How to Punish Putin Without Spending a Dime
With Russia solidifying its hold on the Crimean region of Ukraine, America can help the Ukraine—and its own economy—by increasing exports of natural gas. This would hit Russia in the pocketbook and reduce Russia’s economic hold on the Baltics, Europe, and Asia.
1. Allow more liquid natural gas exports. Congress can send President Obama legislation to increase U.S. exports of liquid natural gas (LNG). Russia provides more than half of Ukraine’s natural gas and 30 percent of Europe’s. Taxes from the oil and gas sectors provide Russia with about half of its budget revenue. Since LNG is more than twice as expensive in Europe as it is in the United States, exporting more to Europe would eat into Russia’s profits—and power. Legislation alone would be enough to scare Russia into better relations with Europe and Ukraine, and the prospect of U.S. LNG exports would lower futures prices (the market where most energy trading takes place).
2. Expedite, or end, the liquid natural gas approval process. If a country does not have a free trade agreement with the U.S., exporters must get permits from the Energy Department, which can take years. Ukraine does not have years in its conflict with Russia, it may only have weeks or days. The Energy Department needs to expedite its permitting process now. Only six LNG export proposals have been approved since 2011. Any legislation designed to help Ukraine should include amendments to the Natural Gas Act requiring the Energy Department to approve or deny LNG export applications within a brief period of time. Better yet, allow all natural gas exports without the need for a permit.
3. Expand liquid natural gas trade reciprocity. Just 20 countries have free trade agreements with the U.S. Congress should pass legislation that allows LNG to be exported to all members of the World Trade Organization, even if they do not have a free trade agreement with the U.S. Such an arrangement would boost the U.S. economy and create jobs at home as well as helping Ukraine and Europe.
4. Approve more LNG export terminals. Even though it takes time to build a LNG export terminal, approving more would send a strong, long-term signal to Russia and U.S. allies. It would also affect futures prices. As of now, there is only one LNG export terminal, located in Kenai, Alaska. A few more have been approved and are currently under development. More export terminals allow LNG to flow more freely out of the country into foreign markets, undermining Russia’s hand in international conflicts.
The lengthy, convoluted permitting process for LNG exports and for LNG export terminals is an inefficient policy. Increasing LNG exports would create jobs at home by allowing the current energy boom to keep growing on a predictable path. Best of all, it would not require government spending. Any or all of these options would help Ukrainians who are fighting not only for their country but also for democracy.