The Geopolitical Implications of the Natural Gas Boom

There has been a great deal of attention given to the oil and gas renaissance taking place in the United States.  Technology advances in horizontal drilling and hydraulic fracturing have led to a boom in natural gas production that has spurred investment, job growth, and the potential for significant export opportunities.

The benefits of these technologies are much broader than just here in the US. Natural gas technologies have gone global and our boom in natural gas production is going global also.  In doing so, will reshape the geo-political map.

For example, Russia is the dominant source of natural gas to Europe, providing 50% of European gas.  That dominance provides Russia tremendous political leverage, which it has shown to be very willing to use.  In the recent past, it shut off supplies to the Ukraine after a price dispute and cut deliveries to other countries during bitterly cold winters.  Diversifying Europe’s sources of natural gas would allow central and eastern Europe to fully prosper without the threat of a shut off hanging over their heads.

While some have talked about exporting US LNG to Europe, the continent has closer sources that it can access and developments are taking place to make that happen.  Azerbaijan’s Caspian Sea resources are enormous.  Several pipeline projects are in the planning stage that would allow Azerbaijan gas to flow to Southern and Central Europe.  There is also the potential for Azerbaijan gas to flow as far as France and Germany.  These developments mean real competition in the European gas market and the lower prices that come from it.  Russia is responding with projects of its own and efforts to renegotiate contracts.  While that will drive down prices which is good for Europe, it still means that Russia would have too much political influence over too many countries.

The development of Azerbaijan gas will enable it to achieve a level of economic growth and prosperity that it was denied when it was brutally controlled by the old Soviet Union.  Just 23 years ago on January 20, Soviet forces rolled into Baku and slaughtered 133 innocent people and wounded another 700 in an effort to maintain control and discipline.  Azerbaijan is now a country with much promise and is closely allied with US interests.  Helping it develop and export its resources will lead to a more prosperous and stable region.

The US objective stated by the Department of State  of “strengthening democracy and the formation of an open market economy in Azerbaijan…and an Azerbaijan that is peaceful, democratic, prosperous, and strategically linked to the United States and U.S. allies in Europe”  can be advanced by actions that help Azerbaijan complete its pipeline projects as rapidly as possible so that it can compete with Russia and others suppliers of gas to Europe.