It has become fashionable to note a decline of US global power and influence, but don’t tell that to the energy experts. Many see increased domestic production of oil and gas as driving more muscular US energy diplomacy, power that exists in curious tandem with the Obama administration’s efforts to wean the world off fossil fuels.
“The rapid rise in US oil and gas production, together with the decline in oil consumption and the elevation of climate change as a priority, is completely scrambling the way policymakers think about energy diplomacy,” said Michael A. Levi, a senior fellow at the Council on Foreign Relations.
Joseph S. Nye Jr., the Harvard professor who articulated the notion of “soft power” in international affairs, sees a “shale gale” propelling the US’ status: “If you are attracted to a country or any leader, a lot has to do with the feeling, ‘Do they have momentum? Is the wind in their sails or are their sails flapping?’ We’ve got a gust.”
Carlos Pascual, a former US diplomat, agrees. Increased energy production “strengthens our hand.” he said. “China, when it talks to us about global energy supplies, it sees us as a supplier,” he said.
This monumental shift, Pascual said, allows the US to cooperate more closely with the world’s largest energy consumers to combat climate change - for example, by persuading them to reduce their heavy reliance on coal. “If we can’t work with China on diversifying their fuel mix, then we’re all going to die,” Pascual said, calling natural gas “the fuel in the interim that has the greatest prospect for substituting coal”.
The State Department’s Bureau of Energy Resources, which Pascual ran from its inception in 2011 until last August, is evidence of a brighter spotlight on energy. It has grown from a staff of fewer than 50 to 90 today, with a mission to “develop, harmonise and promote US energy security overseas,” according to a State Department document.
Several federal agencies have increased investments in foreign energy projects in recent years. Some are modest, such as a $750,000 (Dh2.75 million) loan by the Overseas Private Investment Corporation (Opic) to an Indian start-up that builds micropower plants run on discarded rice husks. Others are huge: Opic recently announced $230 million in loan guarantees to construct a 141-megawatt solar power plant in Chile’s Atacama Desert, the largest project of its kind in Latin America.
On September 23, President Barack Obama issued an executive order that “requires the integration of climate-resilience considerations into all United States international development work.”
Still, the government remains a big backer of fossil fuel production. The Export-Import Bank underwrote a $1.5 billion bond guarantee last year, enabling Mexico’s state-owned oil monopoly, Pemex, to patronise US companies. In 2010, the bank lent $3 billion for a liquefied natural gas project in Papua New Guinea. The project, led by Exxon Mobil, started shipping gas this year to Japan and has contracts with clients in Taiwan and China.
No doubt many investments abroad are intended to generate economic benefits at home. That’s an old story. In the late 19th century, Standard Oil, owned by John D. Rockefeller, “depended on the State Department to fight for the removal of tariffs and other barriers to the entry of American oil into foreign markets,” Rosemary A. Kelanic, an assistant professor of political science at Williams College in Massachusetts who studies energy access as a coercion tactic, said.
The Pemex financing arguably continues that tradition, with an estimate that it would support around “6,800 US jobs spread across about 10 states,” according to the Export-Import Bank’s website.
But some loans, grants and bond guarantees also serve as attempts to win friends and electrify neighbours. In 2007, the US Agency for International Development spent $43.8 million for energy services, but that rose to more than $391 million by 2013. Opic’s financing of energy projects soared from $123 million in 2007 to $1.21 billion in 2013.
“Investing in development today means averting instability tomorrow,” Opic’s president and chief executive, Elizabeth L. Littlefield, said. Sometimes, the State Department’s Energy Bureau forges agreements directly with other countries. In August, it signed a memorandum of understanding with Grenada to provide technical assistance and encourage private investment in sustainable energy technology.
While Nye considers the Grenada agreement “minor”, he views it as further evidence of the US’ enhanced status: “If you want the vote of Grenada in the UN, and Venezuela is now purchasing it, along with a lot of other Caribbean votes, by subsidized energy, we are now going to be able to compete in that area.”
The US has used its energy resources to play diplomatic hardball. In the summer of 1941, Franklin Delano Roosevelt’s administration slapped licensing requirements on oil exports to Japan, “which effectively amounted to a complete embargo,” Victor McFarland, an assistant professor of history at the University of Missouri, said. It was the “first time that access to oil was used as a foreign policy tool on a big scale,” he added.
At the time, the US accounted for nearly two-thirds of global oil production, but “rather than restraining Japanese aggression,” he said, “the embargo helped push Japan towards war.”
Ellen R. Wald, a professor of Middle East history at Jacksonville University, draws parallels between the US’ ascending role as an energy supplier and the postwar period, when the country still ranked as an oil powerhouse. Government officials funneled foreign-bought oil to rebuild Europe as part of the Marshall Plan.
In 1956, during the Suez crisis, the administration of President Dwight D. Eisenhower used access to oil to intimidate Britain and France. After Egypt’s president, Gamal Abdel Nasser, nationalised the Suez Canal Co. in July 1956, Britain and France launched a surprise aerial attack to seize the critical waterway on Oct. 31.
Furious about being blindsided, the Eisenhower administration stepped up its pressure tactics, weakening the British pound and threatening to withhold oil from Britain and France at a time when both had limited reserves of fuel. The British and French soon relented.
In other words, the US wielded its energy policy to achieve geopolitical ends. “That’s something we did do historically,” Wald continues, “and we may be able to do again.”
It seems a fair bet. The State Department’s Energy Bureau helped persuade China, India and other countries to reduce imports of Iranian crude oil.
The arm-twisting very likely spurred Tehran to freeze its nuclear programme last year, though Pascual, a former ambassador to Mexico and Ukraine, put it more diplomatically. “We were able to have a different kind of conversation than we could have had even 10 years ago,” he recalls, providing negotiating partners with an “analysis of global oil markets: what the trends were in those markets, where supply was coming from - in particular, from the US.”
— New York Times News Service
