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Pipeline Politics: Achieving Energy Security in the OSCE Region
2 July 2007
Pipeline Politics: Achieving Energy Security in the OSCE Region

The U.S. Commission on Security and Cooperation in Europe ("Helsinki Commission") held a hearing on June 25, 2007 to examine questions of energy supply and transit security in the OCSE region. Chairman Alcee Hastings (D-FL) presided over the discussions, and he was joined by Commission Co-Chair Senator Ben Cardin (D-MD) and Rep. G.K. Butterfield (D-NC). The hearing was the first of three planned Helsinki Commission hearings on the subject of energy security. The next two upcoming hearings are to focus on 1) the relationship between democracy and energy resources; and 2) the nexus of energy supplies and environmental security.
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Summary of U.S. Helsinki Commission Hearing
Pipeline Politics: Achieving Energy Security in the OSCE Region

June 25, 2007

Russia's Role as an Energy Supplier

Although Russia was not the central item of discussions, hearing participants turned to Russia-related topics on a number of occasions. Chairman Hastings was the only Member who made substantial comments relating to Russia. Opening the hearing, he asserted, “The recent challenges faced when Russia shut off gas supplies to transit and consumer countries highlighted the potential for political and economic conflict.” He added that such actions on the part of Russia seem to contradict Putin’s recent comments that Russia has a major stake in forming an infrastructure of trust in the global economy. Both Cardin and Butterfield bemoaned Western dependence on foreign sources of energy in their opening statements, but they did not mention Russia specifically.

  • Greg Manuel held that Europe should have access to diversified supplies of energy, adding that European energy markets should function efficiently, and that energy should not be used as a political or commercial weapon. Manuel also stated that the U.S. supports a ring of natural gas infrastructure extending from the Caspian to Europe. He said the U.S. is working to help its European allies maintain a unified front with respect to Russia – in order to elicit “more equitable” deals on energy and “resist divide-and-conquer tactics.”
  • Matthew Bryza suggested that Gazprom’s energy pricing policies underscore signs of market inefficiency, noting that the Russian gas giant buys Central Asian gas at $100 per 1,000 cubic meters, and then re-sells the gas to Europe for three times that amount.
  • The Belarusian Ambassador asserted that Russia’s suspension of gas deliveries to Belarus earlier this year underscore concerns about security of energy supply, and he indicated that his government was generally concerned with Gazprom’s business strategy.  Chairman Hastings noted in response that he was “keenly observant of Russia using oil and gas as leverage in other places,” citing Russian policy towards Ukraine, Georgia, and Poland.
  • Ambassador Keith Smith suggested that the use of Russian energy for political aims dates back to the early 1990s. He asserted that Russia’s recent energy deals with several East European states were non-transparent (at one point even suggesting that Russian intelligence officers are running Russia’s energy policy). He expressed concern that the European Union (EU) has not reacted more strongly to the cutoff of oil in recent years to EU member states Latvia and Lithuania.
  • Pierre Noel echoed many of Smith’s remarks, saying that Russia’s interests consist of maintaining and growing the politicization of the Russia-Europe gas relationship. Noel also stated that the manner in which Russia cut off gas supplies to Ukraine in 2006 harmed Russia’s reputation in Europe as a reliable energy supplier.

Internal Developments in Russia’s Energy Sector

Hegburg stated that Russia has “serious problems” with sustaining oil and gas production, asserting that Russian gas production (as controlled by Gazprom) is in decline. A major implication of this point is that Russia’s contractual obligations to Europe will be in question unless Russia can find alternative supplies. To deal with this problem, Hegburg said, Russia will have to rely on deliveries of Central Asian gas and shift from natural gas to coal and nuclear power as a source of electricity.

About the Hearing

The hearing was divided into three panels with three sets of witnesses.

Panel I:
• Greg Manuel, Special Advisor to the Secretary and International Energy Coordinator, U.S. Department of State.
• Ambassador Steven Mann, Principal Deputy Assistant Secretary of State for South and Central Asian Affairs.
• Matthew Bryza, Deputy Assistant Secretary of State for European and Eurasian Affairs.
• Al Hegburg, Deputy Assistant Secretary of Energy for International Energy Policy.

Panel II:
• Yashar Aliyev, Ambassador of the Republic of Azerbaijan to the U.S.
• Mikhail Khvostov, Ambassador of the Republic of Belarus to the U.S.

Panel III:
• Ambassador Keith Smith, Senior Advisor, Center for Strategic and International Studies.
• Pierre Noel, Research Associate, University of Cambridge.

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This news item was contributed by the USRBC. The U.S.-Russia Business Council (USRBC) is a Washington-based trade association that provides significant business development, dispute resolution, government relations, and market intelligence services to its American and Russian member companies.

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