Obama at NATO: Can US energy save Baltic allies?

It may not be a Cold War, but it could be a cold winter if Europe’s ties to Russia continue to sour.

As President Obama travels to Wales this week for a NATO summit, he is meeting with leaders from Baltic countries who rely almost exclusively on Russia for a vital heating and electricity fuel. That means Mr. Obama will be under pressure from both NATO allies abroad and lawmakers at home to loosen export restrictions on a resurgent US energy industry.  

“We wish to develop a real transatlantic bond between Europe and the U.S. on energy,” Latvian President Andris Bērziņš said Wednesday during a press conference ahead of the NATO summit. “Recent developments in Ukraine are the further proof of the urgency to reduce dependency on one supply here. Thereby, the U.S. involvement is very important for our efforts to make strong energy security and develop integrated energy markets in the region.”

Russia’s recent military incursions into eastern Ukraine (a major transit country for Russian gas to Europe) have ratcheted up tension over natural gas in Europe, including concerns that Russian gas flows through Ukraine might be disrupted in winter – when the fuel is needed most.   

With Russian relations strained, NATO countries are expanding their energy import capacity, hoping allies like the US will continue to permit and build export capacity. The US is the world’s largest natural gas producer thanks to recent drilling innovations, and the US rivals Saudi Arabia and Russia in oil production.

Countries across the globe would rather do energy trade with the US than with less stable energy superpowers, but US law largely prohibits oil exports and limits natural gas exports.  

Cutting into Russia’s resource dominance over Europe with new supplies from the US might be one way to help defuse a tense situation that shows little sign of easing. But it would not be easy – and might have unintended consequences of costlier energy at home and greater environmental impacts globally.

“The situation in Ukraine is so tied to energy that it will increase pressure on the US to be open with its resources,” says Kristine Berzina, a Transatlantic fellow at the German Marshall Fund, a Washington-based think tank.

Tensions have long simmered between gas-rich Russia and NATO-aligned eastern Europe, which relies on Russia for fuel. The Baltic states rely almost exclusively on Russia for gas, and much of Eastern Europe is similarly crippled in its reliance on Russia. Yesterday Obama visited Estonia to assuage the Baltic states’ concerns over aggression from Russia, and Thursday he heads to Wales for the annual NATO summit.

The NATO talks will primarily focus on expanding and shifting NATO’s military presence to deter Russia in eastern Europe, but European countries will also push the US for more natural gas, says Mihaela Carstei, energy and environment director at the Atlantic Council, a Washington-based think tank.

Though Russia has said it won’t halt gas deliveries to Europe, that’s far from certain for Ukraine. EU-brokered gas talks between Ukraine and Russia faltered last week, and past Russian gas outages in 2006 and 2009 – as well as Russia’s gas cut-off to Ukraine in June – have startled the continent.

But even if more US gas were available to European markets, Russia and Europe will continue to be extremely interdependent for the next decade. Europe needs Russia’s gas, and Russia needs the money it makes from selling to Europe.

“In terms of revenues, Russia is just as dependent on Europe as Europe is dependent on Russia,” Ms. Carstei says.

Still, Europe hopes to loosen the choke hold Russia has on its energy supply. To that end, the US could promise to expedite permitting for liquefied natural gas (LNG) export terminals in the US, as Republicans and moderate Democrats in the Senate have advocated. In terms of oil, Europe, South Korea, and Mexico have all lobbied for the US to open its crude to global markets, lifting a ban installed during the Arab oil embargo in the 1970s.

“When Putin is committed to holding our NATO allies hostage to Russian energy, America should be as committed to making our energy available to our allies,” Sen. John Barrasso (R) of Wyoming says in a statement to the Monitor. “There’s no reason for the Administration to continue delaying the United States from exporting LNG to NATO countries.”

Senator Barrasso introduced legislation in January of 2013 that would expedite LNG exports for NATO allies. Barrasso says US natural gas would provide a critical alternative to the Russian gas Europe is so dependent on.

From a policy perspective, it is not clear that Obama can do significantly more to help Europe energy-wise in the short term, according to Carstei.

The substantial infrastructure needed to export, ship, unload, and deliver gas would not materialize overnight. And regardless, energy firms might prefer to ship gas to Asian markets where they can get a higher price.

“It’s an unrealistic expectation to say: ‘US, give us cheap gas – and a lot of it – right now,’” Carstei says in a telephone interview.

Militarily, NATO is planning to ramp up its preparedness in the region, moving equipment and troops to strategic locations to deter Russia and guard European interests.

“Not because NATO wants to attack anyone,” says NATO Secretary General Anders Fogh Rasmussen, explaining NATO’s movement of arms and troops. “But because the dangers and the threats are more present and more visible. And we will do what it takes to defend our allies.”