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U.S.-European Cooperation on Energy Focus of Webchat
USINFO Webchat transcript

June 29

Matthew Bryza, Deputy Assistant Secretary of State for European and Eurasian affairs, discusses European energy matters, strengthening U.S.-European cooperation and implications of the opening of the Baku-Tbilisi-Ceyhan pipeline in a USINFO webchat.

Following is the transcript:

U.S. DEPARTMENT OF STATE
Bureau of International Information Programs
USINFO Webchat Transcript

Energy Issues for Europe and the U.S.

Guest: Matthew J. Bryza
Date: June 29 2006
Time: 11:00-12:00 p.m. EDT (1500-1600 GMT)

USINFO WEBCHAT MODERATOR: We will start just after 11:00.

Matthew Bryza: Hello everyone, I'm Matt Bryza, with the State Department. One of my duties as Deputy Assistant Secretary in the European Bureau is to coordinate U.S. energy policy in the regions surrounding the Black and Caspian Seas. This is an area I've been working on many years, having served as a Presidential advisor on energy issues in starting in 1998, and continuing to work on issues for the region since then. Our underlying goal is to increase the efficiency of European energy markets by increasing commercial competition through diversification of supply. We seek a mutually beneficial energy partnership with Russia and with all of the countries stretching from the Caspian Basin to Europe. It is my pleasure to participate in this webchat with individuals from Albania, Greece, Turkey and Azerbaijan today, and I look forward to your questions on a broad array of energy issues with our European partners and how they relate to the United States. [June 29, 2006 11:04]

QUESTION [Marianna]: I am Marianna Androutsou, Greek newspaper "Apogevmatini". I think it was back in 2003, when "Nuclear Energy 2010" (American plan for new nuclear reactors) was announced. Is that plan still active? Is there any American cooperation with Europeans "building" new nuclear factories (Finland, Turkey, Italy, France)? Do you also think that "energy cold war" has begun? If so, who will be the winner then? Thank you.

ANSWER: Thank you for that question. Yes Nuclear Energy 2010 is still very much active. The U.S. Department of Energy has the lead on this initiative, which is a joint government/industry cost-shared effort to identify sites for new nuclear power plants, develop and bring to market advanced nuclear plant technologies, evaluate the business case for building new nuclear power plants, and demonstrate untested regulatory processes. For more information, I'd invite you to look at the Department of Energy Fact Sheet.

Is there any american cooperation with Europeans "building" new nuclear factories (Finland, Turkey, Italy, France)?

I am unaware of any ongoing cooperation between U.S. and European companies on nuclear energy plants, but would welcome such collaboration if the companies decide this is in their mutual interests.

I don't agree that a new energy cold war has begun. Russia is one of the leading producers of hydrocarbons and the U.S. is the world's largest consumers. So both our countries have a great deal more to gain by working together and positively engaging on energy issues. In 2002, we established the U.S. Russia Energy Working Group to focus on investment issues, legal and regulatory frameworks, and information exchange. But we do believe in the importance of commercial competition to improve the efficiency of Europe's energy markets.

Diversification of supply - especially from the Caspian Basin - is crucial to increasing competition for Europe's energy market. The EU shares these goals, as articulate in its "Green Paper" on energy this past March. We seek competition, not confrontation. The recent opening of the Baku-Tbilisi-Ceyhan oil pipeline and the start of the South Caucasus gas pipeline later this year clear the way for a new generation of infrastructure to export large volumes of natural gas from Azerbaijan to Greece, Italy, and the Danube Basin.

Q [Erion]: Since the last energy crises, there are trends that Russia will play with its energy resources putting a sort of "monopoly" in order to gain political credits in the international arena, I think they started already. What will be the international community response on regard to these energy issues, and how will prevent future crisis? It will be something like BTC pipeline projects that will exploit Ukraine and former Soviet Union republics energy resources, or there will be other options?

A: The international community and the United States are committed to maintaining a free and competitive market based on supply and demand for all energy sources. Russia and Ukraine have an interest in seeing that there energy resources reach markets and that they sustain good reputations as supplier and transit countries. That said, the United States Government has a long tradition of opposing energy monopolies. This began back in 1912, when our Federal Government broke apart Standard Oil in the first major anti-trust case in our history. Avoiding crises such as the one last January 1 between Russia, Ukraine, and the rest of Europe will require the Euro Atlantic community and Russia and other energy suppliers to operate in a more commercially competitive environment based on diversification of energy supply.

Q [Erion]: Regarding AMBO (Albanian Macedonian Bulgarian Oil) Project. Do you think US is still interesting in AMBO project, which is one of the major energy efforts in the Balkans, and is suffering for years bureaucratic delays and lack of political willingness? How do you see the "competition" between AMBO and Burgas-Alexandropulos Pipeline (in which Russia is more interested and have been seen as competitive to each other by some countries in the Balkans).

A: We welcome any new projects to diversify energy supplies in the region, and we believe the private sector should decide which projects are the most promising. We seek to get as much oil and gas into the marketplace as possible. The U.S. Government funded a feasibility study of the AMBO project a few years ago through our Trade and Development Agency. We did the same for the Constanza-Trieste and Odessa-Brodiy projects. Meanwhile, the Burgas-Alexandropolis pipeline has attracted serious attention. Our government now looks for the backers of these pipelines to compete in the marketplace for investors and crude oil supplies to make their projects work.

Q [Baku]: Mr. Bryza, Europe needs more and more gas and oil, and Azerbaijan and Central Asian republics have huge oil and gas reserves. Why EU and USA are not joining financial, technical and political forces effectively to bring Caspian hydrocarbon resources via Trans-Caspian pipelines to EU and World markets? This would: 1) secure additional energy supplies to EU and US; 2) release more North and West African production for US market; 3) strengthen independence of Caucasus and Central Asian Republics. Unfortunately, in this region US has been active in security and political issues and EU has long neglected, or I would say left this region to Eastern powers (Russia, India, China, Iran). Do you think EU and USA will be able to work more effectively together in the coming years to bring Caspian energy resources via Azerbaijani route to world markets? What is the biggest obstacle for EU and US to working together on this? Ramin Isayev AAA (US-educated Azerbaijanis' Association)

A: The United States is working closely with our European partners - both governmental and commercial -- to ensure that Caspian Basin resources reach their intended markets. Azerbaijan is a crucial supplier and transit route for this energy. Our support of the Baku-Tbilisi-Ceyhan pipeline is an excellent example of cooperation and support by the United States. We believe BTC and the South Caucasus gas pipeline will clear the way for a Southern Corridor of gas infrastructure that can deliver large volumes of natural gas from the Caspian Basin to Greece, Italy, Bulgaria, Romania, Hungary, Austria, and beyond. Achieving this vision will require private investors to drive these projects, in close cooperation with governments.

Q [Tirana Ms. Anila Basha Panorama]: There is a lot of discussion in Albania about the Albania-Macedonia-Bulgaria Oil (AMBO) project. Does that project have the support of the U.S. Government? Are there U.S. strategic interests involved in it?

A: The USG has supported AMBO since its inception over a decade ago. A USTDA funded study in 1999 determined the initial feasibility of the pipeline and proposed routing. The project has also been considered a component of the Corridor VIII transportation corridor that the USG has encouraged in the region since the mid-1990s. American and British investors have been its main promoters.

AMBO is a Bosporus-Bypass pipeline. Its primary competitor is a proposal to run a pipeline from Burgas, Bulgaria to Alexandropolis, Greece (BAP). USG policy on Bosporus-Bypass crude oil pipelines is clear - commercial interests, not governments, should make the ultimate decision as to which Bosporus-Bypass pipeline should be the one that is onstructed.

AMBO and Burgas-Alexandropolis are also competing with Samsun-Ceyhan (across Turkey), Odessa-Brodiy, and Constanza-Trieste for investors.

Q [Tirana Ms. Anila Basha Panorama]: How do you view the fact that Russia is supporting the Bourgas-Alexandropoulis project, a parallel pipeline project?

A: USG policy on Bosporus-Bypass crude oil pipelines is premised on the idea that commercial interests, not governments, should make the ultimate decision as to which Bosporus-Bypass pipeline should be the one which is constructed. We do not look at investments in pipeline projects as a zero-sum game. Our goal is to maximize the flow of oil and gas to European markets through commercially viable pipelines.

Q [Tirana Mr. Elton Metaj Korrieri]: What is your assessment of the rivalry between the Bourgas? Vlorл (AMBO) and Bourgas? Alexandropoulis pipeline projects?

A: With regard to AMBO and BAP, the various commercial interests appear to be waiting to see what the final treaties and routes will look like. AMBO is scheduled for a final tri-lateral treaty conference in Bulgaria in late July. The three countries involved have already submitted comments to a draft treaty. BAP is believed to be similarly positioned in terms of obtaining treaty commitments. The USG does not believe that the final determination of which pipeline is better is a matter for governments. Rather, we believe that such a determination needs to be made by the commercial interests which are most closely affected by the pipeline - suppliers, operators, shippers and consumers.)

Q [Tirana Mr. Elton Metaj Korrieri]: What is the U.S. position toward Gazprom projects to expand into Central European countries, including in Albania? How do you see GOA's invitation to Gazprom?

A: With regard to the supply of gas to Europe, we believe that the principles of competition and intensive market participation by many actors and suppliers best serves the interests of the region as a whole. We are unaware of any specific Gazprom initiative to expand its gas network into Albania, but we are aware that Albania needs to increase its access to sources of gas and we certainly expect that access to competitive sources of gas will be a positive development for Albania. We believe that Azerbaijan can become a major supplier of natural gas to Southern Europe over the next decade, with gas from Central Asia coming on stream across the Caspian thereafter.

Q [Tirana]: Do you think the AMBO pipeline project has been left aside?

A: No, not at all. Major pipelines like this take a long time and a lot of patience to become realities. AMBO is scheduled for a final tri-lateral treaty conference in Bulgaria in late July. The three countries involved have already submitted comments to a draft treaty. Once the Treaty is finalized, we would expect commercial interests to make their final decision as to whether to proceed with AMBO or another project. At the end of the day, private investors will determine whether MBO or other pipeline projects succeed.

Q [Tirana]: What do you think would be the political implications in the debate about AMBO?

A: In terms of regional political implications, any pipeline that crosses a border, whether it is AMBO or BAP, creates economic interdependence between countries. We hope this would lead to closer and more harmonious political and economic relations for the countries in the region.

Q [Michael T]: Matt. What are the main lessons learned for you in the BTC project good and bad.

A: Michael, BTC's success underscores how important it is for governments that support a particular project to articulate a clear vision (as did the leaders of Azerbaijan, Georgia, and Turkey), then work collaboratively with prospective investors to ensure the project's commercial viability. Governments can play an important and appropriate role in helping investors negotiate the international agreements that form the commercial and legal framework of such projects.

Q [Baku]: The increasing interest to BTC was proved by recent Kazakhstan joining to the contract.

If several years ago, Russia was very skeptical to the implementation of this project, now it faces the fact that one of its main allies in the Middle Asia? Kazakhstan turns to be one of the participants of BTC. What does Kazakhstan participation show: that it has changed its foreign policy to increase economical cooperation with Europe and abandoning Russia or this step was taken consciously with permission of Russia?

Thanks in advance, Asli Samadova
Board Member of US-Educated Azerbaijani Alumni Association
Baku, Azerbaijan

A: Kazakhstan's participation in the BTC project shows that this project has succeeded because it makes commercial sense. Governments can facilitate such projects, but will have a meaningful impact only if they are helping investors reach necessary agreements to ensure a project's commercial viability. The laws of the market can be much stronger than the political preferences of countries. This reality of the market can work in the opposite direction as well, if a country wishes to block a project, but the project simply makes too much commercial sense to be derailed.

Q [Mars]: Hallo from Greece to all. Thank you for your time. Russia has been accused consistently and from senior members of the US government the last six months especially after the crisis over the prices of selling natural gas to Ukraine- of using natural resources as a mean of diplomatic pressure. Is the Baku- Tbilisi- Ceyhan pipeline a way of countering the geopolitical dominance of Moscow in the area?

Do you feel Russia or the Gulf States can be reliable partners as suppliers of oil or gas towards the West- Europe in our case- anymore; Moscow certainly seems to contest the role. Which is the American answer to that?

The Russian Gazprom has signed a first deal to build a pipeline from the bulgarian port of Burgaz to the Greek one of Alexandropolis. Do you believe it is a competing project or it can be put in the framework of cooperation in the area towards energy security?

How do you see the role of Greece in this whole frame; Can it evolve in a regional energy hub due to its geopolitical position at the cross wards of Europe-Asia; Can the diplomacy of energy affect the Us-Greek cooperation in the solving of problems like the ones concerning Cyprus, the name of FYROM or Kosovo?

Right from the start of the project of the Baku-Tbilisi- Ceyhan pipeline there have been concerns expressed about the consequences on the environment -and security. Turkey, for instance, is a highly seismogenic area and there is the treat of terrorist attacks by PKK. Do you feel they have been answered effectively?

A: Baku-Tbilisi-Ceyhan, and the South Caucasus Gas Pipeline that will come on stream later this year, are crucially important projects in our shared effort with our friends and allies in Europe and the Caspian region to help European and global markets diversify their supplies of oil and gas. Relying on market forces of commercial competition and diversity of supply is the best way to improve the efficiency of energy markets, and ensure that commercial rather than political considerations drive the flow of energy. It is precisely for these reasons that the United States supported the ambitions of Azerbaijan, Georgia, and Turkey to develop BTC and the South Caucasus pipeline. We now seek to build on these successes, and in close collaboration with Greece, to ensure deliveries of large volumes of natural gas to Greece from Azerbaijan.

The Burgas-Alexandropoulis pipeline will succeed if Gazprom and its Greek and Bulgarian partners can reach agreement among themselves on the commercial and legal terms of the project, and then attract supplies of crude oil to move through the pipeline. We wish the prospective investors success. But they also face serious competition from the Samsun-Ceyhan project in Turkey. Odessa-Brodiy also provides some competition in Ukraine and Poland, as do the AMBO and Constanza-Trieste projects. The pipeline that is the most commercially attractive will win the race to attract investors.

Cooperation on energy security is emerging as a cornerstone of our partnership with Greece. Our friends in Greece have told us they seek to help their country secure its energy future by attracting supplies of natural gas from Azerbaijan to complement the supplies Greece currently receives from Russia. This strikes us as a wise policy, which will help ensure the lights stay on and homes stay warm in Greece, and that Greece can emerge as a crucial element in our effort to help all of Europe diversify its energy supplies. For this strategy to work, Greece, the United States, gas producing countries, and gas transit countries must all work together to develop commercially viable projects that attract investors. It is the investors, not governments, that will provide the financing required to make these projects work. If we succeed, Greece will indeed emerge as an energy hub. The first step in this process will be to complete the Turkey-Greece-Italy pipeline with gas supplied by Azerbaijan.

Matthew Bryza: I am sorry that we don't have more time. Your questions have been posted and I hope to have time to get to them later. Thanks for all the questions.

The transcript and an article will be posted at USINFO's Webchat Station.

Thanks again.

Created:30 Jun 2006 Updated: 30 Jun 2006