President Obama and the leaders of the biggest Western economies agreed Monday to temporarily kick Russia out of the Group of 8, excluding Russian President Vladimir Putin as punishment for his annexation of Ukraine.
“This group came together because of shared beliefs and shared responsibilities. Russia’s actions in recent weeks are not consistent with them,” the leaders said in a statement. “Under these circumstances, we will not participate in the planned Sochi Summit. We will suspend our participation in the G-8 until Russia changes course.”
The statement followed Putin’s latest act of aggression on Crimea. Yesterday, Russian troops seized yet another military base on the peninsula. This prompted interim Ukrainian President Oleksandr Turchynov to order the withdrawal of armed forces from Crimea.
Related: Does Putin Want to Carve Up Ukraine and Take the Spoils?
Many politicians and experts are urging Obama that sanctions against Putin and his allies and diplomatic gestures like the one announced yesterday would do little to stop Putin. They are urging the president to pitch the Europeans on the prospect of importing more liquefied natural gas from the United States. Others are suggesting that the best way to stop Russia is to bankrupt it. And the best way to bankrupt it is for Europe to stop buying so much energy from Gazprom, Russia’s state-controlled energy giant.
In theory, this is a good plan. Right now, Russia supplies 31 percent of EU gas, 27 percent of crude oil, 30 percent of Europe’s uranium, and 24 percent of European coal. Revenues from these transactions make up 40 percent of Russia’s budget.
If the United States were able to supply for energy to Europe - right now, federal regulations limit the export of U.S. oil and natural gas - it would cut the amount of energy Europe needed from Russia, bleeding the Russia’s oligarchs in Putin’s circle. This would up the pressure on Putin to calm his ambitions.
Related: Russian Ties to Ukraine Go Much Deeper than Gas
This plan makes sense, but only in theory. In practice, it would take time, hundreds of billions of dollars and a unified regulatory effort to make it happen. Here are just a few of the obstacles to weaning Europe off of Russian energy and on to power from the United States.
1. It would take years to cut into the amount of energy Russia supplies to Europe. The chart below shows just how much gas is arriving in Europe via Russian pipelines.
By comparison, in 2012 the United States exported just 0.1 billion cubic meters of gas to Europe. It would also take a bipartisan change to energy export laws to supply Europe with enough energy to allow it to turn away from Russia.
2. The United States lacks the infrastructure to ship natural gas to Europe. Right now, the United States has just one liquefied natural gas (LNG) export facility, located in Alaska. It would be extremely difficult to get energy to Europe from there.
Related: Does Putin Want to Carve Up Ukraine and Take the Spoils?
Therefore, the United States would need to build new export facilities, likely on the east coast. They would first have to seek approval to build the plant from the U.S. Department of Energy and the Federal Energy Regulatory Commission.
There are five new liquefaction plants that have been approved by DOE. According to the MIT Technology Review, only one in the Gulf of Mexico is under construction; when it’s done (it’s scheduled to be completed by 2015), it would only be capable of exporting 78 million cubit meters per day. This would pale in comparison to what the Russians send. Earlier this month, Gazprom shipped 505 million cubic meters to Europe in a single day.
3. Fierce bipartisanship in Congress would make changes to laws governing exports difficult. Congress is so divided that it was unable to pass an aid package to Ukraine. It’s hard to imagine lawmakers uniting to pass regulatory changes that are necessary to change export laws. There are also political roadblocks that can be thrown in front of the Department of Energy if it moves to approve new LNG export plants.
4. Even if Congress does act, it will take time to create LNG export infrastructure. Even if Congress acts quickly, it would take years to get the infrastructure built. Right now, there are 25 LNG export applications are pending. If they were approved, it would take years and billions of dollars to build the facilities to export it. MIT says eight of these export facilities would be built at existing LNG plants, costing between $8 and $10 billion each. New terminals cost as much as $20 billion.
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