America’s Natural Gas Exports Won’t Be Enough to Blunt Putin’s Energy Weapon

A massive tanker eased into its berth in Louisiana last week and began loading thousands of tons of super-chilled American natural gas. The ship made history when tugs nudged it out of the terminal and toward the open sea: It was the first time in almost 50 years that gas from the lower 48 states was exported overseas by ship.

It also marks the culmination of years of discussion about how America’s energy boom could potentially give Washington a new arrow for its geopolitical quiver by allowing it to ship cheap energy to allies in Europe and Asia — and freeing them from being dependent on Russian strongman Vladimir Putin’s vast gas holdings.

The only catch is that the first cargo loaded onto the 100,000-ton “Asia Vision” tanker is headed for Brazil, not to European countries trying to wriggle out of Russia’s thumb. That underscores that America’s arrival as an energy exporter, while important for reshaping global energy markets, will not automatically translate into the kind of geopolitical tool that countries like Russia use to advance their national interests.

The gas loaded last week at Cheniere Energy’s export terminal in Sabine Pass, Louisiana, is just the first of a coming flood of U.S. natural gas unleashed by the boom in hydraulic fracturing in recent years. Cheniere itself has another export facility under construction in Texas, and there are four others that will be operational by 2018. A decade ago, the United States was poised to become a big natural gas importer; today, the country is set to become one of the world’s biggest exporters of liquefied natural gas, or LNG, alongside only Qatar and Australia.

That has many in Washington and allied capitals rubbing their hands with glee. Secretary of State John Kerry, like many lawmakers on the Hill and think tanks in Washington, has in recent years talked up the possibility of using U.S. gas to undercut Russian energy leverage in Europe. And European leaders themselves have for years been asking the United States to expedite energy exports and recently opened the door to increased gas exports from countries other than Russia as a way to break Moscow’s hold. In Lithuania, a small country overwhelmingly reliant on Russian gas, officials are waiting for the first arrivals of American gas at their newly built import terminal.

To be sure, the sheer re-emergence of the United States as a big producer of oil and gas has had huge knock-on effects around the world, including some that dovetail with U.S. interests. The glut of natural gas, fueled by the U.S. fracking boom, means that more gas was in the global system even before the Asia Vision loaded its cargo. That alone has forced Russia’s Gazprom to renegotiate a spate of contracts with its European customers. And the flood of oil, caused in no small part by the breakneck production from U.S. shale fields, has made it easier to do some things, like slap oil-export sanctions on Iran over its nuclear program, without severely damaging the global economy.

“It’s not that we have an energy weapon now. But we have something that blunts our opponents’ weapon,” said Andrew Holland of the American Security Project, a think tank.

Indeed, just because firms in the United States are producing — and are now ready and able to export — huge amounts of energy doesn’t mean that it will automatically become part of the arsenal for policymakers in Washington.

Other big energy-producing countries can use energy production and exports as a way of advancing their national goals, whether that means strangling neighbors that don’t toe the line (as Russia does), underwriting the very existence of friendly neighboring regimes (as Venezuela has done for Cuba), or cutting off supplies of the world’s most important commodity (as OPEC did during the embargo of 1973 and 1974.) Even would-be energy exporters, like Israel, hope to use their newfound riches to advance their own goals, such as rebuilding ties with Turkey and mending fences with Arab neighbors like Egypt and Jordan.

But for the United States, the energy boom — and now, the export bonanza — is above all a private-sector phenomenon, not something directed by Washington. U.S. diplomats overseas say they are besieged by requests to send cheap energy to a variety of countries — and that they wear themselves out explaining that the energy business is run by companies, not the departments of state or energy.

For the companies pumping, freezing, and exporting gas, the key consideration is economics, not politics. American firms will sell gas to the buyers willing to pay the most money — not where they will necessarily do the most to advance the U.S. strategic agenda. Sabine Pass’s first shipment, for instance, is headed to Brazil — because the country needs to use gas to run power plants idled by the drought that has curtailed hydroelectric generation.

That alone makes it harder to envision America’s energy exports being used strategically to meet, for example, a sudden supply shortfall somewhere in Europe. And there’s even more reason to question the geopolitical impact of the U.S. sales: About 90 percent of Sabine Pass’s export capacity has already been gobbled up by private companies in Britain, Spain, India, and South Korea. Companies like Britain’s BG Group will likely resell the gas to customers in other countries, but most purchasers will probably use the American gas to run power plants and heat homes within their own borders.

The fact that U.S. exports are finally hitting the market right when the world is awash in natural gas makes it even harder to envision big geopolitical dividends. Countries such as Qatar and Australia are already adding huge amounts of LNG to the global supply, and new entrants in Canada, East Africa, the eastern Mediterranean, and Iran are scrambling to put even more gas into the system. Faced with that glut, many developers of U.S. export projects are now hitting the brakes.

There are some practical problems, too, with the idea that U.S. gas can save Europe from Moscow. Europe does have a lot of terminals to import LNG, and most are very underutilized. But they’re also overwhelmingly in Western Europe, especially in Spain — not in countries like Lithuania, Ukraine, Hungary, or Bulgaria that are squeezed by reliance on Russia for energy.

That doesn’t mean there’s no upside to the U.S. energy boom. Just the idea that extra supplies could be available at some point can pay dividends for countries under pressure. Lithuania, for example, saved billions of dollars in energy bills after Gazprom renegotiated its contracts when the country built a floating terminal to potentially import gas from other sources, even though no new shipments had actually arrived.

Simply having other energy options, regardless of how many physical cargoes land in Europe, is a boon to European countries who’ve spent years on a quest to diversify their energy supplies.

“Probably the most powerful reason why the specter of US LNG exports holds geopolitical value is that EU officials believe it is geopolitically valuable,” said Jennifer Harris, a senior fellow at the Council on Foreign Relations and co-author of War By Other Means: Geoeconomics and Statecraft.

That’s not to mention other big benefits that are hard to see because, as Holland said, they are cases where “the dog didn’t bark.” A decade ago, for example, big gas producers like Russia, Iran, and Qatar dominated the market and were even talking of creating an OPEC of natural gas. Instead, thanks to the U.S. boom, those countries are today struggling to preserve market share.

“That’s a huge geopolitical victory for the United States, even if it’s an invisible one,” Harris said.

Photo credit: KEES TORN/Flickr