Here's One Thing We Can Do About Russia and Ukraine

Mar 4 2014, 2:34pm CST | by

If America wants to strike at Russia’s actions in Ukraine then there is an economically sensible step we can take – expediting the approval process for natural gas exports to our allies in Europe.

In a modern economy, the current slow approval process that, in effect, prevents U.S. exports of natural gas makes little economic sense, particularly since the energy sector is a major source of job creation in the United States. “Section 3 of the Natural Gas Act prohibits the import or export of natural gas, including liquefied natural gas (LNG), from or to a foreign country without prior approval from the Department of Energy (DOE),” according to the Energy Department.

In practice, companies can export to nations that have free trade agreements with the United States. (Find list here.) Importantly, that list does not include Ukraine or the European Union, which means licenses must be obtained to export liquefied natural gas to that part of the world.

Action on this issue is within the control of the executive branch. In other words, the U.S. Department of Energy under President Obama can approve applications to export liquefied natural gas. However, the administration has been slow in doing so. Two bills in Congress would change that.

S. 192 and H.R. 580, sponsored by Sen. John Barrasso (R-WY) and Michael Turner (R-OH), would amend the Natural Gas Act to expedite the application and approval process for NATO countries, Japan and “any other foreign country if the Secretary of State determines that such exportation promotes U.S. national security interests.”

Such a change in the law would be an important economic and foreign policy step. “As an energy superpower and the world’s new No. 1 producer of petroleum and natural gas hydrocarbons, the U.S. is now in a position to become a major energy exporter,” according to Mark Perry, professor of economics at the University of Michigan (Flint) and founder of the economics blog Carpe Diem. “Outdated restrictions on the exports of crude oil and natural gas no longer make sense in a new era of energy abundance in America, thanks to the revolutionary extraction technologies that have accessed oceans of oil and gas trapped in shale rock formations.”

Perry notes the U.S. government has no business trying to set prices for energy by impeding exports. “Experience and history have clearly demonstrated that the free market is a much better allocator of commodities and natural resources than bureaucrats or politicians, and we should now allow market forces, not outdated energy policies, to allocate America’s energy bonanza in a global marketplace. America’s new energy superpower status gives us additional geo-political leverage in situations like the current one in Ukraine, and provides another reason to end the restrictions on oil and gas exports.”

Gary Schmitt, a foreign policy expert at the American Enterprise Institute, has written, “With almost half the state’s budget coming from oil and gas revenues, Putin can ill afford to see Gazprom lose its preferred position supplying Europe’s gas. Moscow’s sway during the Cold War was largely a product of its massive arsenal of men, tanks, and missiles, but today its influence is tied to what comes out of pipelines.”

Americans, including American companies, should be free to export anything they want so long as it does not threaten vital U.S. national security interests. In this case, granting licenses in an expedited fashion would significantly aid a vital U.S. security interest.

Expediting approvals of future exports of natural gas to Ukraine would help that country against blackmail threats from Russia, while U.S. exports to the European Union would weaken Russia’s economic position in Europe. Such a step would make sense for America.

Source: Forbes Business

 
 

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