Atlantic Council

2020 Global Energy Forum

Energy Security and Geopolitics: Return to the Past or a New World?


Helima Croft,

Managing Director and Global Head of Commodity Strategy, Global Research, RBC Capital Markets, LLC

Amos Hochstein,

Senior Vice President, Marketing,

Tellurian Inc.

General James L. Jones, Jr., USMC (Ret.),

Executive Chairman Emeritus,

Atlantic Council

Kadri Simson,

Commissioner for Energy,

European Commission

Masakazu Toyoda,

Chair and CEO,

Institute of Energy Economics Japan

Moderated By:

Andrew Sollinger,


Foreign Policy

Location:  Abu Dhabi, United Arab Emirates

Time:  9:00 a.m. Local

Date:  Sunday, January 12, 2020

ANNOUNCER:  Ladies and gentlemen, please welcome to the stage publisher from Foreign Policy, Andrew Sollinger.  (Applause.)

ANDREW SOLLINGER:  Good morning, everyone.  How are you today?

So I’m very excited especially to be leading this discussion because it’s always been a dream of mine to be leading a morning talk show on a Sunday, like Chuck Todd, and wrapping up all the hot events of the week.  And we certainly have some tremendous events that have occurred over the past week. 

And we have a fabulous panel of experts that are going to walk us through some of these actions and talk about geopolitical impacts, what that means for energy security, of course in the Gulf, but also around the world because it does have wide ramifications.  And I’m very much looking forward to that.

You know, when I agreed to do this discussion about a month ago, I had assumed we would really just talk through the really important implication of the death of the Carter Doctrine, which really came into force almost exactly 40 years ago when President Carter, in the State of the Union, declared that the U.S. would secure Gulf energy resources and act militarily against any aggressors.  And it seemed that President Trump had decided to forego that doctrine and not honor it, and that became clear after the Abqaiq attack, and there was really no reaction by the U.S.

And then last week happened – the missile strikes against Soleimani – and an entirely new era in U.S. relations in the Gulf emerged.  And it has really called into question a lot of – still the Carter Doctrine, but it restates U.S. interests, and that is in protecting U.S. personnel and not oil.  And that has a lot of ramifications for what happens here because there are a lot of residual angers and issues that are happening in Iran, and the expectation of more activity.  But still, the oil price does not move, and it’s really fascinating to try and understand why that is; why the markets are so sanguine.  And we’re going to talk a little bit about that today.

So I’d like to bring out our expert panelists who are going to help us pull that apart.  Helima Croft is managing director and global head of commodity strategy at RBC Capital Markets.  Please welcome her.  (Applause.)

Amos Hochstein is senior vice president, marketing, of Tellurian – (applause) – but he’s going to talk a little bit more as his former role as top energy diplomat to President Obama.

I’d also like to welcome General James Jones – (applause) – former national security advisor to President Obama.

I’d like to also welcome Kadri Simson, the new commissioner for Energy for the European Commission.  (Applause.)  Welcome, Kadri.

And Masakazu Toyoda, who is the chair and CEO of the Institute of Energy Economics in Japan.  (Applause.)  Toyoda-san, welcome.


MR. SOLLINGER:  So to keep our juices flowing and the interactivity happening, I’d like you to pull out your phones.  We’re going to do a little bit more polling, and we’ll do a snap poll right now.  So if you would, again, go to your app, open it up, and if you would click on “Interactions,” – “Interactivity,” we’re going to put up our first – and then “Voting,” we’re going to put up our first question.


And our first question is:  Do you think Iran or its proxies will disrupt Persian Gulf oil infrastructure or shipping in the next three months?  Please place your vote.


And I think we can get some tallies here.  That is a unanimous we’re in trouble.  So 73.5 percent of you thinking that, yes, there will be some attempts to disrupt infrastructure and oil shipping.

Let’s ask another question now.  Don’t put your phones away.  New question.  Go to voting again, if you will, and let’s pose a new question.  Now that we know that fact, where do you think the price of oil will be in three months?  Now, I should have put ranges up here.  Helima definitely mentioned that.  So let’s just use those as rough ranges.  Around $55, around $65, 75 (dollars) or 85 (dollars). 

And, Helima, where are we now?

HELIMA CROFT:  We’re – what are we at, 63 (dollars)?

MR. SOLLINGER:  Sixty-three.  So we’re around number – between number one and number two right now.  Please vote. 


So there’s a 70 something percent chance that there will be disruptions to our oil infrastructure and shipping, and a similar chance that the price will not move.  (Laughter.)  And that is exactly the reaction that we saw from the markets after Abqaiq and it is very similar to the reaction that we saw after the most recent missile attacks, with a 5 percent oil move and then back to current pricing.

Helima, you were in the Gulf during the September attacks, I know, and you wrote a fantastic research note on a letter from Kuwait. We’re talking about the September attacks.  You highlighted the Carter Doctrine’s demise and the fact that prices moved up and the fade, and that the U.S. was, clearly, not providing security.  We saw the same price retrace with last week’s attacks and you wrote in another note entitled “Broken Barometer” that oil prices are not reflecting reality.  Why is that?  Why are the markets so sanguine?

MS. CROFT:  I think what’s so interesting is your first poll number where you showed, like, you know, 73 percent of the participants here, who have a deep expertise in the region and geopolitics, think that there’s likely to be another attack on energy infrastructure in the Gulf.  If you polled market participants, I think you would not have 73 percent.  I think there is a view that we’re going to have some type of off ramp.

I think that they, particularly after you had the “All is well” tweet from President Trump, believe that sort of reflects where we’re headed in this situation.  I also believe that there is a segment of the market that believe that even if you have further attacks on Gulf energy infrastructure that it’s going to be very transitory because one of the things that many of us who sort of grew up in the sort of geopolitics and the oil markets were always told was that Abqaiq was essentially the mother ship of the oil market and if you had a major attack on Abqaiq it would have very serious ramifications for the market.

And the fact that we had such a major disruption on September 14th and Saudi Arabia was able to bring back production so quickly, I think for a lot of people in this market they say, well, the worst happened.  The worst, you know, incident we’ve seen in terms of supply disruption happened and, yet, the effect was so transitory.  Anything that comes after that cannot be nearly as big in terms of infrastructure and will not be a sustained outage. 

And so I think the market is saying, well, you could have potentially – sure, you could have another attack on a tanker or you could have something happen.  But it’s not going to be material, and because you have this prolific U.S. production story that the ceiling has really lowered – that even if you have a disruption we have U.S. production so it doesn’t matter as much for the market.

And so I think it’s a combination of being very complacent about the situation here but also believing the market is so well supplied that it’s not going to matter.  So I don’t look to oil anymore as a leading indicator of potential unrest in the region.  It’s not a barometer for temperatures in the region.  It reacts when you have a disruption, which I think is actually different than five years ago where prices would run up in anticipation of something or concern about conditions here.  Now it reacts to something happening.

MR. SOLLINGER:  So many other factors at play driving that price.  Talk about U.S. energy independence for a moment.  Is the – is the U.S. energy independent and is that really what’s driving markets right now and providing that cushion – oil sloshing around the world?

MS. CROFT:  Well, I mean, certainly.  I mean, the American story is you can’t underestimate the importance of it and if you look at imports from the region they have significantly dropped.  I think in 2001 the United States was taking about 2.8 million barrels a day from the region.  That had dropped to about 1.5 million (barrels) in 2018.  And now if you look at the first 10 months of 2019, average imports from this region were, like, 906,000 barrels a day. 

So we have had a downward structuring.  But, clearly, oil from this region still matters.  We still take imports into the United States, particularly the heavier barrels.  The U.S. story is, largely, a light story but also it’s a globally traded product and so disruption here does affect prices. 

And one thing I would say is – I was saying this a lot last year – is when President Trump is tweeting about OPEC and saying, OPEC, we need more barrels, when he’s asking Saudi Arabia for more barrels that means that OPEC matters.  It means that this region matters, and there’s only certain countries that can provide additional barrels if it’s needed on the market.

And so we still need – if we’re going to have a disruption we will still be looking to Saudi Arabia to make up for it, if we don’t want to draw from our Strategic Petroleum Reserve.

MR. SOLLINGER:  Interesting.  And China, of course, plays a crucial role in their demand in this as well.

Amos, I’m interested.  You, first of all, had very strong views, I know, on President Trump’s statement whether or not the U.S. cares about oil in the Gulf and that’s a very big statement to make, that the U.S. is not – that’s not its primary interest, that he’s interested in U.S. personnel and safety and security.  Tell us a little bit about the impact of those words and what that means here as well as in the U.S.

AMOS HOCHSTEIN:  Well, I think that, echoing what Helima just said, first, the concept – I don’t feel comfortable with the concept of U.S. energy independence.  There’s a self-sufficiency to some degree.  But independence suggests that you are disconnected from the rest of the market, and I just – even during previous administrations there was some people that started talking about energy independence and that’s a – it’s become more and more of a frequent mantra in the United States that I just don’t feel is accurate for exactly the reason that Helima just said, which is a disruption anywhere has impacts everywhere and that’s including the United States.

If we did have a major disruption that – and, unlike this audience, a major disruption that did actually cause a price increase around the world in Brent crude prices, WTI prices in the United States would rise commensurate with the rise in Brent crude and that would have an impact on the U.S. as well. 

It is true that it would not create a scarcity of supply, as we do have barrels.  But it’s important to think about what Helima said.  We are – yes, we produce an enormous amount of oil and we’re the largest oil liquids producer in the world today.  But we still import because we have balances in the market and we import what we don’t produce instead of making significant costly changes to our slates and refineries to just use the American crude.

But there’s a second element to that – to that statement.  The statement was we’re independent and we don’t need Middle East oil anymore, and I think this goes beyond the oil markets.  This is not about whether or not we need oil or we don’t, or whether our decline down to 900,000 barrels a day or not. 

What it goes to is a deeper concern among our allies in one of the most important regions in the world about the base relationship with the United States.  There was a sense in the region for decades that there’s a sort of an unwritten covenant between the U.S. and the region – we will supply you with a stable supply of hydrocarbons and you will supply an umbrella of security and – for stability in the region, tested, largely, in Kuwait during the invasion of Saddam Hussein. 

But, overall, this has been sort of a – this was seen as a basis of the relationship, and I started hearing some of the concerns among – sort of quietly behind the scenes in private conversations in my previous role in government and continuously since then that since the shale gas and shale oil revolution in the United States had changed the dynamic of demand in the U.S., this concern that that covenant’s broken – that we essentially – can we – questioning can we rely on the United States in a time of crisis to be there for us as our main ally if we on our side are no longer necessary and for the American economy for hydrocarbons.

And that – so with one statement of we are energy independent and we don’t need Middle East oil, I think that undermines what has been a U.S. response to that I think in both the Obama administration as well as in the Trump administration.  No, that’s not the case; we do need this relationship because this region is a major source for stability throughout the world.  And our presence here is a national security imperative for the United States.  I think it strengthens that suspicion and that worry whether or not we can rely on our relationship with the United States, or is it fundamentally altered and changed as a result of the shale oil production in the United States.

MR. SOLLINGER:  Interesting.  Now, you have some also very interesting thoughts around how we got here.  We talked a little bit earlier around what happened in September and how this all kind of began in September, this escalation, and whether the pressure that the U.S. has been exerting on Iran is working, and what types of reactions we’re forcing.  What started in September?  And talk us through how that brought us to where we are today.

MR. HOCHSTEIN:  Well, for context we were talking a little bit about what the – how we got here with – between the United States and Iran.  I think it started a lot before September.  It started with exiting the Iran nuclear deal.  And following the exit of the nuclear deal was the imposition of sanctions; and the very successful imposition of sanctions by the administration of being able to achieve far more than the market and analysts had expected, and being able to bring down if not necessarily the production, but exports of hydrocarbons and specifically oil out of Iran; and crippling the economy.  And that started creating that pressure cooker.

But the question remained, towards what?  And is it towards a return to the negotiating table to have a JCPOA, the agreement that the Obama administration and the EU had with Iran, or is it really towards a regime change?  And I think as you saw starting in September is this escalation of attacks, whether it was on Abqaiq as Helima talked about but also then in Iraq and Syria, the increase in poking us, to me this seems we’ve put a – we’ve created a pressure cooker that didn’t have an outlet, and unclear what that outlet was supposed to look like.

The government and the regime in Iran is not going to accept regime change as the – as an outcome.  And so if you take that off the table from the Iranians, who are not going to voluntarily walk away, then the question becomes, what’s the other outlet?  Because we are facing significant pressure, including demonstrations that we all saw against the regime on the streets in Tehran.

So, therefore, you need to change the narrative, because if you don’t like the story change the story.  And I think then we started getting into an escalatory tit-for-tat process of events between the United States and Iran that culminated with where we are today.

I don’t believe that – you know, the Iranians attacked the embassy, but with restraint.  It was a significant attack on the U.S. embassy, but once they broke down the door the two Marines or the few Marines that were there were not what was going to stop a mass of taking over the embassy compound, at least temporarily.  They walked away at that point.

I think the attack on and the killing of Soleimani, nobody had any illusions about how we all felt about him, but nobody also expected us to take him out.  And so that clearly caught the off guard.  The response was a missile attack on the U.S., and now we’re here.

I think the most critical part of where we are goes back to something Helima alluded to.  The market and the world has decided before the retaliation of the Iranians that we were going to World War III.  And that was – you know, if you went on Twitter or you went on CNN, we were – the question was, are we going to World War III?  And as extreme a view as that was, the minute the missile attack happened on the – on the airbases in Iraq the view was it’s over – the escalation is over, this round is over, we’re back to where we were three months ago, everything’s fine, we’re back, the region is as normal.

I think the first reaction was flawed.  I think the second reaction was equally flawed.  And we are not done, and this round of escalation is not done, for the simple – not because we killed Soleimani, but for the base fact that we are back to the same point that Iran is facing crippling sanctions without a clear path out of it, and it needs to get a clear path out of it.  And if we don’t provide one, they will try to create one.

MR. SOLLINGER:  So excellent point.  And now we’re at a juncture, however, where the U.S. has taken an extreme move that was unexpected, however prompted, however baited, and we’re at a point where there may be some very valid understanding of the U.S. as an actor in the region, in the space, that will make moves, that will – that will stand up for itself.

General Jones, we were talking earlier about one of the best-read pieces in Foreign Policy last week, which was a story – an interview with General Petraeus talking about the return of a credible retaliatory threat and deterrent, credible deterrent.  And that got incredible popular – a lot of our content was very well-read.  Ironically, at times like this it is.  It was retweeted by Donald Trump Jr. and Brit Hume and many others, other great – other great folks.  I’m just curious what your view is of General Petraeus’ comments, if that – if we have established a credible deterrent right now and if that’s what’s off-putting the Iranians.  And I will preface that by saying this unfortunate downing of the Ukrainian Airlines jet, while, you know, presumably an accident, is a corollary of the – of the trigger finger that the Iranians had, thinking that there would be even an instantaneous – could be an instantaneous U.S. response to that missile strike, which was telegraphed by a polite phone call:  you know, here are the buildings we’re going to blow up.  What’s your view on that?

GENERAL JAMES L. JONES, JR. (RET.):  Well, it’s obvious that the regime in Tehran has had a bad few weeks.  Certainly, the removal of Soleimani, the downing of the aircraft, and also I think we have to point out the escalation in the internal unrest in the country is something that’s much more significant than at any time in the past.

So I think the situation has changed dramatically.  The regime is many things, but it’s not stupid, and it is oriented on survival.  And they’re going to do whatever it takes to stabilize the situation in such a way that the survival of the regime is – continues to be intact.  I do think that if I were in a – in a leadership position in Tehran, I would – I would listen to the president’s words every day as a first order of business because there has been a very clear statement by the United States that the regime will be held accountable for what it does and what its proxies do, and that is a major change in terms of intent.

And so I think for a while the regime will be off balance.  I think it will – it will – it has to be in a state of shock in terms of at least the two events, plus the preoccupation with the unrest – the general unrest in the population.  And I think that there is a – there is a new deterrent quality – I agree with General Petraeus – a new quality of deterrence that they will have to think about.

Amos is absolutely right that the sanctions have if anything been strengthened and the regime is probably further isolated.  So for those who really want to see this thing through with the possibility of a – of a regime change at some point in Tehran, that trendline is, I think, enhanced.  I don’t know by how much, but it’s certainly a more credible proposition than it was two months ago or three months ago.

We’ll have to see what happens.  I personally believe the regime change will come from within Iran, not from outside of Iran.  But the combination of sanctions, global pressure, isolation, and the removal of a – of a very serious player in what’s going on in the world in terms of proxy manipulation – I mean, this is a country that has a GDP the size of the state of Maryland and it’s batting way above its weight.  And I’m hopeful that the days and the months, maybe a few years ahead, that we’re going to see a dramatic change that will bring much more peace and stability in the region.

MR. SOLLINGER:  So it is possible, perhaps, that it could happen this year even within the –

GEN. JONES:  I don’t – I wouldn’t want to guess on a calendar, but I would say that the needle has shifted in the direction of, you know – at least that would be a serious possibility.

MR. SOLLINGER:  So a serious possibility – let’s dig into that deeper with our audience because we have another one of those fun word clouds we’re going to do.  And this word cloud – again, you’ll go back to your app, to “Interactivity,” and I think there is a word cloud to click on, and if we could put that up on the screen – (pause) – use one word to describe how you feel about the prospects for long-term U.S.-Iran conflict resolution by the end of 2020.

Now that conflict resolution doesn’t have to be mutually agreeable; it could be any kind of resolution to this conflict –

GEN. JONES:  It won’t be –

MR. SOLLINGER:  – but that would be this year –

GEN. JONES:  It won’t be longer.

MR. SOLLINGER:  – and the word you can use is any word you like.  It could be positive, negative, frightened, hopeless, unlikely – it looks like unlikely is the leader right now.  Impossible has even made the board.  (Laughter.)  Even the new adjective, Trumpless – (laughter) – and train wreck – not to be necessarily used together.  Skeptical, impossible –

AUDIENCE MEMBER:  There’s a possible.

MR. SOLLINGER:  Possible is gaining.  Keep going, people.

I’d have to say – OK, let’s close it out.  I’d say unlikely, doubtful, impossible win; skeptical, too, but hopeful and possible, there are few in there as well, so very interesting to see that in there.

GEN. JONES:  I think the question long term is probably what drives this debate here, but if you said short term, you might have a different answer.

MR. SOLLINGER:  OK, well, it’s all in the wording, as you know, General.

Last question for you on this topic, General.  We were talking about the earlier question around the expectation for other types of attacks or actions on infrastructure to disrupt.  Is that something – how would you answer that question?  Would you expect that to occur?

GEN. JONES:  I think it would be crazy.  I mean, I actually think it would be – I give the regime much more credit for a sane discussion in terms of what their options are, but I – personally I think that, particularly at this time, it would be crazy to go back and say, well, things are back to normal, and we can do – we can act with some sort of impunity against shipping, or energy infrastructure in the region.

I think, given the president’s words – and I believe that to be extremely serious – that there would be a very swift and strong response, and I think, based on where I think the regime might be – at least mentally – right now, it will be a while before they – before they get back to business as usual.

MR. SOLLINGER:  Back to that credible deterrent.


MR. SOLLINGER:  And Commissioner and Toyoda-san, we’ll come to you in a second.  We want to talk – I should have said earlier we’re not just going to talk about Iran; we’re going to talk about geopolitical energy security certainly globally, not just in the region. 

But Helima, I wanted to come back to you on one point, and I really – we talked about this earlier, and I really liked in your broken barometer note in July – a few comments you made that the IRGC was ascendant in Iran, that talk of diplomacy was overblown, that they view Trump as a Twitter tiger who would never take action, and that he could be frightened into rescinding sanctions and calling it a great deal ahead of the election.  And the question to you is, understanding you have no inside knowledge, what do you expect the IRGC thinks now?

MS. CROFT:  Well, I think what’s interesting – and I think this is the debate – is that, you know, General Jones just said, you know, he doesn’t expect them to do anything, again, on infrastructure because he might respond.

I’m not sure at this point whether he will respond to energy infrastructure.  I mean, he was pretty clear after September 14th – like, I was stunned by September 14th.  I mean, the idea that you would have, you know, drones and low-flying cruise missiles attack such a critical energy infrastructure facility – and President Trump basically said this was an attack on Saudi Arabia, not an attack on the United States, which again – you know, five years ago, people would have said, you know, Abqaiq is a facility that is important to the entire global market. 

And, you know, he has alluded to the fact that this is oil headed to Asia.  And when he says we’re energy independent, I do wonder if the red line still remains American personnel, American institutions, not energy.  And so I’m not quite as sure that he would respond to an energy infrastructure attack, particularly if it was carried out by proxy groups.  So if you had something, for example, in southern Iraq where you had, you know, and Exxon facility hit by, you know, a rocket fired by a proxy group, would that necessarily be a trigger for Trump administration action?  I’m not sure.

And so that is, I think, what’s still sort of open for debate, you know.  It would be one thing if the Iranians came out and publicly claimed it, but if they go back to working through proxy groups, will it trigger a formal U.S. response?  I’m not sure on that, and I am actually very worried about attacks in Iraq because we talk about Saudi Arabia showed that they had redundancies in the system on September 14th.  They were able to execute very quickly.  I mean, you hear the stories about how they got it together so quickly.  Amin Nasser at Aramco getting everybody in there to get this restored.

MR. SOLLINGER:  They knew what to do.

MS. CROFT:  They really did.  I mean, this was a great, you know, vindication of, you know, his leadership.

But if you had a situation like that in Iraq, an attack on an Iraqi facility, I don’t think it’s clear at all that they have the type of redundancies that they could recover from it, again.  And so I do think that we still have to be concerned about the Iranians going back to the more shadow wars in terms of the effects that could have on infrastructure, and Iraq is where I am most concerned.

MR. SOLLINGER:  Right.  Amos?

MR. HOCHSTEIN:  I think – I think it’s important – we over – in lionizing Soleimani posthumously, we have overblown his control, so to speak, in Iraq.  I mean, we’ve now read stories where he was essentially controlling cabinet appointments, controlling oil production, controlling every aspect of every militia.

The militias that he was supporting – and clearly he was instrumental in creating this network of terrorist organizations and militias – but they are not just under the complete and total control of the Quds Force, the IRGC, or the regime in Tehran.  They have their own interests.

And I think that what’s opened here also is there are some significant concerns and issues for the United States in Iraq, as Helima just talked about, and energy infrastructures is a place where that can take place.  We have American companies who operate in both southern Iraq as well as in Kurdistan.

There is a lot more risk to energy infrastructure, pipelines, terminals, export facilities, tankers throughout the Gulf that can have – that then people are pricing it.  And this idea that we can have it both ways; that we can have audiences in this room and across New York and London trading floors that can say I truly believe there is not going to be a resolution to the conflict between the United States and Iran, I truly believe that there is going to be escalatory attacks, I truly believe that proxies in Iraq and the region are going to be attacking the United States, and I truly believe that the price of oil will remain exactly the same as it is today, I think is a bit of a wishful thinking; that I know – I love the rally on the NASDAQ, or on the Dow, or in London, and I really don’t want anything to disrupt that, so let’s just keep everything – yes, we’ll have conflict, but let’s just keep all the prices where they are.

MR. SOLLINGER:  Right, exactly.

So we’re going to come back to this topic.  We’re not going to talk only about what’s happened with Iran and Soleimani, but I want to invite you all to ask questions now if you have – about this issue, or submit them on your app so we can cycle through and come back to those.  And we’ll get to those shortly.  But please do stick your hand up if you would like to interact at any point.  We don’t have to wait until the end; we’ve got plenty of time left still.

But I do want to jump really quickly to Toyoda-san for one moment.  We saw yesterday in Dr. Fatih’s presentation how important oil flowing from the Gulf is to Asia, is to Japan, China, Korea – your neighbors.  This has got to be very scary for you, and I know that you are – or your government is here now in the Gulf on a peace mission to try and ensure everything is OK.  Tell us a little bit about Japan’s perspective on this issue – a lot at stake, no energy independence in Japan at this point.

MR. TOYODA:  Yes, I think the center of the economy grows East Asia.  Japan is not necessarily part of that, but we could help them.  And now, I think if you look at the data, the dependence of Asian economies on this region – not only oil but also gas – is increasing.  And with respect to Japan, 85 percent of oil is coming from this region.  And so this region is very important for Japan and now increasingly for all Asia – China, India, ASEAN, all countries very much depending on this region.

But what we can do as Asian countries is not to resort to military force.  What we can do is sort of economic diplomacy, peace diplomacy.  And I understand even though many things happening in this region, I think no country would like to wage wars.  I’m sure all the countries try to stabilize their economy first and try to be prosperous.  And so what Japan or other Asian country can do is to play a role of go-between.  Some people may not like that, but the reason why Prime Minister Abe is visiting this region now is to discuss how we could help them to be more prosperous rather than to start wars.  And –

MR. SOLLINGER:  What’s an – what’s an example of that help –

MR. TOYODA:  Well, I think one of the examples is, clearly, they in all these regions are facing the common challenge, which is climate change.  Climate change is getting more and more serious, and the end result is that we may not use sort of carbohydrate (sic) anymore.  But I don’t think it is true, but what we can do is to decarbonize carbohydrate (sic).  And so we could produce hydrogen from fossil fuel with CCS.  We can develop the technology of carbon recycling, et cetera, et cetera.  So we are working closely with many country in this region, and they have a great interest in doing that.  And also, we could help them diversify their economies.  They don’t have to depend on the oil economies.  And so by doing that I think what Asian countries, including Japan, can help them stabilize their economy first, and then perhaps sort of economic diplomacy would stabilize this region.

I don’t think at all military force will stabilize this region.  And I think only prosperity would stabilize this region.  That’s why Prime Minister Abe is visiting this region and he received the visit of president of Iran.

MR. SOLLINGER:  Right.  So regional cooperation, specifically when it comes to climate change, is critical and very important, and an excellent segue into the new commissioner of energy for the EU.

Commissioner Simson, thank you so much for joining us.  And I know one of your big initiatives coming right out of the gate six weeks into the job is the Green Deal, the EU Green Deal, which is a new compact within the EU to be carbon-neutral by 2050 and a very aggressive stance.  I personally am weary, tired, and frustrated by seeing sustainability goals go up on slides when we know – that we know we can’t meet.  But early diagnosis is that is – it is potentially achievable with some very tough measures that need to be taken and instituted by the EU to make that happen.  Maybe you could just tell us for a few minutes about the Green Deal – what it is, what it means, and what you’re trying to achieve in the EU.

KADRI SIMSON:  Yes.  Thank you for that chance.

I do believe that if that word cloud question would have been asked in front of all-European audience, the answer would have been kind of different because we do believe that diplomacy is a powerful tool.  And I am – I also think that it is kind of ironical that in the end of last year us in European Union, we were prepared for some disruptions in the natural gas market because we accommodated negotiations between Ukraine and Russia, and then we achieved agreement just before Christmas.  Now another crisis is ongoing.  But on top of the current crisis for us it’s very important that we are open – keeping open the door for nuclear talks, that is atomic agency.

What about European New Green Deal?  We published it only a month ago.  So as you know, new European Commission entered office from the 1st of December and this is our major priority, our roadmap – (inaudible) – by 2050.  And this is not only environmental plan or a plan how to pollute less; it is also a growth strategy.  So we do see that we have to invest into research and innovation, and by taking over new innovations our economy will be more competitive.  And now we can say that this strategy is also adding to our energy security because Europe is importing both natural gas and oil, but moving towards a bigger share of renewables you will achieve the goal that you are not so dependent anymore.

So in European Commission there are 27 commissioners.  And this is overarching goal not only in the nature field, but also transport industry, housing, agriculture.  All the other sectors have to add their part.

And we do have existing plan how we will achieve our 2030 targets.  So renewable – share of renewables will be 32 percent, and each and every member state has a national plan how to change their current energy mix, how to reduce solid fossil fuels, and even more important how to use less energy.  So energy efficiency is extremely important because this is the cheapest energy for us, if you don’t use it.

So it needs lots of investments because if we will use more electricity it needs investments into grids.  And we are currently building interconnectors between our different member states so that we will have bigger markets – not state-based markets, but markets on a regional basis.  That helps us also to accommodate a bigger share of renewables.

MR. SOLLINGER:  So one of the elements of implementing this law, which I believe will be pushed in March if I’m not – if I’m not mistaken, is a border tariff ensuring that there’s no leakage around the EU – indeed, trying to influence other regions.  This, then, of course makes us think about trade, specifically with the U.S., which has been weakening its restrictions on carbon-related industry.  How do you expect that to work?  I know this is something you may want to pass on to your fellow trade commissioner, but how do you think that will impact trade negotiations with the U.S.?

MS. SIMSON:  Well, for us it is very important that our transition that will take place, it has to be just towards our own people, just towards our regions, but globally just too.  And that means that if we are – well, inside European Union we do have emission-trading system.  That means that if you pollute, you have to pay.  And that also means that in some parts of Europe – for example, in sectorwise – you are closing down coal power plants because it’s not competitive anymore against nuclear power or against renewables.  But at the same time, right now there is open door for our closest neighbors to sell us their own production of their electricity, but sometimes it comes also from coal power plants.  So this is not fair.  And if we are talking about carbon border tax, then there will be a sectoral approach.  And of course, if we are talking about trade, then it – when the carbon border tax – that is not there yet and we don’t even have official proposal – it has to be competitive to WTO regulation.

MR. SOLLINGER:  Right, of course.  And there will be also implications from a tax basis internally as well.  My understanding is that you will be looking at the tax code internally within the EU to affect this as well.

And I gave you this anecdote earlier.  I holidayed over the Christmas break with my family in France and did quite a trip.  And we had planned to do it by train, but because of the strikes related to pensions I opted to drive, and was shocked pulling into the petrol station to fill my tiny SUV with gas the amount of money it took to fill that car already.  It had me digging for the yellow vest in the boot to see if I could go out and protest.  (Laughter.)  What is going to be the implications of this within the EU trying to drive more of this change towards 2050?

MS. SIMSON:  Well, this is a – in each and every member state you are independent on the taxations.  But that’s very true that all of our member states are adding significant sums to fossil fuels in different excises and levies.

Well, from out point of view you can help our consumers by consuming less.  So we have different initiatives how we will support energy efficiency so that our cars don’t consume as much fuel, so that our public transport routes are – well, that they will help people so that you don’t need your private car.  Well, in your case there was a strike and you couldn’t take a train.

MR. SOLLINGER:  Yeah.  Yeah.

MS. SIMSON:  But on top of that we are also planning renovation wave because 40 percent of our energy goes to heating and cooling, and we already know that if you will renovate old buildings you will consume so much less.

MR. SOLLINGER:  Right.  And of course in context, you know, as far as energy security and the – and the price of commodities, this is that same type of trend that we were talking about last night in our night owl session.  That is also pulling pricing down globally.

To move directly back to energy security with you on a slightly different topic, what has the EU learned about managing through disruptions, which last occurred in January of 2009 when gas was cut off?  Rather than getting into the politics of that move, what are some of the lessons learned from that that you’ve taken away to build energy security internally within the EU?

MS. SIMSON:  Yeah, that’s very true that about a decade ago, in the middle of a cold January – there is considerable different back home than here – there was a natural gas disruption and big regions where they’re without heat.  And since then we have invested in the interconnections so that if one member state faces a problem, another one can help.  And we have diversified our routes so that – well, it’s not wise that if you are dependent on one single provider.  We have built new LNG terminals, and this is a very good example of good cooperation between the European Union and the United States.  And we have this overarching regulation that you need to have oil reserves up to 90 days so that if something happens in imminent – well, you will – you will be secure for three month(s).

MR. SOLLINGER:  Right.  Great.  So we have less than 10 minutes left and I do want to take your questions.  I’ve got – I’ve got one last question for the commissioner, and that is around back to disruptions and preventing those.  The trilateral agreement that you just negotiated between Russia-Ukraine-EU, tell us a little bit about that.  Was that a situation where everyone wins, security achieved?  And that was something that you were involved in very recently; this just occurred less than a month ago.

MS. SIMSON:  Yeah, that’s very true that, well, in European Union we are importing natural gas, and our major partner is Russia, second – and we are importing also from Norway.  But Russia is changing its routes.  There are new gas pipelines built in northern part of Europe, and that created a problem that until the end of last year we had no agreement between Russia and Ukraine how they will use existing pipeline that brings natural gas to the part of Europe entering point is Slovakia.

Well, there were different phases of those negotiations, but basically now it is agreed that there will be five-year contract with a possibility to extend it for 10 years.  And it has – it seems to be mutually beneficial both for Russia and Ukraine, who will – who will earn significant sums because this is a transit country.

MR. SOLLINGER:  Good example of a negotiated solution, I guess.

Waleed (sp), you had a question that you wanted to ask?

Q:  Yeah.  Thank you very much.  Thank you, distinguished panelists.

MR. SOLLINGER:  Please introduce yourself, if you would.

Q:  Yeah.  This is Waleed Samali (ph) from Saudi Arabian National Oil Company, Saudi Aramco.

I know the focus of this panel is on energy security, but I would like to hear your valuable thoughts on something related at a different level, which is the science and technology diplomacy used as soft power in the geopolitical scene globally.  And what implications do you think of having science and technology as enabler for influencing – making an influence on the global scene and its impact on the Middle East and the region?  Thank you.

MR. SOLLINGER:  To anyone in particular?

MR. HOCHSTEIN:  I can’t – I can’t say that that’s my expertise, or any of us.  But I do think that as we talk about especially in the context of Saudi Arabia and Saudi Aramco the discussion of diversification of the economy beyond oil, which has been a stated goal of the Kingdom and of the rest of its neighbors, it is I think the international community’s interest to support that effort.  And as we’ve done in other sectors with diplomacy, I believe that that bringing together science/technology, whether it’s in the energy industry or beyond, and making sure that there is a support in both directions to strengthen those ties to enable that kind of a transition – to enable an economic growth that is not only related to energy – I think is critically as important to the rest of the world as it is to the region.

It is – from a national security perspective, I think the United States and our allies don’t spend enough time thinking about the economic conditions of national security, especially as you take that view out 10, 20 years.  We heard the other day in one of the dinners about just the population growth projections in the region.  And even if oil prices remain at 65 (dollars) flat as this audiences hopes for eternity, that’s just not enough.  And therefore, science and technology is going to have to be a piece of that if you want to get a next generation that’s coming up in the region to be able to integrate into new parts of the economy.

GEN. JONES:  I would just add to that the next big wave of technology is what everybody’s talking about, which is 5G.  But I would say that the important aspect of getting into the 5G world is whether it’s secure or not.  And if you don’t have a secure technology to protect your infrastructure, your critical instruments of power and military security, then you really don’t – you really don’t have – you really don’t have the reason to achieve the potential that this 5G technology can unlock.

So you’re going to hear a lot over the next year about 5G, but for those who really know it’s really whether you can achieve secure 5G in a way that makes it relatively impenetrable for the foreseeable future.  And that is where I think the United States is going to play in the competitive world with China.

MR. SOLLINGER:  And Toyoda-san, you had a thought on this as well.

MR. TOYODA:  Well, I think what I can say is only about energy security.  But I think two things.

One is that this region, including Saudi Arabia, can make independent from the standpoint of energy.  You could develop first energy conservation, and second you could develop renewable energy.  And clearly, countries with big population you could develop nuclear energy.

But in addition to that, I think, you know, the second thing which I wanted to explain to you is that Asian countries are happy to work with this region because, as I said, Asian countries increasingly depending on this region, not only oil but also gas.  And clearly, we work very closely together with have – trying to have a sort of joint stockpiling, et cetera, et cetera.

But the most important thing is we could work together to develop new technology to address climate change.  As I said, you know, decarbonization of oil or gas is quite important.  And by doing that, we could have a very good relationship between this region and the Asian region, and that is the most important thing for us and for this region.

And I think, as I said at the beginning, military force doesn’t stabilize this region.  I think only prosperity could stabilize this region.

MR. SOLLINGER:  Thank you, Toyoda-san.

MR. TOYODA:  We can work together.

MR. SOLLINGER:  Thank you, Toyoda-san.

I think we have time for one more question.  Please, sir, if you could –

Q:  Yeah.  Good morning, everyone.  This is Ragg (ph) with General Electric.

My question is for the commissioner – European commissioner.  Congratulations on your nomination, first.

My question is related to the EU 2050 strategy.  So we know that gas is good for the decarbonization strategy and for, you know, improving the use of renewable energies.  But at the same time, we see that some of the European countries and the financial institutions within the EU are reluctant to finance gas projects, although we know that until, as Toyoda-san said, we arrive to decarbonizing oil and gas with hydrogen it’s going to take some time.  So how do you reach that balance of, you know, decarbonization – you know, gas as part of the decarbonization strategy and continuing to finance it at least for the five- to 10-year term?

MS. SIMSON:  Thank you.  You are referring to the decision made by European Investment Bank, who is now partly European climate bank, that they are not financing in the future gas projects anymore.  Well, from our point of view future gas projects, they have to be future-proof.  So they – well, if we are talking about gas, then we’re talking not only about natural gas but also hydrogen.  This will be one of the priorities of us this year, the hydrogen initiative.

At the same time, of course, we know that gas is necessary to – for transition.  And this is also important for us that if we are investing inside European Union that we will have partners in our close neighborhood, for example Balkans and Northern Africa.  And just I would like to mention that from European Commission’s point of view we do see that we need a special partnership with African Union, so there will be colleagues-to-colleagues meeting soon in Addis Ababa.  And this was also the first destination where our president went outside of the European Union.

But gas will have a role during our transition period.  And the infrastructure and investments, they have to be future-proof.  We don’t need any stranded assets.

MR. SOLLINGER:  Excellent.  Thank you very much.

We’re over now, so we have to bid adieu.  But I want to thank our panelists, and please join me in thanking our panelists for a really excellent and interesting discussion, and really appreciate it.  Thank you so much.  (Applause.)

So we next have a discussion on “Sustainable Metals and Minerals for the Energy Transition.”  So please sit tight and we’ll move into that shortly.