U.S. fuel exports on the rise: Any connection with the new sanctions against Russia?
- Written by Victor Lupu
The shale oil revolution, started in 2010, has turned the U.S. from a net importer of oil into a net exporter on the fuel markets and the exports, according to analysts, may hit a record in 2017.
Ten years ago, the US had net fuel imports amounting to 2.3 million barrels per day (bpd), the exports in 2016 peaked to 2.5 billion bpd. On the other hand, the U.S. refineries work around the clock with heavy demand mainly from overseas. The efforts made by OPEC and non-OPEC countries since late last year and reaffirmed in May 2017, to cut the oil output in order to see the international oil price rise, have been mostly in vain, as the international price varies around USD 50 per barrel.
On the other hand, the U.S. still is a huge crude oil importer, but has shifted focus on exporting jet fuel, diesel and gasoline in Latin America (2.5 million bpd), Europe (500,000 bpd) and Asia (to China 303,000 bpd).
So, where is the U.S. heading to in terms of energy policy? During the election campaign last year, U.S. President Donald Trump had voiced his intention to stimulate domestic producers of coal, oil, shale oil and gas, thus to ignore the calls for environment protection.
Trump had campaigned on a promise to ‘cancel’ the Paris deal and sweep away the Obama-era environmental regulations to help coal miners, whose output in 2016 sank to the lowest level since 1978. Despite the allies’ criticism for rejecting the Paris Climate Accord, the U.S. coal exports have jumped more than 60% this year due to soaring demand from Europe and Asia, according to government data, allowing President Donald Trump’s administration to claim that efforts to revive the battered industry are working.
Overall, the U.S. energy policy aims at expanding and boosting exports and making the U.S. the top power, mainly in terms of fuel and gas. According to analysts, now, the government of U.S. President Donald Trump is seeking to deregulate oil and gas production to further leverage rising U.S. exports for international political gain - a policy President Trump calls ‘energy dominance’.
Well, just days after the U.S. Senate sanctions against Russia, which have stirred discontent and anger not only in Moscow, but also in European capitals, there are voices wondering about a possible connection between the U.S. energy plans and the sanctions. As one German official put it, the new sanctions could have an ulterior motive - getting energy customers to buy American.
SANCTIONS, DISCONTENT, RETALIATION
On July 27, the U.S. Senate overwhelmingly adopted sanctions against Russia for alleged meddling in the presidential elections, a bill that has to be further approved by President Trump. The vote was 98 to 2 and makes it difficult for the president to exercise the veto right. The sanctions are expected to further deteriorate the relations with Moscow and, at least for the moment, have strained the relations with the EU.
The new sanctions could see U.S. fines imposed on EU investors in Russian energy projects. They also target Russian extraction of offshore gas in the High North, Russian arms exports, and Russian banks. The interesting part is that the sanctions might affect European companies that work with the Russian companies. Therefore, the threat of U.S. fines could put at risk Russia’s plan to build the gas pipeline Nord Stream 2, which involves five Austrian, German, French, and Anglo-Dutch firms - Engie, OMV, Shell, Uniper, and Wintershall. The EU officials themselves expressed disappointment, as the sanctions could damage the multibillion-euro pipeline and infrastructure projects.
The European Commission chief Jean-Claude Juncker said that “if our concerns are not taken into account sufficiently, we stand ready to act appropriately within a matter of days. America first cannot mean that Europe’s interests come last,” referring to German complaints that the new sanctions were designed to help U.S. firms sell liquid gas to Europe. It should be noted that the EC had previously criticised Nord Stream 2 for increasing dependence on Russia, however the new developments related to the U.S. sanctions has led to a shift in the official position.
Germany and Austria have complained in strident terms that the U.S. has no right to impose restrictions on their energy sectors. German foreign minister Sigmar Gabriel said his country won’t accept new U.S. sanctions against Russia being applied to European companies but underlined that Berlin hopes in a coordinated policy towards Moscow. “It remains the case that we will in no way accept an extraterritorial application of these U.S. sanctions against European companies,” he said, adding that sanctions are not “an appropriate instrument to promote national export interests and the domestic energy industry.”
German Economy Minister Brigitte Zyries has also warned the U.S. to expect repercussions after abandoning the ‘common line’ with Europe over Russia sanctions.
On the other hand, the U.S. believes that Nord Stream 2 would give Moscow a bigger say in Berlin and would split the EU by ignoring the complaints of Poland, the Baltic States, and other Eastern European countries that see the pipeline as a strategic threat.
In its turn, Russia has retaliated to the sanctions, hitting the U.S. diplomatic corps. Thus, the U.S. must downsize its diplomatic and technical staff in Moscow and other cities. The U.S. has until September 1 to cut the number of its staff at the Moscow embassy and at three consulates to match the exact number of Russian diplomats who are working in the U.S. – i.e. 455 people. Foreign minister Sergei Lavrov has told U.S. Secretary of State Rex Tillerson in a phone call that Moscow was forced to respond to the new package of U.S. sanctions and that it is still willing to improve ties with Washington. Lavrov told Secretary Tillerson in a phone call earlier that day that Russia’s decision was “triggered by a number of hostile steps” the U.S. has recently taken but added that Moscow was “ready to normalize the bilateral relations with the U.S. and cooperate on important international issues.”
Russian President Vladimir Putin himself has reacted, accusing the U.S. lawmakers of ‘insolence’ and promised retaliation is the sanctions turn into law. “We are behaving in a very restrained and patient way, but at some moment we will need to respond,” he said, adding that the sanctions were “Russophobic instruments in the U.S. domestic political struggle”.
WILL THE SANCTIONS KILL NORD STREAM 2?
Tough question, anyway. Former U.S. diplomat Daniel Fried, who coordinated the sanctions in the Obama administration, was recently asked if Nord Stream 2 will be ‘killed’ and said he doesn’t believe it will. “I do not think this bill alone will kill it. If the deal falls apart, it will be because of either it’s found inconsistent with European energy policy, or Europeans themselves change their mind about it.” On the other hand, he admitted the fact that US LNG exports are good for European security, because they help to weaken the Russian monopoly.
The connection between sanctions and the U.S. energy expansion worldwide may not be that far apart, some people would say, looking a bit further than the immediate consequences and analyse the parties involved. After all, international politics are based on the strategic economic interests.