Moderator: Good afternoon. I’d like to welcome everyone joining us for today’s virtual press briefing. Today we’re very honored to be joined by the State Department’s Senior Advisor for Global Energy Security Amos Hochstein.
And with that, let’s get started. Senior Advisor Hochstein, thank you so much for joining us today. I’ll turn it over to you for opening remarks.
Mr. Hochstein: Thank you, Andrea, so much, and thank you all for joining us today. It’s really a pleasure to be here and be able to answer some questions that I know a lot of people have about Nord Stream 2 and the joint statement that we signed with Germany and the implementation of that, especially in the context of the global energy crisis that we are experiencing today across the board of the value chain of energy, not just in Europe and not just on natural gas.
But let me just frame for everyone how I think about this subject in general. The – while we talk about Nord Stream 2 as a critical issue that clearly has a lot of political attention and ramifications for Europe, for Ukraine, for Russia, for the United States, I think about it more as one piece – one piece of a whole energy security for Europe or European energy security puzzle. And this is an area that the United States has been committed to for several decades, to support European energy security. It has been threatened on multiple occasions over the last 30 years from the Baltics’ independence through the events of 2006, 2008, 2014, et cetera. And Nord Stream 2 is an area that contributes to the instability and insecurity of broader Europe, of Ukraine, but it is not alone. It is not the whole piece of it. Nord Stream 2 is obviously a big piece of it, and the changing dynamic of energy and the fuels that we are going to be using in the future all play into this dynamic.
So as I take on the role of implementing the Nord Stream 2 joint – the joint statement between the United States and Germany on this, I think about it as what do we do with the lens of looking forward, not backwards, and I’m sure we’re – I’ll go into great detail on this as you ask the questions. But that’s really the frame in which we look at it.
So the idea of reaching the joint statement with Germany was recognizing the reality of the complete – the near completion of the pipeline itself, understanding that aggressive action by the United States would likely not have changed the outcome and perhaps only would have delayed it. So looking at reality, understanding it, and fashioning something with an arrangement with Germany that would allow us to continue to defend the significant interests that Europe has, that the United States have to defend the security of Ukraine while addressing and mitigating the bad effects and the threats that Nord Stream 2 could pose. And that’s the idea. We did not change our view as an administration. The President, President Biden, has stated this on several occasions. We did not change the view that this was a pipeline that probably should never have been built and that was not commercially driven but rather political. But we just came to the realization that we now have to switch our focus to mitigating rather than trying to prevent.
So with that, Andrea, I would be happy to answer any questions, if there are any.
Moderator: Okay. I think we definitely have questions, and we’ll now turn to that portion of today’s briefing.
And so with that, our first question goes to Tim Gardner from Reuters. Tim, we’ve unmuted your line. You can go ahead and ask your question. I think you may need to actually hit the unmute button as well.
Question: Sorry. Can you hear me?
Moderator: Yes, we can.
Question: Well, thank you and thanks for holding this, Advisor Hochstein. I wanted to ask about Nord Stream. The head of Ukraine’s state energy company, Naftogaz, said this month that Russia is trying to blackmail Europe into certifying the pipeline by keeping gas supplies lower. I wanted to ask you what your take was on that and what you see as the latest in making sure that Ukraine and other countries in Eastern Europe are not undermined by the pipeline.
Mr. Hochstein: Thanks, Tim. Look, I think that let’s – I like to separate these issues out. Number one, we are in a global energy crisis, and in Europe that is playing out specifically in the natural gas shortage. We are seeing prices in Europe of natural gas that we haven’t – that we’ve never seen. And we have – and the worst part about it is that there’s been a sustainability of these high prices. It’s not been a spike that went back to – came back down to Earth, but rather stayed at these elevated prices, and that’s very concerning. And it reflects the fact that the market is looking at the inventories in Europe as significantly below where they should be even though there’s been some filling, and running scenarios of a cold or colder winter. So under any scenario of a winter that is colder than average, there could be an availability-of-resource crisis.
Now, it’s being driven higher not just by the situation in Europe but by the fact that we have other global effects. China suffered through a very dry season that led to a hydropower in southwest China scarcity, and that led to essentially a price competition between China and the rest of the market, including Europe, for gas supplies. That drove up the price in China and drove up the price in Europe as well. So there are a number of these factors that are playing into the gas prices.
There is no doubt in my mind, and the IEA has itself validated, that the only supplier that can really make a big difference for European energy security at the moment for this winter is Russia. Now, they can increase upstream production. They should do it. They should do it quickly and they should supply it through the existing pipelines. I don’t think that we should, as a society of laws, the United States and Europe, especially Europe in this case, as a society of laws should not be pushed into waiving restrictions, waiving the regulatory process and the legal process in order to satisfy a crisis that is a – to some degree can be alleviated through other means and mechanisms.
So Russia – if Russia has the gas to supply through Nord Stream 2, as they suggest, that means that they have the gas to supply it through the Ukrainian GTS or the pipelines as well. So they should do that. So you can’t have it both ways. And so that’s how I see it. I don’t want to call it names, but that is what we expect and what I think any open, free market should expect.
Moderator: Thank you so much, sir. Our next question comes from Moritz Koch from Handelsblatt in Germany, and his question is: “Is Russia currently using energy as a weapon against Europe? And should Germany respond with sanctions given the commitments made in the U.S.-German joint statement on Nord Stream 2?”
Mr. Hochstein: Well, I think that’s – the hardest question about using energy as a weapon is one of those things where you know it when you see it. I think we’re getting close to that line. If Russia indeed has the gas to supply and it chooses not to and will only do so if Europe accedes to other demands that are completely unrelated, then it’s hard to make the argument that it is not. I think Germany needs to pay attention to this, and I know that this is a complicated political season in Germany, and I’ve gone through transitions myself in the U.S. so I know that government-formation process is an all-encompassing effort.
But I think we are at a critical month right now as we sit at the end of October towards November when the heating season is beginning, where Germany needs to get significant clarifications from the Russians and make it clear, and I think this is important, to make it clear that the regulatory approval process that has been outlined by the regulator and by the German Government that it will take no less than the four months to review it, and that’s not before January the 8th, and that then it will have two months for the European Commission to opine on the legality and the fact that the pipeline is adherent to the third energy package and the gas directive, that that’ll take two more months. So before March, Nord Stream 2 is not on the table. And once that is clarified and I think everybody understands it, hopefully we can move to the next level of conversation about making sure that as much gas supply is being delivered into Europe for this winter as possible.
Moderator: Thank you so much. And now we’d like to move to Will Mauldin from The Wall Street Journal. Will, you can unmute yourself and ask your question. Will, are you able to unmute yourself? Okay, I’ll go ahead and ask his question that we have here in the chat. It says: “What concrete steps can the U.S. take to address the energy insecurity in Europe? Would sanctioning the Nord Stream 2 and its chief directly help? And are there actual steps Washington could take to get LNG to Europe?”
Question: Sorry about that. I guess you’ve asked it. But yeah, appreciate any ideas about what responses the U.S. can take. Thank you.
Mr. Hochstein: Well, I think that, Will, if I understand your question correctly, what you’re asking is can U.S. LNG or are there things that the United States Government can do to support the crunch in Europe? Is that right? Will?
Question: Yes, that’s right. Anything about the – that the U.S. Government could do or whether you think putting pressure on Moscow through sanctions would also help. Thank you.
Mr. Hochstein: So, look, I think that the U.S. has a significant amount of LNG that is flowing onto the market. The U.S. Government does not direct our companies in who they sell to. We provide the licensing for both free trade agreement countries and non-free trade agreement countries, and then the companies sign contracts and sell those volumes out on the market. So I’m not in a position to tell companies who to sell to.
I think that Europe can and should take steps to address the market condition and where – when you have a price competition with an instruction from another country to pay “whatever it takes,” quote/unquote, that’s going to create some distortion where cargos are going to go to the highest dollar. And in a period of scarcity where we have – which we are in right now, that is clearly what has happened. So from that perspective I don’t think the U.S. Government has much that it can do more than it has already done. The U.S. already is a significant – one of the largest exporters to the global market and holds a pretty significant share of the global market.
When it comes to the second part of your question, I think that’s what we are doing. We are in – as you may recall, I was – I raised alarm bells several weeks ago before people were willing to discuss this publicly, that I was concerned that this was – this crisis that we were facing, if not addressed, was not just about money and higher prices; it was literally something that endangered lives across Europe and that there would be – could be countries, if we were in a colder-than-usual winter, that there would be places where gas was just not available and people would have to making choices about heat. And during cold spells, that affects the most vulnerable of society and the most vulnerable of countries in Europe, and that is what I was concerned about and that is what I’m concerned about today.
I think that a number of steps have been taken by Europe. I think more can be done to have a collective contracting for cargos. There are physical things that can be taken. I think the commission is taking some steps that will ensure next year and the year after that we don’t have these kind of concerns, but we have to continue to work, and as we are, to identify other areas that could provide solutions.
So I can assure you the United States is in daily communication with our friends and allies across Europe and Ukraine to look for mechanisms that would alleviate the pressure and the dangers that this winter could pose.
Moderator: Thank you so much. And now I’d like to turn to the Polish Press Agency and Oskar Gorzynski. Oskar, you can now unmute your line and ask your question.
Question: Okay, thank you. So my question is you said that the U.S. reaching the joint statement with Germany was an acknowledgment of reality and a switch towards mitigation of the bad effects of this Nord Stream 2 deal. But so is that – in your opinion, is that basically a done deal and there’s nothing that can be done against – about that? And my second question would be: Do you see this situation now as a test by Russia of this joint statement and the commitments that were declared in it?
Mr. Hochstein: Look, my – I was appointed in the middle of August.
Mr. Hochstein: And after the joint statement was already in place. And I will say my first, very first trip anywhere in the world in this new position was to Warsaw, and from there to Kyiv. So I recognize that there are certain countries that are affected by these decisions more than others, and I value the partnership and the conversation that I had in Warsaw. And by the way, our communication with Warsaw continues and I’m in regular contact with my colleagues and friends in Warsaw on this issue.
But the large picture is, look, the sanctions – we got to the point in this pipeline construction which was above 95 percent complete where the only companies that were really involved in the construction were Russian companies that I don’t believe cared one way or the other if they were sanctioned, and in fact some of the companies that were sanctioned continued operations. So we had to make a decision: Do we impose sanctions and let the pipeline be completed anyway and maybe delayed by a few months, or can we put something together that would allow for us to work collaboratively with both Germany and Ukraine and Poland and the commission, and the EU Commission, to address and mitigate the concerns? And I think that that was the decision the President of the United States made, and that’s the decision that I am implementing, and I think it’s a critical one to make to get us to a better place.
And that is to understand that Europe is changing. If you look at everything that we are – we’re now what, 10 days away from the COP, from COP26 in Glasgow. We’re looking to transition the entire global energy system to a cleaner and greener one. Europe is one of the leading – is the leader when it comes to this. So it is entirely within reach that gas demand, natural gas demand, which is continuing to grow – we have not peaked natural gas demand – but we are going to get there in the next 10 years. And looking at using this moment of time to ensure that Ukraine is positioned to continue its historic role as a supplier of energy into Europe, and moving that not from – well, moving that from transiting molecules to transiting electrons, and clean ones.
And that is an opportunity that we were able to create through this joint statement with Germany and through our work with the European Commission to be able to make sure that Ukraine is not just reliant on the revenues from the transit system for natural gas, which it will continue to receive at least until 2025, and we’re hoping that for years later, but that it begins to receive the investment dollars from Europe, from both governments and private sector, to invest in a cleaner future that allows Ukraine to connect into Europe. And to this – this is another example of what we’re just launching, is the integration of the Ukrainian electricity system into the European electricity system. And once we do that, this is not just a benefit for Ukraine but we can not have a benefit for Ukraine and Europe of bringing in affordable and additional clean electrons of power into Europe, supporting Europe’s goals of a transition to a lower-emitting power system and supporting Ukraine’s – not only their clean goal, their clean energy goals, but also their economic goals.
So this was this moment in time where you recognize that the world is shifting and that we are able to both address the security risks that Nord Stream 2 poses, and I don’t underestimate the security risks, while also looking towards the future and understanding that there’s no better time than the present to address and prepare countries for this future and stare at it right in the face and do what you need to do to be prepared and not get caught behind, being left behind.
So that’s what this arrangement was all about, and whether or not this is a test – look, I think that, as I’ve said, I think Russia has the ability to increase its production and therefore will be able to increase its supplies into Europe beyond its contractual obligations, and I think that’s what Europe is – that’s what Russia should do. I think that Europe is making that clear and should continue to do so with an even louder voice, and that’s what we will continue to do as well.
Moderator: Thank you, sir. And I believe we have time for one last question, and I’ll turn it over to Andrei Sitov from TASS News Agency. Andrei, you can unmute your line.
Question: Unmute. Hi. Thanks for doing this, Ambassador, and thanks to our friends at the State Department for holding the briefing. I wanted to ask you to comment on President Putin’s take on the situation, but before I do that, two specific questions. First, does the U.S. regard nuclear energy as green energy? That’s number one. Second – you’re smiling. Second, the – what was the second one? Let me see here just a sec. Second, do you stand ready as the U.S. to increase energy supplies to Europe to help out your allies?
And as for President Putin, as you probably know, he has described the current situation as a self-inflicted wound, the result of a shortsighted policy. You probably don’t agree with that description, but why not? Thanks.
Mr. Hochstein: Andrei, great questions. Thank you. Let me start with we, as you know, when we have had American companies with the support of the U.S. Government, including this administration, have signed MOUs and agreements with a number of European countries, including Ukraine, to pursue expansion, refurbishment, and modernization of nuclear power plants to supply additional nuclear power for their own country and to their power systems. That is a form of clean energy that can come on at fairly large scale. And looking at both the most up-to-date, latest technology of nuclear power, including the small modular reactors, which obviously is the next breakthrough of technology, which has not yet been put into practice but we think there are a number of places around the world that would be good opportunities for that. As you know, when President Zelenskyy visited Washington he signed three MOUs relating to nuclear, including one with – that is related to the SMR, to the small modular reactor. This is an issue where different countries have different views, and we are very well aware that some countries in Europe are not supportive for additional nuclear power and in fact are reducing and shutting in nuclear power in their – within their borders. Every country has their own considerations to make. But we have been supportive of the U.S. companies that have been working with countries both in Europe and elsewhere around the world.
When it comes to President Putin’s comments on self-inflicted wounds, look, I’m not 100 percent sure I understand what he means, so you would have to ask him for more clarification about what the wound is. But there is this notion out there that – I would say a false notion that ties the current crisis to the energy transition. And I want to be very clear. There is – the energy transition is not what caused this crisis. There are a number of contributing factors. But some of the leading factors – not all of them, but some of the leading factors have to do with global weather patterns that have significantly affected the energy system. We had a drought in China and a drought in Brazil that affected hydropower in a fairly significant way. We had hurricanes in the Gulf of Mexico that affected deliveries into Europe, two of them in fact back to back. We’ve had fires. So the weather pattern – the climate is changing. We are in a climate crisis. And in fact, if I learn anything from this crisis that we are facing – and I think it’s a real crisis, right, because oil prices are extremely high, coal prices are high, natural gas prices are high; this is having an impact of a chain event on other metals production where prices of metals are going up; those are inputs into renewable energy.
So as you look at the value chain of energy from fossil fuels to renewables, everything is being affected by this energy crisis. That is what should convince us that the real effort that we have to make here is accelerating the energy transition. The more we can accelerate towards the process towards using greener and cleaner energy that is not dependent on fossil fuels, the more secure we will be. But we have to do that while also coming up with advancing the technologies that enable renewable energy to be less intermittent or less affected by intermittency and not require as much baseload of power. So we – and baseload being fossil.
So that is what we need to do, is to accelerate the process. While we accelerate the energy transition, we also need to realize that it’s not a flip of a switch. And while we’re in the process of transitioning, we need to work together as a global community, as a global economy, to ensure that we do not suffer from energy price shocks that lead to – that could lead to economic shocks. That is a delicate balance that we have to do that we don’t have a choice but to do. And as we accelerate the process, we will be able to ensure our security and stability. But that’s going to take some time, and we need to do everything we can together as a community, as a global community, to ensure that we don’t have these kinds of price shocks that we are experiencing right now.
Moderator: Unfortunately, that’s all the time that we have for today. Thank you all for your questions and thank you, Senior Advisor Hochstein, for joining us. Shortly we’ll send the broadcast-quality video files of the briefing to all participating journalists and provide a transcript as soon as one is available. We’d also love to hear your feedback, and you can contact us at any time at TheBrusselsHub@state.gov. Thanks again for your participation and we hope you can join us for another press briefing soon.