Ambassador Morningstar Delivers Second Annual Prometheus Energy Lecture
Amb. Richard Morningstar
Founding Chairman, Global Energy Center, Atlantic Council
March 4, 2019
It is an honor to be here today in Piraeus to deliver the Prometheus Lecture and receive the Prometheus Award. I want to personally thank Professor Angelos Kotios, the Rector of the University of Piraeus, Professor Aristotle Tziampiris, the Chairman of the International and European Studies Department, Michail Sfakianakis, the Dean of the School of Economics, Business and International Studies, Ambassador Pyatt, the United States Ambassador to Greece, and the Aikaterini Laskaridis Foundation.
Frankly, I was a little bit worried that giving this lecture and accepting this award could lead to a giant eagle coming after me and eating my liver. It is interesting that the myth talks about how Prometheus’ liver regenerated every day. There must have been some people twenty-five hundred years ago who truly understood medicine, because livers, to some extent, do regenerate. From my understanding, you could have a third of your liver removed and it will grow back. It is remarkable to have that as a part of the myth so long ago.
I spent the last few days at the Delphi Economic Forum as part of the Atlantic Council delegation and now I am here today. I am also glad to be here because Greece is such an important contributor to European energy security. Greece is playing a critical role as a transit country for the TAP pipeline and the Southern Gas Corridor, which will bring Caspian gas and other gas into Europe; a critical role as a potential LNG supplier through the Greece-Bulgaria Interconnector to Bulgaria and on into the Balkans; and as a potential developer of resources in the Eastern Mediterranean, which can provide an additional gas supply to Europe. I have heard only good things about how Greece handled the construction of its portion of the TAP pipeline. Greece is a key player that nobody should forget.
Today, I would like to focus briefly on four areas: all of which are relevant to Greece. First, to answer the question as to why the United States should be involved in European energy security; second, the inextricable nexus between commercial and geopolitical issues in looking at energy projects; third, specific steps that can be taken to increase European energy security, including some of the areas that I mentioned earlier; and fourth, the importance of European-United States cooperation on the geopolitics of the energy transformation, so that new technologies are not left to other countries.
Turning to the first issue, why should the United States care about European energy security? Some might ask why is it any of the United States’ business? To me, the answer is relatively straight-forward. European energy security is critical to US interests. Likewise, American energy security is critical to Europe’s interests. Put simply, energy security creates economic and political security. The US and EU are the largest trade and investment partners in the world. A prosperous Europe that is politically secure and not subject to external threats is in the interest of the United States. Needless to say, the United States cannot tell Europe what to do. As Hillary Clinton said when she was Secretary of State, the United States cannot want European energy security more than Europe does. We do not need to agree on every energy issue. What we need to do is constructively engage, in order to do what is possible to enhance our common interests.
This brings us to the second issue; the nexus between the development of energy resources and geopolitics. An obvious example is in your own backyard, the development of resources in the Eastern Mediterranean. For years, I have said that: there never have been such large potential benefits to all of the countries in a region with so many political obstacles as in the Eastern Mediterranean. I do not need to repeat to you what seems like an endless list of challenges. The countries in the region need to work together to remove those impediments, so that all countries and their citizens benefit. The United States must help in that effort. Let these great natural gas resources lead to reconciliation, and not to threats to peace and stability. Unless the obstacles are overcome, the resources will be left to a very few countries. It would be a shame for these resources to be left to only larger countries with large domestic markets.
I know that Greece would like there to be a pipeline involving Israel, Cypress, Greece, and Italy. In order for this project to materialize, the political issues have to be solved. Exxon’s finding of gas is important. Hopefully, that will lead to more United States involvement and help in resolving the issues, as opposed to leading to conflict.
The Southern Gas Corridor, of which Greece is such a critical part, presents an interesting case where both geopolitical and commercial aspects have played an important role. From a geopolitical standpoint, the US and EU have been strong supporters of the Southern Gas Corridor because it will provide Caspian gas as an alternative source that will mitigate dependence on Russian gas. But the choice of the Trans Adriatic pipeline to bring that gas from the Turkish border through Greece and Albania on to Italy is an example of commercial considerations taking precedence over geopolitical considerations. From a geopolitical standpoint, many preferred the gas to go directly from Turkey into the Balkans to provide direct competition to Russian gas, but companies and countries in that region could not come up with a commercial proposal that made sense. The result was that the shareholders of the Shah Deniz project in Azerbaijan chose TAP as a transit route because it was a much better project from a commercial standpoint. Geopolitical factors are important, but any project must be commercially viable. I should also mention that TAP presents additional opportunities to Greece as it expands beyond its present 10 BCM per year. Gas can be delivered through the Greece-Bulgaria interconnector to Bulgaria and on northward. Gas can also go from Albania to Croatia and the Western Balkans.
Another example of the intersection of commerce and geopolitics is the well-known controversy surrounding the Nordstream 2 pipeline, which would carry gas from Russia under the Baltic Sea directly to Germany and into Europe. Turkish Stream presents similar issues. Regarding Nordstream 2, you may remember President Trump railing about this pipeline and all the money Germany pays Russia for gas, using that point to question why the U.S. should support NATO and defend Europe. Nordstream 2 is a real issue, but not for those reasons. The real reasons that the Obama Administration and most in the Trump Administration have opposed Nordstream 2 is that it would increase European dependence on Russian gas, which Russia has used as a political tool and could deprive Ukraine of transit fees on existing routes. That would send a terrible signal, given Russia’s actions in Crimea, Eastern Ukraine, and the Kerch Straits. Poland and other Central and Eastern European countries have strongly opposed the pipeline. However, Germany and some other countries many have supported the pipeline, saying that it is a commercial project and that geopolitics should not be a consideration. So, there you have it, commercial issue or geopolitical issue. The same issues would apply to Turkish Stream, which could ultimately have more of an effect on Greece. Turkish Stream will deliver gas from Russia under the Black Sea to Turkey. It is still unclear how it would get to Europe, probably through Bulgaria, but many of the same issues will be involved if and when the routes are chosen. With respect to Turkish Stream, it could have a negative effect on the expansion of the TAP Pipeline, Eastern Med projects, and LNG coming into Greece. Turkish Stream could affect Greece becoming a transit hub, with Greece less likely being able to ship gas in all directions, including to the Balkans.
I will make two more points with respect to new Russian pipelines that both tangentially relate to Greece. Some in Europe argue that the only reason that the United States cares about these pipelines is that it could interfere with the sale of U.S. LNG to Europe. Yes, we would like to see LNG exports, but we are more concerned with energy, economic, and political security. The amount of LNG that will be imported here in Europe—not only from the U.S., but also from other places, including Algeria and Qatar—will depend on the market. LNG must be price competitive and little will be sold unless it can compete with piped gas. In one sense, however, it doesn’t even matter how much is sold. The key point from an energy security aspect is simply that the LNG is available, because if it is available, including in Greece, it will keep prices down. That will help keep gas from being used by Russia as a political tool and imposing monopolistic prices on gas. Many of you may have heard how when the LNG terminal in Lithuania was constructed, Gazprom unilaterally lowered its prices by about 20%. This could be the case as well if the Krk Terminal is constructed in Croatia, as well as terminals in Greece that could ultimately bring LNG to Bulgaria and Romania. It is worth noting that the first U.S. LNG shipment came to the expanded Revithoussa terminal a few months ago, and an LNG terminal at Alexandropolous would have great potential.
We could debate the merits of the various issues relating to Nordstream 2 and Turkish Stream for hours, such as whether U.S. sanctions are appropriate. It will also be interesting to see how the amendments to the Third Energy Package, recently passed, will affect Nordstream 2 and Turkish Stream. Don’t misunderstand me, I am opposed to these pipelines. The key point, however, is that the European energy market be competitive and transparent, whether Nordstream 2 and Turkish Stream happen or not. For this to happen, the EU has to rigorously enforce its energy regulations and directives, particularly the third energy package as amended and competition laws. This will force Gazprom to comply with European law and act transparently and competitively. The EU and member states also have to work continually on diversifying their sources of supply. Greece will play an integral role in supply diversification. Work must continue towards achieving a low-carbon economy; and finally, Europe must integrate its energy market by building necessary interconnections and storage facilities to tie Europe together.
In this regard, the United States has been strongly supportive of the Three Seas Initiative, which originally began at the Atlantic Council as the North-South Corridor Initiative. There are now 12 member states that have joined the Three Seas Initiative, whose major objective is to further integrate oil and gas and electricity networks across the region and to continue to work on increasing connectivity between the Baltic, Adriatic and Black Seas—and Europe as a whole. There are also transportation and telecommunications projects. This infrastructure will allow for diversity of supply and competition across the region and mitigate the negative effects of any new Russian pipelines. Having said all of this you might ask, “what about Greece?” I would argue that Greece should be closely connected to Central and Eastern Europe and can be a conduit not just to Italy but to the Western Balkans as well as all of Central and Eastern Europe. I believe Greece should be part of the 3 Seas Initiative as soon as possible. Maybe it should be the 4 Seas Initiative!
Because this initiative is so important to European energy, economic, and political security, the U.S. is strongly supportive and is working diligently to generate investor interest in the priority projects that have been identified. As I have also mentioned, the United States needs to be fully committed to eliminating obstacles to the development of resources in the Eastern Mediterranean, must be fully committed to further expansion of the Southern Gas Corridor, and should be a major global supplier of LNG and oil.
The one final area I would like to talk about is the geopolitics of the energy transformation to a low-carbon economy. Parenthetically, Greece has tremendous opportunity in solar and wind energy, neither of which is lacking here. Energy transformation is an area where the United States, the EU, and member states must cooperate, or we will find ourselves hopelessly behind other countries in the race to develop new technologies. This will damage our economies and reduce our influence in the world. It remains unclear whether the United States and Europe can play a leadership role in this energy transformation, in the same way that we have led previous energy transitions.
China, for example, is set to account for more than half of global solar deployment and electric vehicle sales this year. Beijing’s Belt and Road Initiative from China, across Central Asia, and on to Europe will accelerate China’s plans to become a clean energy powerhouse, and China is also poised to construct a network of high-voltage power lines across the Eurasian landmass. Add to this the fact that the U.S. will soon fall behind China in overall R&D spending, and the picture of an energy-rich, yet complacent, United States emerges. Europe is doing no better.
So, this clearly represents a high-stakes game for both the United States and Europe—not only in deploying clean energy technologies, but also finding a strategic, sustainable role to play in clean energy manufacturing and innovation.
But it is even more than that. We have heard a lot in recent decades about soft power and the need for the United States to exercise its soft power to win the admiration of people around the world. We have not been doing a very good job in recent years of serving as a model to emulate. Perhaps the best example is our intent to withdraw from the Paris Climate Accords. By defaulting on climate leadership, we have allowed China to take on a leadership role on climate change, and we have enhanced China ‘s position as a leader on new energy technologies.
Europe for now may be doing a better job regarding soft power than the United States, but Europe still has many issues. We have to ask whether both the U.S. and Europe are losing the soft power battle to China. In fact, China is not the easiest partner for countries to deal with, but we have to come up with a real strategy to be able to compete in this new world.
My final point is that we must double down on research and technology, which will take an “all of the above” approach. We have to continue research in areas such as carbon capture and new nuclear technologies. I know nuclear energy is controversial, particularly in Europe, but we have to determine whether new generation nuclear technologies such as small modular reactors (SMRs) can provide a cost competitive, safe, and efficient clean energy source in countries as large as China to compete with coal as well as in areas in Africa or elsewhere that lack sufficient electricity. From a geopolitical and national security standpoint, we cannot leave the nuclear space to Russia and China. Safety risks and proliferation risks are too great and the potential benefits so large that we both must have a stake in the game. The bottom line is that we have to work together in all of the areas that I have addressed here today. The U.S.-EU Energy Council can be a vehicle to oversee this cooperation.
Today there are several bumps in the road with respect to the transatlantic relationship. Right now there are a lot of major issues between the United States and Europe. Let’s do everything we can to make sure that energy security is an area that brings us together in the pursuit of our common interests and values.