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Why the European Union also needs to be Energy Independent

Tuesday, August 19, 2008

In the US, we have been talking about our current energy crisis, and our need to become energy independent.  The general population certainly is becoming aware of this need, $4 a gallon gas helps to get people focused on an issue.  Hopefully our political leaders will start to put action behind their rhetoric. However, the US is not the only country that needs to be concerned about energy independence.   With the recent crisis in Georgia, it is clear that this conflict has a large impact on the energy situation in Europe.

As we discussed last week, Russia currently has a stranglehold on the EU’s energy supply.  The Russians now supply about 25 percent of the European Union’s crude oil needs and half of its natural gas.  If the European Union has not figured out the strategic importance of this fact, the Russians obviously have.  Just as OPEC held the West hostage in the 70’s, Russia now has the ability to wield the same control over Europe.  Their first step was invading Georgia and daring NATO to do anything about it.  So far, Europe has once again shown their leadership in the fine art of appeasement.   And the US, which is busy fighting multiple battles, does not have the stomach to get involved. 

There are three basic reasons why the US, EU, and others such as China, India, and Japan need to become energy independent.

1) Stop sending Trillions of dollars to non-democratic countries that are usually unstable dictators, or hostile regimes.  This money transfer is unhealthy to the global economy.  It allows a small group of people in these petro-kingdoms to hold their own people hostage.  Is it any surprise that almost no country who’s main export is oil is a free democracy that values human rights?

2) Our reliance on carbon based energy sources is a contributor to global warming.  In addition, the extraction of oil from areas such as the Middle East, Nigeria, and South America creates huge environmental issues.  These countries do not have strong environmental regulations like we have in the West.

3) New energy technology will drive our economy over the coming decades.  Instead of sending petro-dollars overseas, that money should be invested in our economy, and on new technology that will help make the world a safer and cleaner place to live.

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The Russian Bear is Awake - Hold onto your Wallet

Tuesday, August 12, 2008

Moscow, with its recent attack on its former Georgian republic has caused concern across the world.  Russia is feeling strong, and is showing that it is no longer going to sit idly by as their former client states forge stronger relationships with the EU and the West.  This new found strength has been gained by becoming one of the world’s largest energy producers. The Russians now supply about 25 percent of the European Union’s crude oil needs and half of its natural gas.  But now Black Sea oil tankers that normally would be filling up with Baku crude, are anchored 15 miles offshore the Georgian port of Batumi, waiting for a cessation of hostilities.

Russia has demonstrated that its military is a force to reckon with, that it can defeat a Western-trained force, and that the West and NATO will not act to intervene.  Like during the Cold War, the West has limited ability to blunt Russia’s military agression.  Both sides know that an armed conflict between NATO and Russia is never going to happen.

After the fall of Communism, both Washington and the EU invested heavily in Russian energy production.  The result has been a network of oil and natural gas pipelines, ports, and tankers that can feed a million barrels a day to the world market. Washington has helped to expand and link that network directly to Europe, where Russia is currently the dominant supplier.  The multi-billion-dollar Baku-Tbilisi-Ceyhan pipeline that runs across Georgia is run by an international consortium, including American oil-giants Chevron and Conoco-Phillips.

Now, US taxpayers are about to get a double whammy.  Two government agencies, the Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation (OPIC), have made large investments in the Baku-Tbilisi-Ceyhan pipeline, lending money to private companies involved in the construction of the pipeline. Ex-Im Bank gave $160 million in loans, and OPIC has provided $100 million in “political risk insurance”.  If the pipeline is damaged or destroyed, these companies will be forced to write off these loans, and US taxpayers will be left to pickup the pieces.  That is a potential quarter of a Billion dollar bill that may come due soon.

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