The U.S. hasn't decided to sell natural gas to Ukraine just yet …
but decision time is getting closer.
production means the U.S. can easily afford to ramp up exports of
. And countries like Ukraine, which are currently at the mercy of
Russian energy exports, could stand to benefit.
Consider the situation in Eastern Europe, where it would be an
understatement to state that Russia's actions in Ukraine are tied
to its oil interests. Ukraine's position is incredibly weak. The
country gets 70% of its natural gas from Russia. It is also a
veritable export hub, given that more than a dozen other European
countries receive natural gas that flows through Ukraine.
With natural gas production surging in the U.S., the country
is in a position to increase exports, if it so chooses. Ukraine
isn't the only European country that could benefit. And it's
certainly not the only one interested in seeing the U.S. break
Russia's energy monopoly.
A full 30% of Europe's energy comes directly from Russia. That
stranglehold means European leaders seeking relief are
increasingly turning their eyes west.
It's no wonder why. This year, the U.S. is likely to surpass
Russia as the world's biggest natural gas producer. And next
year, in 2015, the U.S. is likely to dethrone Saudi Arabia as the
world's number one oil producer.
The U.S. is growing
natural gas production
at such a rampant rate - by 44% between 2011 and 2040 -that even
the U.S. Energy Information Administration predicts the country
will be a net exporter of natural gas by 2020, if not sooner.
But for the U.S. to loosen Russia's grip on Europe it will
need to do more than simply turn on the natural gas export
spigot. It will need to rewrite laws. At the moment, U.S. natural
gas exports are constrained by a law that limits trade to
countries that aren't free-trade partners.
There are currently 20 countries with which the U.S. has
free trade agreements
, and Ukraine isn't on the list. In fact, very few European
countries are. Most are in Central and South America, and the
There is, however, one loophole that allows a shipment to a
country that isn't a free-trade partner. If the U.S. Energy
Department ascertains that shipping the gas is in U.S. national
interest, it can make an exception.
But according to the
Wall Street Journal
, the Energy Department has only approved six such natural gas
export applications over the past few years. And right now, the
U.S. needs to be absolutely sure it sends the right message to
the world if it takes steps to allow natural gas exports to
That potential has some members from both the Republican and
Democratic parties applying pressure to President Obama to get
out his pen. And if the situation intensifies in Eastern Europe,
that pressure will build.
We don't know how this will work out but one thing is clear:
the U.S. is in a rare position of strength with respect to its
energy production and export potential. It has the potential to
break Putin's energy monopoly in Europe. And that means
Washington needs to think decades into the future, not just
Because where the U.S. comes down on this issue, at this time,
will set the stage for who its greatest allies in Europe will be
in the coming years. And that has important implications for
energy investors around the world.
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