the Saudis support madrassas around the world that teach the Salafi theology on which ISIL and other jihadi movements rest their claim for a caliphate.

The Arabs’ real goal is to separate Qatar from its ally, Iran, with which it is jointly developing the South Pars gas field. Stretching across the territorial waters of both Qatar and Iran, it is the world’s largest. The Saudis-and-friends coalition also wants Qatar to close its pro-Muslim Brotherhood television station, Al Jazeera. With President Trump clearly on its side, despite his State Department’s more neutral stance, the Saudi royal family believes now is the time to wring a total surrender from Qatar. The Saudis would prefer to do to Qatar what they are trying to do to Yemen, bomb it into submission, but the presence of a large U.S. military base in the tiny country makes that a step too far.

The implications for the world’s energy economy of a potential isolation of Qatar, the world’s largest exporter of LNG, couldn’t be more consequential. Norway’s North Sea reserves, on which countries such as Britain rely heavily, are declining; the Europeans are opposed to developing their own resources by deploying fracking technology; Germany is phasing out its nukes; China is choking on emissions from its coal-fired power plants and hoping to complete a deal that would bring large quantities of LNG from Pennsylvania and Texas to Shanghai and Guangdong. Russia stands ready to supply its natural gas to any and all needy consuming nations.

All of this makes our celebration of Energy Week, with its emphasis on increasing exports of LNG, more relevant. We have the resources to augment the world’s supply of energy. The Energy Information Agency expects our LNG exports, which already go to some 20 nations, to increase by 200 percent in the next five years; oil industry executives are predicting a 500-percent increase in a mere three years. Unless over-supply forces a price collapse, some six export terminals will be built or expanded in the United States, allowing exports to rise by as much as $50 billion annually. That will reduce our trade deficit and produce thousands of construction jobs, and require millions of tons of steel—presumably made-in-the-U.S. tons, redeeming a Trump campaign promise.

The president is setting sail (more precisely, taking to Air Force 1) for Hamburg in about a week to attend a G20 meeting. He will once again urge our NATO allies to meet their commitments to devote 2 percent of their GDP to defense. The 22 NATO countries that have not met their commitments have a combined shortfall of $188 billion this year alone. Trump is not alone in believing that the effect is to have American taxpayers subsidize the welfare states of Germany, with the largest shortfall, and other EU countries.

The president is preparing to take a victory lap en route to Hamburg. He will stop in Poland to celebrate the first shipment of U.S. LNG to a country until now almost completely dependent on Russia, and will undoubtedly mention the deal by America’s Cheniere Energy to ship LNG to Lithuania’s floating LNG terminal, reducing that country’s dependence on Russia’s Gazprom. On to Hamburg, where he will have his first chance to meet Putin and, like George W. Bush, “get a sense of his soul” by “looking the man in the eye.”

LNG has created a new Great Game, with America’s “yuge” reserves of natural gas giving Trump a weapon with which to offset Russia’s early lead as a supplier of natural gas to Europe and Asia. If he keeps his fingers off the tweet button, that good news might be noticed by tweet-weary voters.

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