EU & U.S. to Intensify Cooperation on Energy Security Concerns

Source: The Wall Street Journal 4/2/2014, Location: Asia

The U.S. and the European Union pledged strong support to Ukraine to decrease its dependence on Russian gas and said they would work jointly on diversifying energy supplies in Europe.

U.S. Secretary of State John Kerry and the EU's foreign policy chief Catherine Ashton said the crisis in Ukraine has "brought energy concerns to the fore" and called on Russia to stick to principles of "fairness" and "nondiscrimination" when dealing with its energy partners, according to a joint statement issued after talks in Brussels.

"The EU and United States recognized that our energy security concerns and those of our friends and partners pose common challenges, and are considering new collaborative efforts to address these challenges," the statement said.

Concerns in Europe over the threat to gas supplies have soared since the outbreak of the crisis in Ukraine, the main transit route for Russian gas imports to Europe.

Europe gets 30% of its gas from Russia. EU countries that depend partly or wholly on those supplies fear they could be suspended if there is a dispute between the two sides. An earlier quarrel about pricing in 2009 resulted in hundreds of thousands of homes in southeastern Europe going without heat during the winter.

A senior U.S. official said the two sides were sharply focused on addressing the critical needs of Ukraine and would support EU-led efforts to upgrade the country's creaking energy infrastructure. The EU has said it could unlock short-term funding toward energy-related projects, but has stressed any financial support will come with strings attached and would be tied to Ukraine pushing through wide-ranging reforms.

Ukraine owes Russian state gas monopoly OAO Gazprom $2.1 billion in unpaid bills, with the prospect of its debts spiraling further this month, when it will have to pay higher prices for the gas.

"The problem is that Gazprom has a political pricing approach," said a senior EU official, referring to Gazprom scrapping earlier discounts for Ukraine.

The U.S. said it was working fast to enable exports of liquefied natural gas to relieve pressure on the global gas market. It said it expected to supply the equivalent of "half the gas flows coming out of Russia already," according to the U.S. official.

"Merely by no longer being a drain on world supplies but contributing, we have freed up all gas of kinds corridors, which are in fact…keeping gas prices low," the official said.

The two sides said they would also encourage Ukraine to speed ahead with the exploration of shale gas, saying it could generate 20 billion bcm in gas by 2020. Ukrainian authorities have already signed contracts on the development of shale gas with Chevron Corp., Royal Dutch Shell PLC. and Italy's Eni SpA.

The European Commission, the EU's executive, is also pushing Slovakia and Ukraine to sign a deal that would allow gas supplies to be reversed and flow eastward in the event of a shortage. Reverse flow from Slovakia, the main gateway for Ukrainian supplies to Europe, could give Ukraine access to an extra 20bcm, though volumes would be far lower initially and would come too late to address any imminent disruptions.

The high-level energy summit, which was also attended by EU energy chief Günther Oettinger and U.S. Deputy Secretary of Energy Daniel Poneman, came on the same day as the North Atlantic Treaty Organization said it would propose a "reassurance package" by April 15 to bolster the military alliance's response to Russia's military actions in the region.

NATO's top military commander, Gen. Philip Breedlove, said in an interview with The Wall Street Journal that the plan could include deploying forces and equipment in Eastern Europe, beefing up military exercises and increasing the readiness of NATO's rapid-response force.

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