As recently as five years ago, energy analysts were in agreement the US would need to begin importing natural gas to keep up with rising consumption amidst depleting domestic reserves. Fast-forward half a decade and the US sits atop one of the largest natural gas reserves in the world, looking to break into the lucrative global energy market.
As US supplies have multiplied almost overnight, US gas prices have tumbled to near-record lows. According to the US Energy Information Administration, the average domestic price of natural gas hovers around $3-4 per one million BTU; overseas, the same volume of gas can run as high as 400 percent more. Thus, domestic producers, hoping to capitalize on regional price fluctuations in the global market, are looking to quickly sign long-term contracts with gas-hungry countries.
With more than two-dozen liquefied natural gas (LNG) export applications filed at the DOE to date, the US looks set to rebrand itself as an energy juggernaut on the global stage. If the Energy Department allows the domestic industry to reach its full potential, America could have the ability to curtail the international weight of Iran and Russia as both nations rely heavily on funds from natural gas exports and the threat of cutting them off to conduct their foreign policy.
With respect to Iran, American exports would pose an economic danger to the Ayatollah’s regime and provide substantial “buy-in” for continued international pressure on the “rogue” nation. This combined threat would likely increase the efficacy of sanctions against Tehran; consequently reducing the likelihood of Iranian nuclearization as the regime would have less in its coffers to spend on defense.
First, exports would provide Ankara, which receives 20 percent of its natural gas from Tehran, with a means of weaning itself off Iranian gas. With 90 percent of Iran’s shale headed to Turkey, cutting off Turkish demand would prove disastrous for the Iranian economy in the short-term. In addition, according to Sanjay Puri, CEO of the Alliance for US-India Business, India has been forced into talks with Iran and Pakistan over a shale pipeline to meet its growing energy needs. However, if the US were to boost its shale exports to the sub-continent, it would most likely jettison these talks, thus mitigating Iran’s long-term prospects for growth.
Second, it is much more likely the international community would be willing to continue with intense economic sanctions if powerful nations do not need to rely on Iran to meet their energy needs. For example, India would be more willing to participate in putting pressure on Tehran, though it has been reluctant to do so in the past, if a US-India LNG pact were struck. On the other hand, if the US were to delay its LNG exports for at least another decade, Iran could potentially use its gas resources to “drive a wedge” in the powers aligned against it.
If Iran used its shale reserves to finance the completion of its nuclear weapons program, it could spark a dangerous round of proliferation throughout the Middle East and exacerbate the sectarian tensions in the region. A nuclear Middle East combined with the asymmetric threat posed by proxy organizations, such as Hezbollah, would provide a recipe for disaster that could trigger outside intervention. One nation likely to intervene in such a conflict is Russia, which still holds sway¬ throughout the Middle East, as well as in Eastern Europe.
According to the Baker Institute for Public Policy, European dependence on Russian LNG has left the continent at the mercy of Moscow’s influence. As it stands, Europe imports 34 percent of its natural gas from Russia. In January 2009, gas supplies to all of Southeastern Europe were cut off as a result of a price dispute between Gazprom and Ukraine. In recent years, European leaders have found it difficult to object to Russia’s invasion of Georgia and to throw their support behind Viktor Yushchenko, the pro-Western Ukrainian President, for fear of Moscow’s disapproval.
If European dependence on Russian gas, offset by American shale, began to wane, it would have considerable geopolitical ramifications. First, Russia would lose most of its leverage over continental European powers, which could subsequently assist the Balkans and Eastern Europe in resisting Moscow’s clout. Second, an “energy-independent” Europe would be much more willing to support the US in its global peacekeeping initiatives, without Russia’s blessing. Such activities include the enforcement of the UN’s “Responsibility to Protect” doctrine in countries like Libya and Syria as well as the assistance of American counter-terrorism operations. Finally, stronger economic ties between the US and Europe would help repair overall EU-US relations, which have been damaged in the wake of the summer’s intelligence revelations.
Though much has been made of the current transition from a unipolar to multipolar global order, natural gas exports may prove the catalyst that propels the US ahead in the international rat race. Specifically, LNG would provide America with a valuable “energy weapon” that could be used to mitigate the influence of its “enemies” and deepen its engagement with its allies.
This article originally appeared in the Fall 2013 print edition, which can be found here.
