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Amos J. Hochstein Special Envoy and Coordinator for International Energy Affairs Telephonic Press Briefing Hosted by the Brussels Media Hub May 6, 2016

09 05 2016 23:52
Moderator: Thanks so much, Kathy, and good morning or good afternoon, everybody, depending on where you’re calling in from. Greetings from the U.S. Department of State. I would like to welcome all of you dialing in from across Europe and course those of you in Washington as well, and thank you for joining this discussion today. We are very pleased to be joined from Washington by Amos Hochstein, the U.S. Special Envoy and Coordinator for International Energy Affairs. Special Envoy Hochstein is going to speak with you about energy security and cooperation. And of course as you all know, this week the U.S.-EU Energy Council met in Washington, so he can offer his insights with you about that as well. And we thank you, Mr. Hochstein, for taking the time to join us today. We’re going to begin today’s call with opening remarks, then we’re going to turn right over to your questions, and we’re going to try to get to as many as we can during the time that we have. Today’s call is on the record. With that, I will turn it over to you Special Envoy Hochstein, for your opening remarks. Special Envoy Hochstein: Thank you very much, and welcome everyone to the call. I appreciate the opportunity to do this. As was mentioned, and I’ll be brief to give some time for questions and answers. But let me begin with the U.S.-EU Energy Council meeting. This council was established as one of the first actions by the administration, by President Obama and Secretary Clinton in 2009 as a mechanism to create a better coordination and collaboration between the United States and the EU on issues primarily of energy security, and has expanded over time in order to cover the broad range of energy issues. It was established in 2009 because of the energy crisis that faced Europe the very first day of 2009, in January, when Russian gas was cut off to Ukraine and later on was cut off as well to other countries in Europe that receive gas through Ukraine. Over time, as I said, this council has been able to address a variety of issues. We have come a long way since 2009 where the cooperation between the United States and the EU on the issue of energy security has really matured and strengthened and has become constant. Barely a week goes by without contact between the State Department and officials in Brussels, as well as regular contact with, on these issues throughout Eastern and Western Europe. We addressed a number of issues in this council meeting that Secretary Kerry, High Representative Mogherini, Secretary Moniz and Vice President Sefcovic and Commissioner Canete were chairing. We addressed first the issues of energy security. We looked at the progress that’s been made toward achieving greater energy security throughout Europe and the concern that we in the United States have that energy is being used as not only a tool and a weapon against, for political leverage in certain parts of Europe, but also as a divisive mechanism and allowing for a very different energy reality in Eastern and Central Europe and the Baltics compared to Western Europe where it is freely traded and more integrated, while in Eastern and Central Europe it is not integrated, it is not freely traded, and it lacks the ability to move freely between countries. So we discussed a lot of the progress on that, primarily the LNG terminal in Klaipeda, Lithuania; the electricity interconnection from the Baltics to Scandinavia; the same electricity interconnection between the Baltics and Poland as well as the new LNG terminal in Poland. We also noted that this meeting was coming on the heels or right with a backdrop of the first U.S. LNG exports cargo arriving in Europe in Lisbon, Portugal, just a few days before the council meeting, which I think signals a far, a new reality and a new exciting future of participation of the United States market in the European market as part of the broader global market and broader global exports from the United States of natural gas. But I am still concerned that the ability for Eastern and Central Europe in particular to benefit from new technologies and new markets is limited, and when countries are still reliant, the only way the countries can stop being reliant 100 percent on one supplier is by having the mechanism to receive new gas and new energy products. And as long as the infrastructure is not there, they will not be able to benefit from it. Which is a shame, especially at the time when gas prices arriving in Europe have become so cheap and could be so supportive of those particular economies and their consumers. To do that there must be more progress to achieve a floating LNG terminal in Croatia, in the Adriatic in Krk Island. To achieve that we need a similar floating LNG terminal in Greece, and in particular the building of the interconnector between Greece and Bulgaria known as the IGB, coupled with the interconnection between Bulgaria and Serbia and other interconnections throughout the region that will allow for a completely new future for the entire region. This is not, what we discussed in the meeting is that is not about Russia, it’s not against Russia. On the contrary, Russia has the largest reserves, it is a neighbor, and it has infrastructure. This is about creating and generating competition for Russian gas and allowing for non-Russian gas to have the ability to enter the market which currently does not exist. We also noted the very important developments in the Southern Gas Corridor which is the pipeline that goes from Azerbaijan through Georgia, Turkey, into Greece, Albania and finally into Italy with, as I said, a spur, an interconnection connecting north into Bulgaria. I’ve represented the United States in attending the groundbreaking ceremonies in Azerbaijan and Turkey and I look forward to representing the United States in the May 17th ceremonies in Thessaloniki for the final chapter. This is a groundbreaking pipeline that has as much commercial as it does geopolitical implications for Azerbaijan, for the Caspian, for Turkey, and for Europe. So we are very excited. And that is a region that despite the fact that there has been no U.S. corporate involvement or financial involvement in this pipeline whatsoever, we have still seen this as a top priority for U.S. national security over the last several years. Finally, we also discussed some of the concerns of existing projects that are being discussed such as the Nord Stream 2 project. The United States is deeply concerned about a pipeline that would endanger the economic viability of Ukraine and Slovakia, that would deepen the rift between East and West and freeze it in time for another generation, and that would move overall energy security and Energy Union concerns significantly backwards. The concept of Energy Union was something that was established and promoted by the EU. Nord Stream 2 is not, in our opinion, is not compatible with the vision of an Energy Union, nor is it compatible with energy security, nor is it compatible with overall unity and national security for Europe in its entirety and its relationship with its closest neighbors in Ukraine and elsewhere. So that was, we had a brief discussion on that and discussed the way forward. I strongly believe that the best alternative to Nord Stream 2 is the acceleration of the Southern Gas Corridor, the acceleration of an LNG terminal in Croatia and in Greece, as well as the IGB, the interconnector Greece-Bulgaria project. Those are the best answers. They are far more efficient. They are more cost-effective. And they contribute rather than decline energy security and overall unity in Europe. Finally, we discussed the, in the post-Paris environment the urgent need to move forward in a collaborative manner towards COP22, understanding that the close collaboration and cooperation between Europe and the United States led to the great success in Paris and we want the momentum to lead us to the meetings in Morocco. But we also discussed cooperation because I believe that it is the responsibility of countries such as the United States and all of Europe to not only think of ourselves when it comes to renewable energy integration, but to think of the rest of the world that while they may have the political will and desire to move forward, lack in many cases the regulatory environment and the governmental capacity to be able to implement those changes. So we are going to be discussing how we can cooperate on providing assistance to those parts of the world. That is going to be my focus for the rest of this year, to establish programs with support for countries in need. But we also have to look at not just in small countries and developing countries, but how do you overcome the access to finance from the private sector that many countries have been, have suffered from, and that includes small countries as well as big countries such as India where availability of finance, of private sector finance to the renewable energy industry is currently lacking, and if that could be overcome it would unleash an enormous amount of investment, job creation, and cleaner energy sources around the world. I will stop there and see if there are any questions that I’m happy to take. Thank you. Moderator: Great. Thank you so much for setting the stage for us. We are going to begin the question and answer portion of today’s call. Our first question today is coming to us from Bulgaria, and we’ve got Angel Petrov of Novinite.com. Angel, go ahead. Novinite.com: Hello, everyone. So you already mentioned that the Nord Stream pipeline, Nord Stream 2, I mean, is incompatible with EU, and possibly U.S. requirements, but given the priority placed on the Southern Gas Corridor to supply the Balkans with gas, are Russian plants making deliveries along the [Poseidon Route] between Greece and Italy? And how is this link compatible with the Southern Gas Corridor and other projects prioritized by the EU and the U.S.? Special Envoy Hochstein: I think that what I’ll say is, I think there are a lot of projects out there being proposed, from the one you just mentioned to East Ring and others. I think that there are a lot of distractions. The ones that are ready for implementation and support the goals of energy security, national security, economic security and overall unity are the ones I mentioned -- the interconnector between Greece and Bulgaria; the TAP as its original plan, as it is planned today to go into Italy, that route, as well as the Croatia terminal with an interconnection to Hungary and potentially onwards to Ukraine. Those are the projects, along with smaller projects inside Europe, between Bulgaria and Romania, and Romania and Hungary, et cetera. But I think the others at this point are a distraction from what is entirely a doable project. I fear sometimes that new proposals and MOUs that are announced have little more than the goal of distracting from the good projects that are underway and have very little behind them in terms of willingness to implementation. Moderator: Thank you. Our next question is coming to us from Brian Wingfield of Bloomberg News. Bloomberg News: Hi. Thanks for doing this. The meeting also comes on the heels of the meeting by some oil producers in OPEC and Russia to discuss potentially capping production which we now know didn’t produce a deal. I’m wondering if this was discussed at all at the summit, and what types of discussions are you having with the countries that were involved in that producer’s meeting about oil supplies going forward. Special Envoy Hochstein: Well, we did not discuss it yesterday. I think we discussed, we noted the environment in which we are living in the current oil markets. I was in Doha a couple of days, or two days after the failed meeting, and I can tell you that I said at the time, I don’t think anybody should have been surprised by the lack of the ability to reach an agreement. One of the major producers coming back on-line is Iran. It is hardly, it should have been hardly anybody’s expectation that a country that has been under extreme sanctions, and I should know I was in charge of the implementation of oil sanctions against Iran, any expectation that they would adhere to a cap of production, freezing them at sanctions levels, was, I think was not reading the situation correctly. Second, when you have a price reduction in oil that is a result of a glut in oil supply versus demand, freezing production at peak levels is hardly the answer that would result in much more than a psychological signal. So I think what, instead of focusing on coming together with an arbitrary or artificial intervention in the market, we are already seeing, we should focus instead on what we’re already seeing which is a, the market addressing itself. Demand will rise, instead of capped production by governments, we’re seeing capex reduction by companies that will ultimately lead to less production, balancing the market again, and reaching out to a future that has a more balanced approach and maybe a different price level. The oil markets have been volatile since they were, since trading started. I don’t expect that to change, but I think that instead of having the artificial intervention, we’re at a new era which makes it a lot more difficult. OPIC is still an important organism in the oil markets. But so are several other oil producers, namely the United States that will not, have not and will not participate in these kinds of artificial interventions. Moderator: Thank you. For our next question we’re going to jump over to Azerbaijan and take a question from the Caspian International Broadcasting Company, Rustan Abdul Aliyev. Caspian International Broadcasting Company: Mr. Hochstein, as you know, Azerbaijani gas plays a crucial role in the Southern Gas Corridor. The project envisages transportation of 10 billion cubic meters of Azerbaijani gas from the Caspian Sea to Europe. What are the prospects for further U.S.-Azerbaijan energy cooperation given that Azerbaijan is becoming a major exporter of gas to world markets? Special Envoy Hochstein: As you mentioned, Azerbaijan is a critical piece to energy security in Europe. The Southern Gas Corridor is, originates in Azerbaijan. I believe that we will continue to have a close relationship with Azerbaijan and to work closely together on expanding that. I think that the current oil market conditions have been painful for Azerbaijan and are painful for Azerbaijan, and we are also looking to see how we can play a role in the diversification of the Azerbaijani economy as well as looking at ensuring the energy security of Azerbaijan itself. One of the things that we can do is to begin discussing the expansion of Caspian beyond Azerbaijan, where Azerbaijan can play not only the role of producer and seller into Europe, but also as a transit point in the region as well. I think that will be a very good thing for Azerbaijan and incredibly important for Europe and the rest of Central Asia as well. Moderator: Our next question is coming to us from Alexey Bogdanovsky from RIA Novosti. RIA Novosti: Hello. I’m calling from Washington, DC. Maybe by coincidence, but Secretary Kerry and Russian Foreign Minister Sergei Lavrov addressed the issue of Nord Stream 2 the same day, actually, and Sergei Lavrov said that this was purely a commercial concept, I’m quoting here, and attempts to block it are of an entirely political nature, and the United States is engaged and is still trying to create difficulties through their particularly close friends in NATO. So I wanted to ask you to elaborate why the United States believes this project to be harmful, and whether the United States is influencing allies not to take part in it. Special Envoy Hochstein: I think that we’ve made clear we do not believe this is a commercial project. This is a, on the contrary, this is a project that takes the same gas to the same consumers through a new route when a perfectly good route already exists. At a time where every energy company in the planet is reducing their expenditures to only those that are most beneficial economically, this seems to be a project that has little to do with balance sheets and costs. It would simply seek to divert gas that is flowing through Ukraine to another location. It would concentrate 80 percent of Russian gas flows to Europe in one location, which is also not something that is good from a commercial perspective. I would remind everyone that Nord Stream 1, which is currently in operation, is only at 50 percent utilization and there has been very little ability to prove the concept of a commercial argument for this project. I will say even more. There are enormous amounts of gas coming onto the market over the next five years from the United States, from Australia, and from other places. The United States and Australia will have as much gas coming on the market as Qatar is exporting today. By doubling, for Europe to double down on physical infrastructure that is not flexible to new markets, it is shutting itself out from the new market capabilities and opportunities that could come with these lower prices. That is, therefore, that is a commercial argument against the project. Moreover, as I said before, the political part of this project is not our opposition, but rather the project itself. It is either by design or by consequence a divisive project within Europe, and that is something that has raised concerns both here in the United States, as well as concerns throughout Eastern Europe and Central Europe as well as most in Western Europe. I have seen very few things where letters from 50 percent or 35 percent of the EU are sent to Brussels objecting to a project, where there is not emergency meetings to see what needs to be done about it. This is something that clearly has some concerns. At the very least, a pause can be taken in order to assess the implications on energy security and on overall national security of the EU. But again, that is something for the EU to decide. The United States is expressing our concerns because our commitment to energy security and economic security in Europe is directly linked to our concern for national security, and we are committed to that. So therefore, we have these discussions as friends, as partners, as collaborators, and we will continue to have those. Moderator: The next question is coming to us from Ed King of Climate Home. Climate Home: Thank you very much for having this. Two quick questions. One is, can you give us an update on Mission Innovation which was announced by the U.S.-EU among others in Paris, that seems to have gone a bit quiet since. Is there any point where we can expect more information on this? And just a quick one on the LNG imports into Europe. To what extent do you think these could be a conflict with the U.S. and Europe’s climate change goals given we are supposed to start using fewer fossil fuels, be they coal, oil, or gas? Special Envoy Hochstein: Let me start with your second question first. I don’t think it’s in conflict with our climate goals. First we have to deal with the reality of the heating climate. The heating in Europe is done largely by natural gas, and I believe that we need to actually move towards more use of natural gas as a transition fuel towards renewable energy. We cannot replace everything in one day. In many cases we have seen that the rise in renewable energy in parts of the world including in Europe has come while -- a rise that has been coupled with coal rise and squeezing out gas. So the competition here really is much more between gas and coal, and I think the transition from coal to gas we can all agree is a good one. So I think that we’re in a place where we’d like to see more of a growth towards gas, and if you look around the world, we’re seeing competition to gas coming actually from coal and, including in Asia where an alarming number of countries that were thinking about natural gas have actually shelved those and are looking at coal plants, coal-fired plants instead, and I think that’s a concern. As far as your question on Mission Innovation, I think Secretary Moniz discussed it at the council meeting. I think it’s very much still on the agenda and we’re very excited about it and there will be a meeting in San Francisco next month around the time of the Clean Energy Ministerial, and there were discussions, continuous discussions about adding new members and moving forward on the implementation phase of it as well. I would suggest that you, I would refer you to my friend Secretary Moniz for more of the detailed information since he is chairing that initiative out of the Department of Energy. Moderator: Our next question is coming to us from Greece and we’ve got Kostas Mavraganis from Huffington Post Greece on the line. Huffington Post Greece: Hello from Greece. There has been increasing activity in the energy sector in Greece in light of the developments regarding the TAP project and the search for hydrocarbons in the Eastern Med. In light of this, do you expect Greece to evolve into a more important player in the energy field? Or such expectations are considered to be overly optimistic? And last, I would like ask if it is far-fetched to think that, especially in light of developments on the TAP project, is the State Department replacing its ambassador in Greece, replacing Mr. Pearce with Mr. Pyatt? Would that be connected to that whole thing developing on? Special Envoy Hochstein: First, let me just say that I think that Greece is already playing a critical role and can play an even bigger, and will play, an even bigger role in energy. Because I think that Greece is that natural place for a transit of natural gas from an interconnection not only from Turkey into Bulgaria and the rest of Europe but also from future gas supplies from the Eastern Mediterranean once they are produced from Egypt, from Israel, from Cyprus. And I think that is a critical role that the TAP project will be the beginning of. But the IGB will be a continuation as well as my real hope for the future for a few years from now when we can get even more volumes of gas into the system, that we can build another transit system from Greece and Albania through, all the way north to the Adriatic coast. And I think that that just shows the potential. As we see the Eastern Mediterranean develop and it’s facing some hiccups now in Israel which are of concern and I hope that they can overcome their legal obstacles to actually develop one of the largest fields ever discovered in the Mediterranean in Leviathan, to couple that with the Cypriot and Egyptian fields, Greece is a natural place for LNG cargoes to land and to serve as a transit point into the rest of Europe. Greece has already an LNG terminal at Revithoussa but in building a, or in welcoming a floating LNG boat terminal in Alexandroupolis, it could expand its capability as that hub. I know the international investor community is looking forward to becoming, to playing a bigger role in Greece. I would add that as quickly as possible, if we can also complete the privatization that’s on the agenda of [inaudible], we will, that will once again contribute to Greece’s ability to expand its influence in the region. As far as any personnel issues, you know, we have a great ambassador in David Pearce in Greece who has been a partner of mine on this issue and a leader in Greece on many issues. I am not aware of any transitions, but if any occur they’re on a regular basis and regular terms, as they always are. Moderator: We only have time for one more question, unfortunately. For this one we’re going to jump over to Cyprus and take a question from Loukas Fesais from ANTENNA 1 TV. Are you there? Okay, then we’ll go ahead and take the next question from, back to Azerbaijan from Elena Kosolapova who is with TREND News Agency. Elena, you get the last question. TREND News Agency: Thank you. My question is about the gas supplies or energy supplies to Europe and its competition with Azerbaijani fuel. So Mr. Hochstein, do you see the U.S. as an alternative gas supplier that can compete with Azerbaijani fuel on the European market? Special Envoy Hochstein: The United States is not a competitor to Azerbaijan at all. On the contrary, we are compatible. Azerbaijan will, gas resources being supplied to Turkey and to Europe are critically important and do not compete with American gas. Right now American Gas has no way to get to that region in Europe. We can only supply into, maybe into Lithuania and into Spain and Portugal, so I don’t see that as a competition. But even in the future, the pipeline gas that Azerbaijan is delivering is already sold, and therefore until there is a major expansion of Azeri gas availability onto the market, Azerbaijan is actually way at the, years ahead of the United States on the international market on this. So the answer is no, we’re not competitors. We are partners and good ones at that. Moderator: Thank you. And I want to thank you Special Envoy Hochstein for spending some time with us today talking about these issues. Did you have any last closing remarks that you’d like to make? Special Envoy Hochstein: No, I want to thank the Brussels Hub and our folks and everybody for tuning in, and calling in and I know that we’re always available to answer questions for folks, but this is an issue -- energy security and primarily in Europe -- it’s something that is not only at the top of my agenda, obviously, but has become one of the top agenda items on national security for Secretary Kerry, Vice President Biden, and President Obama, and I suspect that will be the case in the years to come. So this is a critical issue for our foreign policy considerations, and I thank everybody for calling in today. Moderator: Indeed. Thank you, and thanks to all of our participants and for your great questions.

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