Senior Obama official: Nord Stream 2 and Brexit may weaken EU energy security

Elizabeth Sherwood-Randall. [National Renewable Energy Lab/Flickr]

EXCLUSIVE / The controversial Russian-German pipeline project Nord Stream 2 will weaken the European Union’s energy security, and Brexit would set back the shared interests of the USA, UK and EU, a senior official in the Obama administration has warned.

In a wide-ranging interview, US Deputy Secretary for Energy Elizabeth Sherwood-Randall discussed the bloc’s Energy Union strategy, and US plans to export liquefied natural gas (LNG). She insisted the recent nuclear deal with Iran had not let the country off the hook on human rights, but she wouldn’t be drawn on the possibility of a pro-Putin president in Donald Trump.

Elizabeth Sherwood-Randall is the US deputy secretary for energy. She spoke to EURACTIV News Editor James Crisp. You can listen to parts of the interview through the SoundCloud files below. 

What threat does Russia pose to energy security?

You will have seen that Europe has been taking very deliberate steps to enhance its energy security. Following the events in Ukraine that began a little more than two years ago, the G7 energy ministers gathered in Rome to set forth a number of principles regarding energy security, and I think that reflected the collective view that one country should not be in a position to use energy as a weapon.

We have seen that happen, putting tremendous pressure on some of our allies and partners, especially in Central and Eastern Europe.

The focus since the agreement on those principles has been on diversified sources of supply, diversified routes and diversified fuels.

The EU’s Energy Union plan…

Yes, but truly it is broader than that.  All of us share the sense that it is important to have multiple energy sources, to be dependent on no single source, to use a diversity of fuels – and that’s good both in the energy security sense and in the climate sense – and to have diversified routes. That includes building much more integrated infrastructure for Europe.

We didn’t anticipate this being the case, but we find ourselves in the position now, in the eighth year of the Obama administration, of being poised to be an exporter of oil and natural gas, which is a tremendous boost to energy security.

However, our European allies and partners need to be able to move that supply to where it needs to go, and that’s going to require the building of additional energy infrastructure. This is true for both electricity and gas in Europe.

That will require better interconnections between countries. Historically that has been difficult, for example between France and the Iberian Peninsula.

I think that progress is going to be made on this front. If you look at the priorities that have been agreed, that the European Commission is trying to advance. I think that they will make these investments as recognition of the imperative that Europe act on this front.

So the Iberian Peninsula is one piece, especially regarding electricity and the integration of renewables coming from the Iberian Peninsula into the broader European grid. You also have the importance of the Baltics altering the orientation of their grid, which is currently facing eastwards, because of their past.  It needs to be reconfigured so as to be interconnected with Western Europe.

I think this will happen. If you look at where Europe was just a few years ago and the Third Energy Package in September 2009, then the Energy Union, and now this package of legislation, the framework, which is quite important, and really there appears to be momentum for taking the hard decisions that are necessary to create more energy security for Europe.

+Nord Stream+

Is this momentum  being undermined by the Nord Stream 2 project?

We have concerns about Nord Stream 2 for the reasons that have been articulated by many of our allies and partners in Europe. That goes back to the point that I was making about the commitment that the G7 countries made that we should diversify our sources.

This doubling of one pipeline from one source, instead of creating multiple routes from multiple sources across that territory, does not appear to enhance Europe’s energy security. And it also of course deprives Ukraine of very important transit fees, which are significant from the perspective of Ukraine’s budget challenges.

Has President Barack Obama spoken to the German Chancellor Angela Merkel about Nord Stream 2?

I do not know.

Do you think it is likely?

They have a very long-standing, frank dialogue on many issues, and often speak candidly to one another in private, so I can’t comment on whether it has happened or not.  But I do know, because I was responsible for Europe in the first term of the administration, and advised the president on his engagements with his key colleagues, that he really values his dialogue with Chancellor Merkel.

The information that we are beginning to hear is that North Stream 2 is going to get a reluctant ‘OK’ from the European Commission.

Really?

This is not something I have been told directly, but it is something I heard from a colleague who has excellent contacts.

That’s interesting. I think they are going to have to scrutinise it very carefully. We have this proposed legislation, which would be a very significant step forward that would require that any private negotiation or bilateral agreement that is being negotiated would have to be blessed from an energy security perspective by the EU. That has to be put to the Parliament.

But politically this is going to be extremely difficult.

Well that is part of the challenge of creating a super-national entity. But when your energy security is interdependent, and the behaviour of one can have a significant impact on the energy security of many, it is obviously of interest to consider ways to ensure that steps are taken to diversify energy sources.

But the idea of submitting international and commercial energy contracts to a civil service…

This is a case study in this question of how you create an entity that provides the kind of capability that a super-national entity might, to the benefit of the contributors, while at the same time nation states might want to retain their prerogatives, as does the private sector. So watch this space. I think it will be extremely interesting.

Thinking hypothetically, can you see any sort of situation where the United States would feel comfortable submitting its energy contracts to a super-national authority?

That is such a hypothetical question I would have to spend some time contemplating it. But look, Europe has a very elaborate treaty structure here. It is not as if it is the first thing that has been put on the table for European countries to agree on.

Elaborate is a very polite way of saying ridiculously complicated, isn’t it?

No, that’s not what I said. This takes us back to where we started, which is that when you look at the energy situation today, Europe can be put into a situation where energy is used as a weapon. That should be a wake-up call that Europe needs to develop the diversity of supply, sources of supply, routes and fuels. This is hugely important for Europe, and it is recognised by all the European leaders, as they stated in the latest Council conclusions.

+Brexit+

So in terms of the Energy Union, we are basically looking at a united front against Putin. What happens if Britain leaves the European Union? Is that something you are concerned about?

This issue is beyond my area of responsibility as Deputy Secretary of State for Energy. What I will say is that it has been US policy, that it is in our interest that there be a strong United Kingdom inside a strong European Union. And I think it would set all of our shared interests back to see the UK leave the EU.

On the energy side of the debate, there is an idea within the UK that Britain could become a sort of Norway, a trading island where we would be able to set up our own energy deals. Is this a credible idea?

All the evidence suggests that the British economy has benefited tremendously from integration and from the opportunity that entrance into the EU created to stimulate competitiveness in the 1970s and 1980s. So I cannot imagine the scenario that you just described as being the optimal one for the UK to follow.

+Climate+

The US is ready to begin exporting LNG.

Yes, we are. In fact, the first LNG is already on the water. I think it is going to Latin America actually.

There are quite a lot of concerns about this whole process. The methane emissions released during extraction by fracking; the shipping, which was obviously not covered by the Paris agreement; and then the fact that gas demand in the EU is expected to fall. So the worry is that we are building all this infrastructure for something that we eventually will not need.

I haven’t heard that worry, but I think that right now the opportunity to create alternative pathways and use alternative sources – to be much less heavily dependent on coal, less dependent on oil, to import more natural gas, to develop more natural gas resources where the geology permits it, and then to continue with the integration of more non-fossil fuels into the mix – is the path forward for Europe.

Well, gas obviously is a fossil fuel.

It is, but it has a less damaging effect on the climate than coal.

So it is the electric cigarette I smoke now, as opposed to the real cigarette.

That’s right, so we are on a pathway. There is a long transition, but I think that one of the things we have heard even the staunchest advocates of our climate goals say, like President Obama, is that fossil fuels will be a part of our energy mix far out into the future, and what we need to do is develop the technology to use that fossil fuel in the most environmentally friendly way possible.

I will add that the Mission Innovation project that was launched on the first day of the COP21 by our president and 19 other world leaders, including David Cameron, to double R&D in clean energy solutions over the next five years, is a very serious one.

Our department in the US government is the lead for the development of the implementation plan, which really involves scaling up very significantly investment in both clean energy alternatives, and also how to use fossil fuels in a way that is heathier for the planet. That includes doing more research on environmentally safe means of fracking. It includes researching carbon capture, utilisation and storage technology, so it is the whole spectrum. It is not only in the renewables space.

But carbon capture and storage is just too expensive isn’t it? We have had action plans here and it has never got off the ground.

You can’t say it is too expensive when you are still in the pilot project phase. What we are trying to do is to push out these first projects to see if it can be proven to work.

+Trump and Iran+

You are essentially saying  that Russia has used energy supply as a weapon, as leverage. Donald Trump, for example, has been very positive about Russia, publically, which has caused a great deal of concern in Europe. Is that a concern that you share?

I am not going to comment on the American presidential election. I have spent many years working on US relations with Russia, growing out of the end of the Cold War and the work we did to transform the security dynamics, and the work has had its ups and downs.

On the nuclear security front, I would note that we have a long-standing shared interest in preventing the proliferation of weapons of mass destruction and fissile materials. In the case of the P5+1 [the permanent members of the United Nations Security Council, plus Germany] meeting that took place this year we managed to work very closely with out Russian counterparts, also the Chinese, EU and our other partners, to reach an agreement with Iran on significantly setting back its nuclear ambitions. That’s a very good example of where our ambitions are aligned and where we can work together. I think we will all continue to work together to build a constructive path forward with Russia, but it has taken steps in Ukraine that are a violation of the sovereignty of another country, and as you have noted, has used its natural resources as leverage against its neighbours.

Let’s note what Lithuania has done, which is very important. They have built this LNG facility at Klaipėda, and that has given Lithuania leverage of its own. This is a good example for Europe of what can happen when a country chooses to create more infrastructure that then gives it alternatives and options to import from other sources.

Iran is a country where they still hang homosexuals from cranes, and the EU is saying we should make energy deals with them. That’s pretty distasteful isn’t it?

Well gosh, this is a whole philosophical question that could lead to a long discussion. We had a very focussed mission, which was to achieve a substantial change in their nuclear weapons programme, and we achieved that goal. We did not let them off the hook on ballistic missiles, we did not let them off the hook on terror, we did not let them off the hook on human rights. So just because we have got a nuclear deal doesn’t mean that Iran has come in from the cold.

That said, there is clearly a struggle for the identity of Iran going on internally, and one of the tools we have to shape the outcome of that is engagement. The challenge is to manage that engagement in a way that strengthens the voices of reform, including on the human rights front, and doesn’t embolden those who are opposed to the values we hold dear. We don’t know where this will end. We do know that it is our self-interest – for the United States and for our allies in Europe and the others that participated in the negotiation with us – to put an end to Iran’s nuclear programme, both the uranium path and the plutonium path, and that is a very significant win for the world. On the other issues, as I said – terror, ballistic missiles, human rights – we continue to hold them accountable.

The fear is that when you are looking for the diversification of supplies, there are a lot of pretty grubby governments that have a lot of oil or other forms of energy. And we are so desperate not to be dependent on Russia that we end up entrenching governments of scumbags.

[Silence]

That seems like a good point to end on.

Sefcovic: Nord Stream is not in conformity with the Energy Union's goals

The European Commission so far is only aware of general information about the project, and is therefore unable to make conclusive decisions, Commission Vice-President Maroš Šef?ovi? told EURACTIV in an exclusive interview.

Further Reading

Nord Stream 2 will kill EU’s LNG strategy, warns US ambassador

The controversial Nord Stream 2 pipeline will wreck the EU’s Energy Union strategy and kill off its plans to boost Liquefied Natural Gas (LNG) in the bloc, a veteran US ambassador has warned.