Richard Morningstar
Special Envoy for Eurasian Energy
Washington, DC
July 17, 2009

Mr. Chairman, distinguished Senators,

It is a great pleasure to be here today to talk about one of the important pillars of U.S. diplomacy, energy security. I’d like to thank the Committee for inviting me to talk to you about what the U.S. is doing with regard to energy security. We’ll examine the issue from a global perspective then I’ll talk about U.S. energy strategy and steps we are taking to implement it.

Before I get into the details, I’d like to express my appreciation to Senator Lugar for the priority you have placed on global energy security as a foundation for peace and security. I had the honor of traveling with Senator Lugar to Ankara, Turkey earlier this week to represent the United States at the signing ceremony of the Intergovernmental Agreement on Nabucco. Our presence together underlined the strong bipartisan approach that we have taken on these issues. The Agreement is a major milestone in opening a new natural gas corridor to Europe. It demonstrated the commitment of Turkey and the other participating countries to that project and needs of Europe. This signing should provide a great impetus to the project. We also have to remember there are many steps to realize the project.

One of the most interesting aspects of the signing was that Prime Minister Maliki attended and announced that Iraq would like to supply 15 bcm/a to Nabucco. It is a very long way from here to there but it is significant that he was there and talked about participation in the project.

What is the U.S. strategy?

There are three main components of our Eurasian energy strategy. First, we want to encourage the development of new oil and gas resources and also promote efficiency and conservation in the use of all energy resources. Because there is a world market for oil, new production can meet growing demand anywhere in the world, including in the U.S. When we are talking about new natural gas production in the Caspian region, it is unlikely that even one molecule of that gas will reach the U.S., but it is still important because it would add to international gas supply. Additional supply in one place naturally frees up supply in another. And as the market for liquefied natural gas grows, we can start to think about gas moving around markets in much the same way oil does.

Second, we want to assist Europe in its quest for energy security. Taking goods and services together, the EU27 and the U.S. account for the largest bilateral trade relationship in the world. Europe is our partner on any number of global issues. We have an interest in an economically strong Europe. Of course, Europe is composed of many different states and energy security is a more pressing issue to some than to others. Some countries in Europe do not have a diverse energy mix and depend to a great degree on one supplier and one transport route. When that route is disrupted, as we witnessed in January 2009, the consequences can be severe. The populations of Bulgaria and Serbia and others who suffered in the cold can attest to that. So our aim is to encourage the development of multiple energy sources with multiple routes to market. This approach furthers competitive, efficient markets and the best prices for consumers.

Third, we want to help Caspian and Central Asian countries find new routes to market. We want to help foster economic growth and prosperity in these countries. By expanding export routes, they can increase competition for their resources and demand a higher price

Some people have portrayed our energy policy and Russia’s as the next round in the Great Game in Central Asia. I reject this analogy. Energy security should not be a zero sum game. Zero sum games are too expensive and we need to find areas where we try to cooperate with Russia. In this spirit, on July 6, the White House announced a new binational presidential commission that will cover a host of different issues, including energy. We look forward to that engagement.

How will we achieve our energy security goals?

Private sector and free market forces are the primary means through which oil and gas are produced, transported, and purchased. But governments can and should play a facilitating role. Governments should put in place the right business climate to attract investment and should work with neighboring states to expand the market and increase interconnectivities. We can encourage these efforts.

At the heart of our policy is the belief that energy security is best achieved through diversity – diversity of suppliers, diversity of transportation routes and diversity of consumers.

We strongly support opening a new corridor, a southern corridor, to bring Caspian natural gas to Europe. This corridor should include Nabucco and the Turkey-Greece-Italy Interconnector, both of which we support. These projects are extremely important from a diversification and strategic standpoint. They can help open up further upstream development not just in Azerbaijan but also in Turkmenistan and Iraq. We believe Turkey’s role as a transit partner is critically important. These projects will form a long-term bond between the countries of the Caspian region, Turkey and Europe.

Oil markets and oil production is also key to our strategy. We also support further production of oil in Kazakhstan and new export routes for that oil to world markets.

It is important to emphasize that new pipelines alone will not sufficiently provide for Europe’s energy security. The U.S. supports the other initiatives that Europe is undertaking to increase its own energy security. Those initiatives focus on building a single market for energy, unbundling the distribution and supply functions of energy firms, building interconnectivity of European gas and electricity networks, enhancing LNG import capabilities, and increasing gas storage. All of these things are pieces of the puzzle to ensure European energy security.

To summarize, the key to achieving our Eurasian energy strategy is engagement. We need to continue to engage with the private sector, with the EU and with individual European states, with Turkey, with Russia and with Central Asia. Our job is to listen, identify common interests and priorities and play a facilitating role where we can.

Thank you.