Remarks at the Budapest Energy Summit

Remarks
Francis R. Fannon
Assistant Secretary, Bureau of Energy Resources
Budapest Energy Summit
Budapest, Hungary
December 3, 2018


Introduction

Good morning. Thank you Piroska for the kind introduction. I’ve seen a lot of Budapest and I’m pleased to be here today for the Budapest Energy Summit.

Today I would like to discuss Europe’s energy security: the challenges and the opportunities.

The United States has been engaged in energy issues as key to foreign policy since the 1800s. The State Department, at that time, worked to secure markets abroad for U.S. oil and kerosene, some of our largest exports at the time. In the 1970s, the Department was at the forefront in managing oil supply shocks, with then Secretary of State Kissinger helping to found the International Energy Agency.

Why European Energy Security is Important to the United States

In the 1980s, President Reagan warned his European counterparts about the dangers of increasing their energy dependence on the Soviet Union. Although the Soviet Union is no more, many European countries have increased their dependence on one source of energy. We, in the United States, continue to raise the call because energy is beyond commercial transactions.

Energy drives economies. In many ways it is fundamental to self-determination and the core of sovereignty.

As such, energy amongst nations is foreign policy. And in foreign policy, we must weigh multiple sets of equities. It requires stakeholders to consider more than what might otherwise appear to be a simple transaction.

Take for example, the lend-lease Act, prior to the U.S. entry into World War II. On the surface, lend-lease was a means for the United States to sell military equipment to Britain and others. It was a rent-to-own model.

But as states knew then, and certainly know today, lend-lease was a strategic move for the U.S. to support the war before formal political involvement.

One could argue that lend-lease was a “commercial project.”

Yet, we know that it was really a foreign policy instrument—a matter of geopolitical security.

We must consider energy security in the same way—beyond a narrow parochial, transactional view.

European Energy Diversification

The EU understands this well. Mr. Sefcovic spoke to it. The European Union recognized this concept in Energy projects of common interest.

These are cross-border energy projects designed to integrate countries. According to the European Commission, these projects “boost competition on energy markets and help the EU’s energy security by diversifying sources.” The Southern Gas Corridor is a good example. It is a $40 billion, 3,600 kilometer project to deliver Caspian gas to European energy markets. That project involves multiple countries, and a dozen top international companies. The United States has supported the Southern Gas Corridor for over a decade—a project without U.S. financial interest. We along with our European partners look forward to first gas expected in Italy in 2020.

The Krk Island LNG project in Croatia is another project of common interest. I just returned from Zagreb and met with Prime Minister Plenkovic where we discussed regional energy security and diversification.

The terminal could import LNG from a wide-range of suppliers. It allows for diversification for the region—in particular for Hungary.

Once key infrastructure is built, or actually built, it provides optionality, and introduces market competition that will directly benefit Hungary.

This is a proven idea – consider Lithuania’s floating storage and regasification unit, the “Independence.” It was built as a strategic investment, yet the FSRU meaningfully introduced market competition.

By contrast, consider Nord Stream 2 and the second line of TurkStream. One can argue that these are “commercial projects.” Yet in the case with lend-lease, they are geopolitical instruments.

As Secretary Pompeo put it, “We’ll keep working together to stop the Nord Stream 2 project that undermines Ukraine’s economic and strategic security and risks further compromising the sovereignty of European nations that depend on Russian gas.”

You see, a project that supplies free nations, should not divide them.

Russia is a significant supplier of gas to European markets. This makes very practical sense. It has geographic proximity, plentiful gas reserves, and a vast pipeline infrastructure.

Yet one country should not—cannot—be the only partner for Europe. As the European Union recognizes, energy security comes from diverse sources of suppliers, routes, and types of fuels.

The U.S. has joined our European allies and partners to advance energy security for decades. Consider the Baku-Tbilisi-Ceyhan pipeline, which delivers Azeri oil to Turkey.

We are encouraged by progress of the Interconnector-Greece-Bulgaria, and support development of new supply options such the Eastern Mediterranean gas.

How the United States can help Europe achieve its energy security goals

The United States has made remarkable gains toward energy security. Today, the United States is the world’s largest oil and natural gas producer. We are also one of the world’s largest producers of renewable energy.

Our energy abundance is a case study in energy diversification—embrace of markets and entrepreneurship. U.S. companies are world leaders in innovation and corporate responsibility. They operate according to market principles and respect the sovereignty of nations where they work. The United States is investing significantly in cutting edge technologies, and our economy is growing even as our greenhouse gas emissions are declining. Our energy-related CO2 emissions have fallen by 14 percent since 2005, even as our economy has grown by over 19 percent.

No other country has been able to achieve such growth while reducing emissions.

The United States stands with Europe to advance our shared energy security.

There should be many suppliers, but one Europe, and one Transatlantic alliance.

Thank you.