December 14, 2018

US Bureau of Energy Resources discuss energy security in a trip to Europe

Mr. Francis R. Fannon, picture by the US State Department.

By Guido Lanfranchi.

During the last week of July, Assistant Secretary of the Bureau of Energy Resources, Mr. Francis R. Fannon, met with government officials and business representatives in Kyiv, Warsaw, and Athens. These bilateral meetings revolved around the issue of European energy security and diversification.

 

Mr. Francis R. Fannon is the first Assistant Secretary of the Bureau of Energy Resources, United States State Department. This post has been established only recently, in spring 2018, and according to Mr. Fannon this “underscores the critical importance of energy diplomacy” for the current US administration. In his first trip abroad, Mr. Fannon decided to travel to Europe, and more specifically to Ukraine, Poland, and Greece, three critical energy partners for the US. In the capitals of these countries, Mr. Fannon met with government officials and business representatives, in order to discuss European energy policy and energy security.

At the center of the discussions there was the controversial project Nord Stream 2, the planned expansion of the Nord Stream gas pipeline running from Russia to Northern Europe via the Baltic Sea. Indeed, in his European trip Mr. Fannon visited two of the staunchest opponents of such project, namely Ukraine and Poland. In a telephonic briefing, Mr. Fannon reiterated the US “unwavering opposition” to the Nord Stream 2 project.

While he declined to comment on any future actions of the US administration, Mr. Fannon warned multiple times that companies involved in the construction of Nord Stream 2 might be exposed to a higher risk of sanctions. This is partly because the US administration sees Nord Stream 2not as a commercial enterprise, but rather as a solely geopolitical project, aimed at increasing Russia’s leverage in the Ukrainian conflict.

Speaking about Ukraine, Mr. Fannon reiterated the US full support to the Ukrainian government, especially in this moment of transition, in which the country is developing democratic institutions and a competitive market economy. In the energy domain, Mr. Fannon praised the Ukrainian government’s ongoing efforts to open and liberalize the country’s energy market, as well as its efforts in tackling corruption. In particular, Mr. Fannon mentioned the memorandum of understanding recently signed by Naftogaz and MGU, which is set to enhance Ukraine’s efforts in the energy sector’s reforms by 2020.

The US support to Ukraine is a crucial factor in shaping the US position on Nord Stream 2. As the direct connection between Russia and Northern Europe would be expanded, Ukraine would see its role as transit country significantly reduced, and therefore it would become more exposed to Russian pressures. In order to avoid such a scenario, Mr. Fannon declared that the US is ready to oppose the expansion projects through different means, ranging from diplomatic pressure to commercial sanctions, in collaboration with all actors willing to cooperate.

While the US opposes projects that increase Europe’s dependency on Russia, Mr. Fannon stated that the US fully supports any European effort in building energy infrastructure in order to differentiate its energy supplies and enhance its energy security. Mr. Fannon praised the work of some European countries in diversifying their energy supplies. In particular, he mentioned Greece’s efforts in the LNG sector, Romania’s BRUA pipeline, Croatia’s Krk Island terminal, and the recent differentiation efforts in Lithuania.

Finally, Mr. Fannon was questioned about the implications of recent geopolitical events on the international oil markets. Mr. Fannon expressed his confidence that the reduction in oil supplies coming from Venezuela and Iran could be compensated by other producers in the global market, also noting that it is a duty for the US administration to closely monitor global oil markets and to ensure that appropriate supplies are available.

In his closing remarks, Mr. Fannon reiterated once more the importance of European energy security for the United States, pledging that his office will continue to closely cooperate with its European partners. As US-EU tensions seem to rise on the trade front, energy security seems an important issue where the two allies still want to work together.

 

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