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US balances old energy alliances with new

Washington remains committed to GCC nations but is also strengthening relationships in Asia-Pacific and beyond, says State Department

The world is entering a new era of energy partnerships that better reflect changes driven by the US’ domestic energy supply boom, by the energy transition and by broader geopolitical dynamics, according to a Department of State official. 

Washington is looking beyond its traditional Middle East relationships to Asia-Pacific, as well as trying to combat growing Russian influence in energy producing nations. “The US transition from scarcity to abundance is opening a new era of opportunity,” Francis R Fannon, assistant secretary of state for energy resources, told the Adipec conference in Abu Dhabi in November. “We are entering a new era built on partnerships.” 

GCC countries should be reassured that the US remains committed to its “strong bilateral relationships” in the region, says Fannon. And while the relative lack of US response to drone attacks on Saudi Arabian oil infrastructure in September surprised many geopolitical observers and seems to have shaken confidence in the region about the long-term commitment of the US to its alliances, Fannon puts a different spin on events.

“The perpetrators’ target was, in fact, all of us—the global energy consume,” he says. “The US recognises and commends our partners in the region for making the necessary investments to ensure productive capacity.” 

On the other hand, Fannon is clear that a core objective of the US policy is to encourage competition and transparency—to reduce the influence of individual nation states on energy prices. Encouraging a more competitive oil market is an implicit threat to Opec and the influence of national oil companies (NOCs), in particular to key policy maker Saudi Arabia. And, further stressing a potential pivot away from the Mid-East Gulf region, the US is increasingly focused on Asia-Pacific markets, Fannon adds. 

GCC countries should be reassured that the US remains committed to its “strong bilateral relationships”, says Fannon

The assistant secretary leads a whole-of-government energy strategy called Asia Edge (enhancing development and growth through energy), on the basis that the “Pacific Region represents two-third of global energy demand growth”. “To meet this demand will require trillions of dollars unless the US works in partnership with countries to achieve their energy ambitions and develop their capabilities,” says Fannon. 

The US is putting in place “several high-level programmes throughout the region” and is collaborating with other countries, including Japan and Australia, “to foster a transparent and efficient energy” market. 

Foreign policy 

The State Department views energy policy as a “broader proxy for foreign policy challenges”, says Fannon, with clear separation from US private sector investment in other nations’ energy sectors, which has purely commercial aims. “There are no links back to Washington. Their businesses are doing it because it makes good sense… the shared value concept of win-win. 

“We do [our] work consistent with [our] universal principles of transparency, clarity and fairness,” he says. “The US strives to expand this new era of energy partnership to optimise resource development in the countries and regions of the global economy.” 

In contrast, Russian and Chinese capital is not necessarily motivated by purely commercial considerations. “As a former energy executive, I see… the dramatic deal flows. As assistant secretary state, I see the diplomatic, commercial and security posture of nations.”

Russian and Chinese capital is not necessarily motivated by purely commercial considerations

 

Energy drives “economic development, progress and energy is foundational to political stability,” says Fannon. “We are living in a period of unprecedented energy transformation, both in terms of energy supply, demand patterns and the technologies to meet that demand.” 

Since Congress lifted a ban of more than 40 years standing on crude oil exports in 2015, private sector oil companies have expanded US production to 13mn bl/d. And having started exporting LNG only in 2016, the US has become the world’s third-largest exporter. “In the next five years, we are projected to be the top LNG exporter,” Fannon adds.

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