Should the U.S. Invest in Natural Gas & Electrical Infrastructure For NATO Allies? (S. 3585)

What is S. 3585?

(Updated April 23, 2021)

This bill — the European Energy Security and Diversification Act of 2018 — would authorize up to $1 billion in financing to catalyze U.S. public and private sector investment in strategically important energy projects in eligible countries from fiscal years 2019 through 2023. These projects would include natural gas infrastructure and electricity infrastructure.

It’d also authorize the U.S. Trade and Development Agency (USTDA) to spend $5 million per year on project feasibility studies, reverse trade missions, pilot projects, and technical workshops to support projects in early development.

Finally, this bill would encourage the State Department to ramp up its political and diplomatic support to eligible countries. This includes facilitating negotiations for cross-border energy infrastructure and assisting eligible countries with improving their energy markets and regulatory environments.

Argument in favor

Europe’s dependence on Russian energy makes it susceptible to Russian manipulation and coercion. Helping our European allies diversify their energy sources will help them become less beholden to Russia, benefiting both regional and global security.

Argument opposed

Investing in new energy infrastructure and projects in Europe likely won’t break Russia’s current dominance in the market, because Russian exports are cheap and readily available.

Impact

Oil and natural gas; NATO allies; State Department; and the USTDA.

Cost of S. 3585

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Chris Murphy (D-CT) introduced this bill to provide new tools for the U.S. to combat malignant Russian influence, wielded through its dominance of the energy market, and create economic opportunities at home and abroad:

“Corruption, graft, bribery, propaganda, illegal invasions – the Kremlin is doing everything it can to gain power over countries in their periphery. We’ve rightly invested billions to shore up military defenses in eastern Europe, but let’s not forget the equally dangerous implications of Russia’s energy stranglehold on Europe. Vladimir Putin gets away with a lot because so much of Europe relies on Russia for energy. By helping our allies secure new sources of energy and contributing to strategically important projects, we can help break Putin’s grip on Europe and create jobs here in the U.S.”

Original cosponsor Sen. Ron Johnson (R-WI) added:

“Russia has the means to coerce political behavior in nations that are dependent upon its energy. It has demonstrated its will to do so. This bill authorizes the USTDA and other agencies to support U.S. private sector investment in strategically important energy projects in Central and Eastern Europe.  It will support U.S. national security interests by promoting increased energy security and market diversification in Europe.”

In August 2018, former U.S. Ambassador to NATO Douglas Lute wrote an op-ed in The Hill, arguing that it’s in the U.S.’ best interests to help its European allies develop energy sources outside Russia:

“[A] key vulnerability for many in Europe is their dependence on Russian energy, particularly natural gas. While Putin has yet to play this card beyond Ukraine, energy intimidation must be a national security concern among many of our NATO allies… The European Union, which includes most of our NATO allies, gets about 40 percent of its natural gas from Russia. While Germany has been critiqued for importing about a third of its gas from Russia, allies in Lithuania and Estonia are 100 percent dependent on Russian gas. Concerns increase as the Nord Stream 2 pipeline would increase Russian imports to Europe. If Russia decided to manipulate these energy streams, or even intimidate by threatening to do so, it could cripple the European allies… Given the dependence of our European allies on Russian energy, it is in U.S. national security interest to reduce Russian potential for influence by diversifying gas sources to Europe… Energy security is national security. This means reducing the dependence of our European allies on Russian energy.  It is in the national interest of the U.S. to stand with our allies to do all that we can to help diversify their energy sources.”

Energy Secretary Rick Perry has called partnering with allies to deliver non-Russian energy to Eastern Europe a major priority for the administration:

“An energy policy where we can deliver energy to Eastern Europe, where we are a partner with people around the globe, where they know that we will supply them energy and there are no strings attached is one of the most powerful messages that we can send to Russia.”

Dr. Mamdouh Salameh, international oil economist and professor of energy economics at the ESCP Europe Business School, argues that this bill is unlikely to significantly alter the European energy market, even though it’s politically attractive:

“Given the growing anti-Russian atmosphere in the United States Congress and the United States’ attempts to challenge Russia’s emergence as the energy super power of the world and also given US self-interest and Russia’s dominance in the gas market in the European Union, there is a reasonable probability that the proposed European Energy Security and Diversification Act will be approved by the US Senate… [However,] US LNG cannot compete under any circumstances with Russian piped gas to Europe. Russia has a fully integrated gas industry underpinned by the world’s second largest proven reserves of natural gas, the cheapest production costs, does not have to convert its gas to LNG to ship it to Europe and already has a monopoly on export pipelines to Europe… Russia provides roughly 40 percent of Europe’s gas needs and that dominance will continue well into the future.”

There is one cosponsor of this bill, who is a Republican.

Of Note: Russia is the largest exporter of oil and natural gas to the European Union through state-owned enterprise Gazprom, which currently controls 35 percent of Europe’s gas market. Gazprom’s ambition is to increase its market share to 40 percent due to declining European production in other areas, and the lower cost of extracting gas in Russia. Some observers say that Russia could double its gas exports by 2030 to meet growing global demand — putting Russia on par with Qatar, the world’s largest liquified natural gas producer.

In recent years, Russia has been accused of using energy pipeline shutdowns as an intimidation tactic to blackmail governments in disputes with the Kremlin.

Media:

Sponsoring Sen. Chris Murphy (D-CT) Press Release