US Energy Diplomacy in Light of the War in Ukraine - Dr. Umud Shokri

Hello and welcome everyone to the Wikistat podcast. Today we'll be doing Q&A with Dr. Umud Shokri, and we're very fortunate to have him today. We'll be talking about US energy policy, mainly in the Caspian Sea Basin. Just before we start, my name is Adam Hoffman. I'm the head of the Middle East desk at Wikistat. And we'll also have here today Dr. Rebecca Molloy, who is the head of our Middle East community. And of course, our guest here today is Dr. Umud Shokri, who is a Washington-based senior foreign policy and energy geopolitics advisor. And he's the author most recently of U.S. Energy Diplomacy in the Caspian Sea Basin: Changing Trends Since 2001, which will be really the topic of interview today. And Dr. Shokri served as a visiting research scholar in the Center for Energy Science and Policy and at the Shar School of Policy and Government at George Mason University. And his specialty is really energy and geopolitics, mainly the context of the Caspian Sea Basin, also looking at Iran, Turkey, and the Gulf. So, Umud, thank you very much for joining us today. So looking really at your latest book and more from a US foreign policy perspective, What do you see as the main changes and continuity in the Biden administration's approach to energy policy compared to that of the Obama and Trump administration?

Thanks for having me. It's a great question. And as you are aware, the world energy market faced a huge energy crisis after the pandemic, and at present, the US and EU trying to overcome and decrease the effect of current energy crisis in domestic and international markets. About the Trump energy policy and contrast, I mean, Biden administration comparison with Trump or Obama administration. I have to say in the US, the Republican, mainly the foreign policy of Republican, which apply is to focus on fossil fuel and oil policy. I mean, you can see there's some effect of oil policy on US foreign policy toward the neighbor and toward the Middle East and GCC. When Democrat came to power and take a seat in the White House, the main priority for the Biden administration and also, and also Obama administration was focus more, focus on renewable energy, using more US domestic potential to increase the share of renewable energy and decrease the fossil fuel in domestic energy mix, and also trying to increase and boost the energy transition process. You know, without the high foreign, without the huge financial capability and high technology. Every country will face with energy, applying active energy transition process. And when Biden came to power, tried to increase the tariff of some solar power plant which imported from China and trying to more invest in R&D by production of solar power plant and battery, which are very important in energy transition process. About the role of energy in U.S. foreign policy, I have to say energy play an important role. I mean energy export play an important role in US foreign policy, no matter which party will be in the power, I mean Democrat or Republican. But during Trump administration, Trump is also used this energy to leverage of its foreign policy to boost relation with the neighbors and to also to help the EU as a traditional ally for the US to decrease dependency of Russian, Russian monopoly in EU energy market and EU foreign policy as well. Biden, during a presidential campaign, announced some long-term plan to decrease dependency of fossil fuel and increase our share of renewable energy, I mean solar, wind, and also trying to also use energy transition process as a tool of foreign policy. I mean more focus and more investing energy transition process, more investing energy transition technology and to export this energy technology to neighbors and other countries to help these countries to play more active in energy transition and to decrease dependency of some allies to traditional counterpart of US. I mean, to China or to China from the technology inspection and from the Russia and other countries from the energy resource. But when Biden came to power, US and world faced with pandemic and due to pandemic, some huge energy firm, I mean, shell firm in the US has bankrupt and you could— but Biden tried to help these companies, but due to the last September, Biden tried to reach to Saudi Arabia and Russia as a major player in OPEC+ and OPEC to satisfy them to increase more production, to increase production capacity, to create a balance in the market, to oil price goes down. But when Saudi Arabia and Russia opposed this suggestion by Biden administration, Biden tried to reach the major energy consumers such as China, India, South Korea, and Japan to release some part of strategic petroleum reserve to decrease the oil price. But we saw that the releasing of strategic petroleum reserve by US and other countries just has a short-term effect on oil market. And last week, Biden himself said that he's playing with the devil to overcome the energy crisis and to oil price goes Yeah, I think the best example of energy in U.S. foreign policy toward the Caspian Sea, we can see during Obama administration event with U.S. energy shows that the shale gas revolution, U.S. lost interest in the Central Asia and Caspian Sea. After Obama administration made a decision to withdraw some troops from Afghanistan and Iraq, there is no need to support these troops and there is no need to new bases in Central Asia to logistics supporting U.S. Central Asia, in Afghanistan and Iraq. And due to the revolution, the US lost its interest in the region. And we saw the same policy in the Trump administration and also the US following the same policy in the Biden administration. And during the last month's protest in Kazakhstan, US will not be able to play an active role in Kazakhstan. And just Russia and China was the major actor and trying to help Kazakhstan to overcome the effect of the protest from the energy perspective and national security perspective. I think Biden administration, as I mentioned before, trying to follow the Trump and Obama administration policy towards Central Asia and Caspian Sea. And we can see during the next decade, Russia will be more active from the security perspective, and China with huge financial capability. And the main object for China, as you are aware, Central Asia play an important role in China One Road and One Belt project. And due to this strategic importance for the Beijing is more investing to control and to also decrease the effect of Islamic fundamentalism to its own territory.

Brilliant, thank you. So interesting. I was wondering, before we go on to the second question, if you could touch on the— with respect to, you know, main changes and continuity, to touch on the context of the geopolitics of U.S. sanctions on Iranian oil exports.

Exports, which I think— Yeah, that's a great question. I just try to focus this topic in my book and chapter 5, and I try to reach some diplomats from the region and also some diplomats from the Department of State to get their comment about the effect of U.S. sanctions against Iran oil export. When Trump came to power, said that he will against the JCPOA and trying to withdraw from the GCPOA, and we saw that by the May of 2018, U.S. withdraw from the GCPOA and ask some major consumer from the Iran oil try to decrease and try to decrease import oil of these countries. And after 6 months, U.S. faced a huge sanction against Iran oil export. Iran in the oil market just been able to export and sell oil to the China in the gray market. But the major problem for Iran was the price. Iran will be able to just sell oil with a huge discount to China. And receiving the money is what another problem, because due to U.S. sanctions against international money transfer, I mean SWIFT, Iran will not be able to get easily money. U.S. imposed the sanctions on Iran. Some officially believes that Iran will be able to bypass the sanction. And by 2019, Foreign Minister said in New York that Iran hold the PhD in bypassing sanction, and Iran knows to how bypass the sanction and reduce the sanction on Iran economy. U.S. sanction against Iran export was mostly successful, but as I mentioned, was because China has a huge demand for oil and trying to buy oil with low price will be able to give some opportunity to Iran to keep some of share in regional oil market. But we know that the new round of this nuclear will be continue in Vienna, but due to some opposite policy from the Iran or from 4+1 group, there is no security about the future of this negotiation. But if both sides will be reach new deal, I am not sure about the Iran will be more successful to get back market. Saudi Arabia, Russia are The West is interested to Iran get that market after lifting the sanctions gradually, but Iran is interested to get that with its whole production and export capacity. Iran last September, Iran new minister of oil said that Iran needs $160 billion investment to keep current production oil and gas capacity, and without the attraction of foreign financial capability and technology, Iran would not be able to play an important role in the regional and energy market. And also, if Iran will not be able to attract such amount of financial capability in the coming decades, Iran will be a net energy importer. At present, Iran faced a natural gas shortage due to low production, and last month Iran cut off natural gas flow to Turkey and further to Europe as a major consumer of Iran natural gas. In renewable energy, Iran also has a good potential, but due to sanctions is unable to attract financial capability and technology. And all of these problems are faced by high domestic consumption, lack of investment, and all, I think, faced by U.S. energy sanctions imposed by Obama administration, the Trump administration, and will continue during Obama— I mean, Biden administration as well.

Excellent. So for those fascinating interviews that you mentioned in the beginning, with experts or representatives from the region. I guess our listeners will just have to rush out and buy the book to see, to read the rest. The second question, to what extent did the U.S. withdrawal from Afghanistan in August 2021 impact U.S. foreign policy toward the global energy market and particularly toward the Caspian Basin?

Yeah, it's also a great question. You know, during the Bush administration, 2006, the U.S. imported about 70% of oil from the Middle East, and from energy security perspective, dependency of just a whole source is just against national security and energy security. And during this time, Bush administration more focus and to some alternative from oil imported from the GCC and Middle East and Central Asia and Caspian Sea is that period sees as the alternative for Middle East oil. And the Bush administration more focus of Central Asia to using supporting US troops in Afghanistan and Iraq also as a sick energy perspective, trying to more invest. And during that time, some energy companies such as Chevron invest in Kazakhstan, or Finland also play an important role in Azerbaijan energy sector as well. US supporting all foreign countries, mainly European and US domestic oil companies, to invest and present in the region and try to help this country to dependency and try to decrease dependency of this country to using Russia energy infrastructure. And the main major object for every government in the, in the West was reducing established country, I mean new countries after collapse of Soviet Union to use and to use own energy, energy resource from using own territory and oil pipeline and own infrastructure without the dependency on the Russia. In this regard, US supporting every project I mean Baku-Tbilisi oil pipeline and South and Gas Corridor and the TANAP and TAP project. As you know, at present Azerbaijan is trying to play an important role in EU energy market and also trying to increase the capacity of Shah Deniz 3 and also capacity of South and Gas Corridor to help some countries such as Italy to decrease dependency on Russian natural gas. About your question, I just It should not be that when Biden administration and U.S. trying to reduce presence in the region and withdraw all troops from this Afghanistan or maybe in Iraq, it has a little effect of energy market in the global perspective, but controlling energy resource and controlling energy transit route is a major factor for competition between major powers such as Russia, U.S., and China. It is possible to U.S. to decrease its presence in the region, but US also very concerned about the controlling energy resource by China and Russia and trying to help GCC countries and other countries to decrease dependency on China and Russia. But if US has a troop in the region, I think White House will be more active in the region. But without the present, I mean, military present, this is the best chance for China and Russia to be more active in the region, to increase, to boost relation with some countries. We saw that last month, the record released by CNN that China and Saudi Arabia use missile program, and also Russia present in the region. In the absence of U.S. troops, we can see that more present and more opportunity for China and Russia. And all is against, I think, U.S. national security national interest in coming years as well. Thank you.

Thank you very much, Umud Shokri, for that response. So moving on to the next question: How does U.S. energy diplomacy in the Caspian Basin interact with that of the EU, China, and Russia? Looking here and how these various, you know, players and their conflicting energy interests, of course, really come into play in the context of the Caspian Basin.

Yeah, this is a good question. You know, when I'm trying to start to write my book, it takes 5 years, and I have a chance to make interview with about more 100 diplomats, US former ambassador in the region, some expert from the think tank, expert from the media, and I try to learn many things from them. About— I am starting from the similarity between US and EU energy diplomacy and foreign diplomacy towards the Caspian Sea, and then with Russia and China. US every time trying to support its ally energy security by supplying their technology and supplying natural gas, oil as well. The EU as a traditional ally for the US, EU energy security was a first priority for every administration in the US, Obama administration, Trump, and also Biden trying to supply more LNG to EU to decrease dependency of EU to Russia. And during the current tension between Ukraine and Russia, Biden administration tried to reach Qatar and Azerbaijan to increase the production capacity of LNG and natural gas, especially natural gas from Azerbaijan in this Caspian Sea to more supply for the EU to decrease dependency to Russia. And also Biden administration reached to Japan to, to, to release some strategic natural gas reserve to help to EU energy security. US supported also EU's energy company to be more active in the oil energy project in the region, in Kazakhstan, Turkmenistan, and mainly in Azerbaijan, and also trying to political support of the Southern Gas Corridor. The main object for Southern Gas Corridor to supply more natural gas from the Caspian Sea, first phase from Azerbaijan, and in the second phase after the Caspian Sea, final maybe from the Turkmenistan and Kazakhstan elsewhere. The US also every time supporting EU energy security. US and China energy diplomacy in the region. China with huge energy needs more energy from the renewable source and due to this destination and more needs for technology and financial capability by Kazakhstan, Turkmenistan, and also from the Tajikistan as a Central Asian country. It's the best chance for China to present in the region, to invest in these countries' infrastructure, to control and to influence its policy in this country's foreign policy, and also try to use this region as a major part of what its One Belt One Road project. The U.S. was very concerned about the influence of China policy in the region, but the major concern for the White House was keeping both I think Moscow in the region, Moscow foreign policy and also energy policy. Russia is not interested to decrease its share in the regional and global market and trying to use every means to stop, to decrease any energy project. I mean, the effect of any energy project from the Central Asia, from the Caspian Sea to the major market, I mean, EU. And due to there is a competition between the US and Russia, but after shale gas revolution and after US make a decision to withdraw its troops from Afghanistan, we can see Russia will be more active in the region. And Putin came to power. Putin, as a— Putin, you know, hold a PhD in economy, and his thesis was about the using hydrocarbon resource and mineral resource as a means for applying new energy, new economy strategy. And they came to power, tried to use more energy as a weapon to gain more geopolitical gain. And we can see such some examples by 2008 during the Georgia War, and after that by 2014 when the Crimea War, and also during this current tension, I mean, between Ukraine and Russia. EU very concerned about the using Moscow energy export as a tool and trying to find alternative, but due to many problem, I mean, storage capacity by some EU countries, the lack of infrastructure, lack of interconnector, the short-term EU has no alternative for Russian energy resource. I have to say that at present Russia supplies about 40% of EU natural gas, 25% oil, and about 40% of coal to EU.

So this actually leads very seamlessly to the next question regarding the current tensions between Russia and Ukraine. To what extent does energy policy play a role in the positions of the US, the EU, and European member states regarding these tensions between Russia and Ukraine?

Yes, as I mentioned before, um, every country, every administration in the US trying to use energy export to boost its relation with the neighbor and also with the strategic ally such as in your countries. During Trump administration, Trump administration, US and Poland signed an agreement to exporting LNG for Poland for 20 years to decrease dependency to Russian natural gas. And also US and India signed another agreement, 20-year agreement to supply more LNG to India. Also, US trying to sign LNG agreement with other countries, but due to, as I mentioned before, lack of huge, lack of sufficient investment in infrastructure, I mean regasification, facility and interconnector, the US will not be able to supply more LNG to this country. But with the huge investment in LNG, US will be able to supply more LNG by coming years. And since last, last December, US became the world's largest LNG producer and exporter. Before December, by the November, Qatar was the world's first LNG supplier, but U.S. passed Qatar and will be world first energy supplier and this U.S. will be able to keep its position as a world large energy supplier by 2022 and maybe by 2023 because Qatar has a huge investment by 2027 to increase production capacity more than 60% and to reach 144 million barrels annually. I mean U.S. adamant to supply to help the EU energy security In the short term, the US will be able to supply more LNG. In the long term and mid-term, US will be able to send, I mean, to supply high technology in energy transition process, to invest in renewable energy, solar and wind in some EU countries, especially the countries, I mean, Italy and other countries will be able to attract more foreign financial from the US, from the private and government sector. About the effect of current tension, as I mentioned, Russia is a major energy biggest supplier in the EU, and also Russia has a very playing, a very important energy diplomacy in the EU. And as you know, the former Chancellor of Germany at present working with some of the board of Gazprom, and some of the think tanks in the US has in the EU using energy expert and foreign policy analysis from the Russia. Russia is trying to supply more, try to fund these think tanks and also to some research center in the university, and also in the EU media and some politicians are affected by the Russian public diplomacy and energy diplomacy. Russia is not interested to lose or decrease its share in the EU energy market, but if EU really wants to decrease the role of Russia in its foreign policy and its energy security, more LNG from the US, more LNG from Qatar, more natural gas from Azerbaijan and from Israel in the second phase, I mean, Next month, the US-Israel president will be visiting Turkey, and last week, Recep Tayyip Erdoğan, president of Turkey, said that Turkey is really interested to import natural gas from Israel and also try to transit natural gas from Israel and Egypt to EU market. Israel also will be one of the options for supplying more energy to decrease dependency to Russia. Without the cooperation of EU country, US, We will not be able to decrease dependency of EU to Russian natural gas, but from the energy perspective, from the energy transition process, Washington has a very good potential and capability to help EU countries to overcome the energy problem. Very interesting.

The details are fascinating.

Yeah, absolutely. Um, looking now at the next question. So more again from a U.S. foreign policy perspective, so what do you see as the main challenges to U.S. energy diplomacy today based on your research for this book?

Yes, general, as I think I mentioned in the second question, when U.S. faced the energy crisis, Biden administration trying to play an important energy diplomacy. People are focused on the Biden administration. I have to mention about the active energy diplomacy played by Trump administration. By March 2020, when oil price goes down and for the first time in the history we've been negative. Some of major energy companies and share companies in the U.S. faced huge financial crisis and Trump himself, national security adviser and Secretary of Energy, some Senate members, congressmen tried to reach the U.S.— I mean Russia and also tried to reach official from Saudi Arabia to satisfy these countries to help to create the balance in the market. And due to Trump's active energy diplomacy, U.S. will be able to support its own energy security to— and also try to create a balance in the market. But Biden will be not able to be more successful as the Trump administration. By last September, Biden tried to satisfy Riyadh and Moscow, but these countries are trying to follow their own interests and own policy in the market, and also it shows that these countries will continue to follow the same policy, and just Biden will be able to just release some part of the Strategic Petroleum Reserve and also trying to raise the energy consumer. But as I mentioned, this just has a little effect on oil market, and we see, we see that if the current tension between Russia and Ukraine will be continue, oil price, oil price, it will be increased by coming weeks. About the, I think the major mistake we can say that more focus on energy transition process will be major crisis for US energy policy during Biden administration. For US and for every other countries, it is better to more focus on decreasing fossil fuel in energy needs and also gradually increasing the share of renewable energy without the huge investment in infrastructure. US during Biden administration or next administration will not be able to decrease the dependency of fossil fuel. More focus just focus on renewable energy, it will be, I think, biggest mistake for every administration in US or other country. Energy transition needs fossil fuel to be more successful, and every country, every administration in the US has to focus on it. US has very good potential in renewable, I mean in solar, in power plant, in solar and wind, and also has a good technology potential in R&D in some university and research center. And also US more focus on electrical will be very effective in energy transition process when The electricity which using this vehicle generated from renewable energy, not generated from the oil or natural gas or LNG.

Uh-huh. Very interesting. I do want to pivot for one last question. In the context of the Vienna talks, if the Vienna talks will succeed to return Iran to some sort of nuclear deal, how will that impact U.S. energy diplomacy?

Yes, from the oil perspective, you know, US trying to increase the share of oil in East Asia and also from the South Asia, I mean mainly India. And for energy perspective, every country's major destination is East Asia and China. Natural gas sector, I mean, during coming weeks or coming months, new deal will be signed and will be reached by 4+1 and Iran in Vienna. In the natural gas market, Iran in the next decade will not be able to treat the U.S. interest in the world energy market from LNG and natural gas market due to high domestic and also due to lack of financial capability and technology. Iran will not be able to be more player. And from the oil perspective, the U.S. has our own market, but if Iran get that market, it will be just Against, I mean, mainly Russia, UAE, and Saudi Arabia, and maybe Iraq. But it is the best chance for the US to supply more LNG to traditional consumer and to supply more foreign finance, more technology requested in energy transition process. I think there is no direct relation between Iran get back to energy market to US energy security and US national security, but it's maybe not in favor of some US ally in the region.

Well, this is what we get when we have such an expert. We're just so eager to get all this information. Thank you. Yeah, Adam's going to take over and close this up.

So thank you, Umud, for really a fascinating interview and discussion essentially on your book and really gives us a look behind the scenes on the US energy diplomacy and politics in context of the Caspian Sea Basin. So for those interested, we'll publish the highlights from this Q&A on the Wikistart website in the coming days. And also, of course, you're warmly encouraged to buy the book and to have a full look for yourself to further understand this very complex issue. So, Dr. Umud Shokri, thank you so much for your time and for these really fascinating insights. Always a pleasure to have you here.