Past Events

USACC Discussion with Senior Policy Advisor for International Affairs to U.S. Energy Secretary Spencer Abraham, Randa Fahmy Hudome

"The Role of the Caspian Region in U.S. Energy Policy"

June 27, 2002

On June 27, 2002, Randa Fahmy Hudome, Senior Policy Advisor for International Affairs to U.S. Energy Secretary Spencer Abraham, addressed the United States-Azerbaijan Chamber of Commerce (USACC). The following is a summary of her remarks and responses to questions.

In answering the question "what is the role of the Caspian Region in U.S. energy policy?" I can say that the Caspian region is a huge part of the Unites States' energy policy. The National Energy Plan (NEP), which debuted 1.5 years ago, puts forth several recommendations, and ¾ of those recommendations are on their way to completion. The 22 remaining recommendations require legislation and are in the House and Senate Bills.

The overall strategy of the NEP is to provide a long-term comprehensive energy strategy and to advance new and environmentally friendly energy policy in order to increase energy supply and raise the standard of living for the American people. Energy security is a fundamental component of national security. After the terrorist attacks on September 11, it is especially important to diversify our energy sources. Energy diversification is important to make us more secure. The NEP was written before 9/11, but diversification has become ever so important. The Caspian region, consequently, is important.

The US wants three main things for the Caspian region: We want it to be peaceful, democratic, and prosperous. We want stability in the region. We want to ensure that there is a legal, structural, and regulatory framework in place. The United States can assist the region in these areas and helps in several ways. For example, public statements of support from US officials help facilitate progress with these pipeline projects. Also, visits to region emphasize the importance of the region. The involvement of financial institutions is also important.

The NEP puts forth several recommendations that specifically relate to the Caspian region.

The first recommendation is "to support the BTC oil pipeline as it demonstrates its commercial viability". To this end, President Bush wrote a letter stating that we do support the BTC pipeline.

The second recommendation is "to continue working with relevant companies and countries to establish the commercial conditions that will allow oil companies operating in Kazakhstan the option of exporting their oil via the BTC pipeline". This is of vital importance because corporations want to know that their investments will be honored.

The third recommendation is "to support the efforts of private investors and regional governments to develop the Shah Deniz gas pipeline as a way to help Turkey and Georgia diversify their natural gas supplies, and help Azerbaijan export its gas via a pipeline that will continue diversification of secure energy supply routes". Again, it is important to diversify energy supplies. Turkey and Georgia will start shipping gas to Turkey in 2005. We have used diplomatic measures and pressure to encourage parties to come together and cooperate towards these ends.

The fourth recommendation is "to complete the current cycle of oil spill response readiness workshops, and to consider further appropriate steps to ensure the implementation of the workshops' recommendations". The US has some of the best technology to deal with oil spills and we are committed to helping protect the environment. Consequently, the Department of Energy provides technical assistance for oil spill response.

The fifth recommendation is "to encourage Greece and Turkey to link their gas pipeline systems to allow European consumers to diversify their gas supplies by purchasing Caspian gas". Just as it is important for us to diversify, we believe it is also important for Europe to diversify. So we use diplomatic measures to encourage Greece and Turkey to link their gas line to Europe.

The sixth recommendation is "to deepen our commercial dialogue with Kazakhstan, Azerbaijan, and other Caspian states to provide a strong, transparent, and stable business climate for energy and related infrastructure projects". The US promotes technological cooperation, business cooperation, sound legal and regulatory structures, and environmentally sound technologies. For example, on Monday (July 1, 2002), Secretary Abraham and I are going to Kansas City to attend a conference on U.S.-Kazakh Investment Opportunities where Secretary Abraham will address the conference to encourage participants to move ahead and move U.S. policy forward. With regard to Azerbaijan, we see the positive effects of President Bush instituting a waiver of Section 907 for the year, an important step toward encouraging business development and cooperation.

So what can USACC do to move this policy along? Azerbaijan is moving in the right direction and the USACC can help sustain and encourage that. Petro dollars are being used in the right way, for sustainability. The USACC can encourage deeper dialogue, and a transparent environment for business. I recommend organizing a conference similar to the one in Kansas City, with government participation, to bring government and investors together.

The following is a summary of the question and answer session following Ms. Hudome's statement.

When asked about the effect Trade Promotion Authority will have on the energy sector, Ms. Hudome replied that TPA permeates everything. Energy is important and the President favors TPA.

When asked about the dominate role of Russian companies in the Caspian region and how the United States will ensure a sustained role for the US and US companies in the region, Ms. Hudome commented that a US-Russian energy summit is planned, with Secretaries Evans, Abraham, Gref and Yusufov in Houston this October. Such events are important because by engaging other companies, US companies gain greater opportunities- it's a win-win situation. She also commented that the US will be watching very closely how the situation in the region progresses.

In response to a question about the strengthening relationship between the United States and Azerbaijan and its potential negative consequences for the relationship between the US and Russia, Ms. Hudome remarked that she didn't foresee a problem, that the US's relationship with Russia is positive and progressing, that this is good thing, and will not be at the expense of the United States' relationship with other countries.

When asked to comment again on the Turkish and Greek market, Ms. Hudome reiterated that the project proposed is under the EU, and that there have been US diplomatic efforts to promote the project, which provides a huge opportunity for Europe to diversify its energy.

When asked what she foresees Iran's Role for Caspian energy to be in future, and whether it is wishful thinking that the U.S. will support projects in the region, Ms. Hudome remarked that the U.S. does support projects in the Caspian region, providing technical assistance and exchanges. She also stated that the level of US support varies. The TDA, OPEC, and EXIMBANK will fund projects at times, so it's not just wishful thinking. With regard to Iran, she commented that we can't predict what will happen. "Iran doesn't figure in our radar screen and is not figuring into our policy". The same is true with Libya. Companies may want to go back there, but it really not for the US to decide because Libya is a UN sanctioned region.

When it was pointed out that with regard to Greece and Turkey, Russian companies tend to dominate, and when asked whether there are fears that the US will hand the region over to Russia, Ms. Hudome stated that it is important to maintain dialogue and that the US will talk to Russia about this if this happens.

And finally, when asked how she views the relationship between OPEC and Russia, Ms. Hudome stated that from the perspective of OPEC, all of the providers are members of one happy family and the more providers the merrier. Russia isn't openly critical of OPEC, yet it knows what opportunities are available. Russia also knows that the US views it as an important player and that the US wants more producers in the market place.