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    In the Era of U.S. Energy Abundance: The Role of the Caspian Region in U.S. Policy [GGP]

Summary

For most of the last fifty years, international energy policy has been a major focus of U.S. foreign and national security policy.

by: Brenda Shaffer, FDD

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Complimentary, Natural Gas & LNG News, Americas, Global Gas Perspectives, Insights

In the Era of U.S. Energy Abundance: The Role of the Caspian Region in U.S. Policy [GGP]

Washington has viewed ensuring the energy security of its allies—especially in Europe, Japan, and South Korea—as part of its own national security. In this approach to energy policy, the United States was unique and contrasted with most Western countries, which generally treated energy policy as part of their economic and/or environmental policies.

Washington has engaged in international energy policy on the highest executive levels in the White House and established influential units within cabinet departments and agencies to promote international energy policies and to integrate them with U.S. national security and foreign policies. Within the Department of State, successive special ambassadors were appointed to promote
various international and regional energy policies and, in 2011, a full Bureau of Energy Resources was established.2

In Washington’s international energy and national security policies, the Caspian Sea region has drawn supersized attention. Unlike most foreign policy issues, promotion of Caspian energy development and export has enjoyed bi-partisan U.S. support for over three decades.3 President Bill Clinton referred to the agreement to establish the Baku–Tbilisi–Ceyhan Pipeline as one of the most important foreign policy accomplishments of 1999.4 Special envoys for Caspian and Eurasian energy were established to promote development of Caspian energy, unmatched by emissaries to support other regions. The late Senator Richard Lugar, who served as the main champion for the Caspian region in U.S. foreign policy, was also the locomotive for establishment of these special envoy positions and for the Congressional legislation that established the Bureau of Energy Resources at the Department of State. Senator Lugar’s actions underscored the connection between U.S. geopolitical goals in the region and Caspian energy.

A mega-shift in the global geopolitics of energy took place over the last decade as increased U.S. production of oil and natural gas vaulted the United States to the position of top global oil and natural gas producer.5 From 2008 to 2018, U.S. oil production more than doubled, and the United States transitioned from a net natural gas importer to a net exporter.6 In a world awash in U.S. oil and natural gas, some have surmised that Washington’s international energy policy will change significantly. In particular, some assume that Washington will stop developing energy production regions like the Caspian Sea and that new mega pipelines, like the Caspian export projects, will no longer be needed.

Low oil prices today are a threat to the U.S. economy—just as high oil prices were in the past.

Yet Washington today is actively engaged in global energy politics despite its new producer super status. In fact, the 2020 oil market crash has seen Washington even more engaged in the geopolitics of oil than in many previous periods. The need to protect the new U.S. production has left Washington as economically tied to the ebbs and flows of the global oil price as when it was a major importer, but from a different vantage point. Low oil prices today are a threat to the U.S. economy—just as high oil prices were in the past.

This article examines if, given the changes in the geopolitics of energy with the meteoric rise of U.S. oil and natural gas production, Washington will continue to champion oil and natural gas pipeline projects abroad, focusing on the case of the Caspian region. Since the collapse of the USSR in 1991,
promoting Caspian energy production and export has been a major focus of U.S. international energy and national security policy. The article claims that the newfound U.S. energy abundance does not supplant the contribution of Caspian energy to U.S. foreign policy and international energy policy goals. This is due to several geopolitical and energy policy factors. On the geopolitical front, increasingly aggressive Russian policies and potential spill-over from expected Iranian instability require active U.S. engagement to protect the U.S.-led achievements in the Caspian region realized over the past three decades. Next, while U.S. and other liquified natural gas (LNG) volumes increase liquidity and security in many gas markets, they do not always supplant pipeline supplies. This is especially due to the prohibitive and volatile prices as well as physical limitations in supplying landlocked states and states located beyond straights, such as the Bosporus Straits, which prohibit entrance of LNG supply vessels. In addition, with increased challenges to global trade, such as changing policies of the major players like the United States and China, increased awareness of the threat of pandemics, and growing challenges to security of passage in major trade waterways (especially in the Persian/Arab Gulf), many states are rethinking the necessity of pipeline gas supplies to ensure security of supply and price. Accordingly, despite the new U.S. energy abundance, Washington’s continued engagement in Caspian energy development and protection of its past successes will serve U.S. national interests.

Brenda Shaffer is senior advisor for energy at the Foundation for Defense of Democracies. Follow Brenda on Twitter @ProfBShaffer.

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