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Diplomacy in Action

Energy Sector Issues in Eurasia and Review of Recent Travel to Sweden, Russia, and Ukraine

FPC Briefing
Ambassador Richard L. Morningstar
Special Envoy for Eurasian Energy
Foreign Press Center
Washington, DC
June 23, 2009

Date: 06/23/2009 Location: Washington DC Description: Ambassador Richard L. Morningstar, Special Envoy for Eurasian Energy, briefs on Energy sector issues in Eurasia and reviews his recent trip to Sweden, Russia, and Ukraine on Tuesday, June 23, 2009. © State Dept Image1:45 EDT


Good afternoon, and welcome to the Washington Foreign Press Center. Today we have with us Special Envoy for Eurasian Energy, Ambassador Richard Morningstar. He will discuss the energy sector issues in Eurasia, and review his recent travel to Sweden, Russian, and Ukraine. Ambassador Morningstar.

AMBASSADOR MORNINGSTAR: Thank you very much. You know, the – I know that this was advertised as talking about my recent travels to Sweden, Russian, and Ukraine, but I should also mention that the week prior to that I returned from Turkey, Turkmenistan, and Azerbaijan. So, I’m happy to talk about anything relating to energy issues in those countries, as well. In fact, I’m happy to talk about whatever you want to talk about, in connection with Eurasian energy.

My job, as I see it, is that I deal with everything from – or every place – from Europe to China, as it relates to Eurasia. So that includes European security issues, Russia-Ukraine gas issues, the Southern Corridor, issues relating to Turkey, Azerbaijan, Turkmenistan, other central Asian countries. And so I’m – you know, I’m open to talk about whatever it is that you want to ask me about.

This is an area that is very important to both the President and Secretary of State. I report directly to the Secretary of State, and she’s well aware of all of the issues, and we had had several sessions going over the issues. So this is something that is a high priority within the Administration.

So, with that, happy to entertain any questions that you might have.

MODERATOR: Yes, please state your name and media organization. Wait for the microphone.

QUESTION: Yes, my name is Zaur Hasanov. I’m from Azerbaijani news agency. It was a real pleasure to see you this morning in Azerbaijan chamber of commerce.


QUESTION: Yeah, Mr. Morningstar, where is the main root of problem for the implementation of South Corridor project? Is it the relationship between Azerbaijan and Turkey, or the fifteen percent lease of issue, the problem of Azerbaijan with Turkmenistan because of the (inaudible)?

You know, there is many, many problems in the region between many, many countries involved in this project. So can you kind of elaborate on this issue?

AMBASSADOR MORNINGSTAR: Well, you know, I don’t know that I would characterize them as problems. There are certainly issues that have to be worked out, with respect to the various agreements among those countries.

Right now, Turkey is working with the EU, with respect to an intergovernmental agreement in connection with Nabucco. We believe progress is being made with respect to that agreement, and we’re hopeful that there will be an agreement soon on that.

At the same time, as you mentioned, Turkey and Azerbaijan have to work out an agreement with respect to gas pricing, with respect to transit issues through Turkey. And that is a prerequisite for a southern corridor to develop, at least through Turkey. And also, I think in the last several weeks there’s been progress being made in that area. But I don’t think – the agreement isn’t final, but progress is being made. And, again, we hope that, in the not-too-distant future, there’ll be an agreement there.

Turkmenistan is an interesting country and raises some very interesting opportunities. Their foreign minister, Mr. Meredov, is in Washington right now, even as we speak. I was in two meetings with him this morning. I think that there is flexibility on the part of Turkmenistan, with respect to doing more on-shore production with Western companies in a way that would be satisfactory, both to the government of Turkmenistan and to the companies.

There are possibilities that have been proposed with respect to getting gas across the Caspian. And the relationship between Azerbaijan’s President Aliyev and Turkmenistan’s President Berdimuhammedov has been growing and is positive.

And so, we think that, assuming that the intergovernmental agreement is reached between Turkey and the EU, that agreements are reached between Turkey and Azerbaijan, which is a prerequisite, that the southern corridor will then open up to gas produced in Turkmenistan. There may be gas available at some point from northern Iraq coming through Turkey. So we see it as a very positive opportunity.

QUESTION: Sir, what do you mean when you say there is a kind of progress reached by Azerbaijan and Turkey?

AMBASSADOR MORNINGSTAR: Well, you know, let me say this. I’m not going to talk about confidential conversations, but I have met – I was in Azerbaijan two weeks ago, and I met with President Aliyev, who I’ve met with him now in person twice since – in the 11 weeks that I’ve been back in this job. I have talked to him on the telephone. I met with all of the appropriate officials in Turkey, including their energy minister, Mr. Yildiz. And then, a few weeks prior to that, with President Gul. And that just from those conversations I know that they’re getting closer.

Things aren’t final yet. Nothing is ever final until it is final. But, you know, there is – all I can tell you is I think progress is being made. That doesn’t mean that there will be an agreement tomorrow. We hope it will be soon, and that whatever differences they have, the gap will be closed, because it’s in the interest of both countries that there be an agreement.

MODERATOR: Next question right here.

QUESTION: Brian Beary from Europolitics, European affairs news daily. I am just wondering if you would like to talk a little bit about what your job is involving, concretely.

And, following on from that, why is the United States so interested in securing Europe’s energy supply? And is this not something that Europeans should be able to figure out for themselves?

AMBASSADOR MORNINGSTAR: Well, you know, obviously, issues of European security, energy security, are, first and foremost, a European issue, and we understand that. And the role that we can play is to help when our help is asked for.

There are some very important things going on within Europe, as far as reforming Europe’s own energy structure, and creating more interconnections and storage facilities, and looking at alternative technologies and the like. Yes, I mean, Europe is going to work on those kinds of issues on their own. But we can talk with them about alternative technologies, cooperate, and both get benefits from that.

When we’re dealing with issues like the southern corridor, or Ukraine, for example, you know, we have our own relationships with the countries that are involved in all of these issues, whether it be Turkey and Azerbaijan, or Turkmenistan, or Russia and Ukraine. And we work together, and have been, I think, coordinating very well to make sure that our messages are consistent.

We feel very strongly that European energy security is important. Europe is our partner. The United States and Europe are going to play – will be playing major roles in dealing with global issues. And we need a strong partner, and a strong partner needs to have energy security.

So, it’s in – certainly in our interest that Europe deal with whatever energy security issues they have. But having said that, our job is to listen. Our job is to help when we can, and to recognize, again, that you’re right, that these are European issues, but that we have – we may have something to offer when asked.

MODERATOR: For the next question, we’ll go to New York.

QUESTION: Nikola Krastev, Radio Free Europe, Radio Liberty. Returning again, I mean, to the question of Turkmenistan and the visit of the foreign minister in Washington, D.C., could you be more specific? There is very little information. What, exactly, are the topics of the conversation with the U.S. officials?

And also, a related question: In your conversations with Russian officials relating to oil and gas fields, how often the issue of Turkmenistan is raised? Because it is very important that Russia, particularly, is not very helpful with bigger participation of Western and U.S. companies in developing gas fields in Turkmenistan.

AMBASSADOR MORNINGSTAR: Well, first, with respect to the foreign minister’s visit, the only area that I’m really qualified to talk about are the energy discussions. And certainly – and those have been extensive, and were extensive during my visit to Turkmenistan.

I would prefer, since it’s not within my portfolio, to not really – to not discuss other issues that were – that came up at the meetings. But energy was certainly one of those issues.

Now, with respect to the question of Turkmenistan and Russia, we actually did not talk during my trip to Moscow last week about issues relating to Turkmenistan. It is obvious to anybody who’s looked at the press that there have been issues that have come up over the last couple of months with respect to Russia not taking Turkmen gas, with respect to the pipe explosion that took place in Turkmenistan, whatever was the cause of that. And so, you know, so there are issues. But that did not come up specifically in my discussions in Moscow.

MODERATOR: Next question, we’ll go in the back, please.

QUESTION: Ambassador Morningstar, thank you very much. Ahu Ozyurt from CNN, Milliyet. Could you tell us how your trips in the Caucasus would tie in with your talks in Sweden, specifically with the possibility of an intergovernmental agreement between Turkey and EU on the Nabucco deal?

Did you get any signs, any signals, that Europe might be willing to open the energy chapter with Turkey? Have they shared any ideas with you? I know it’s Europe’s own business, but have you gotten any clues about it?

AMBASSADOR MORNINGSTAR: That’s right. That’s one of the mantras of today’s discussion: “It’s Europe’s own business.”

On European energy chapter negotiations, and on the IGA, totally apart from the visit to Stockholm – because I’ve also been to Brussels in the past several weeks, I’ve been at the Sofia energy summit, I’ve been at the Prague energy summit, I’ve spent a lot of time in Europe and a lot of time here, talking to Europeans – and, obviously, the question of the energy chapter negotiations have come up. Europeans certainly recognize that this is an important issue for Turkey.

I think that – well, I mean, there – it’s a complicated issue within Europe, because you have the commission, and then you have the member states. And if some member states are blocking those negotiations, there is no legal way, anyway, other than political influence, to get those member states to change their mind.

I believe – and this is just my opinion – that Turkey is now taking the view that they ought to look at the IGA on Nabucco, independently of the energy chapter negotiations, that if they sign an IGA – again, this is my opinion, now – if they sign an IGA, they’ll make it – it will be much more difficult for the EU not to open the energy chapter negotiations. If they don’t sign an IGA, then I think the problems for Turkey will even – then it would be even worse.

So, I really think that they are taking the position – I don’t mean to speak for them, and this is more my opinion, I guess, than anything else – that the failure to open energy chapter negotiations at this point in time will not stop a Nabucco IGA. And a Nabucco IGA should help the opening of those negotiations.

MODERATOR: We will take the next question right here.

QUESTION: Thank you very much. Dmitry Zlodorev, Itar-Tass news agency. Mr. Morningstar, after your meetings in Ukraine, it was a statement that U.S. are ready to help Ukraine to resolve gas problems. Could you explain what does it mean, and how you are ready to help?

AMBASSADOR MORNINGSTAR: That was a very general statement that was reported in the press. And, of course, we are willing to help Ukraine. We have a very strong relationship with the Ukraine. And, to the extent we can help, we will.

This does not include financial help that the – basically, the financial issues are being dealt with by the EU, and by the international financial institutions, and Russia, and by – and if one, you know, looks again at the recent press – and I’ve certainly had conversations with our European friends about it – the EU is trying very hard, including President Barroso, to work on a package, either through the companies or, more likely, through the international financial institutions, to come up with some financial solutions.

But this is also going to have to include Ukraine taking necessary steps to reform its gas sector. And they understand that. And we had discussions about that. To the extent that we can help on some of those issues, we will.

You know, just to give you two examples, you know, if Ukraine is going to raise their residential gas prices, they are going to have to have targeted subsidies to help those who will be – who can’t afford it, and will be adversely affected. We have programs, through our Agency for International Development, as an example, that can work with them on targeted subsidy programs.

One of the things that’s going to be very critical to Ukraine – and I might say, also, to Russia – with respect to the energy sectors – and we’re going to talk to our Russian colleagues about this – is the whole question of efficiency and conservation. And we have programs that can – that we can help Ukraine, with respect to those kinds of issues, as well.

So, when we talk about help, it’s, you know, encouraging them to make the necessary changes to their gas sector. If they are willing to do that, to come up with some programs that will help do that. And, if they’re willing to do that, to work with the international financial institutions to help come up with some solutions.

MODERATOR: Right here.

QUESTION: National News Agency of Ukraine, Natalia Bukvych. Mr. Morningstar, do you think there is any progress in such issues as launching U.S.-Ukraine bilateral working group on energy and security, first of all? And then, by establishment of trilateral consultation group between European Union, U.S., and Ukraine? Thank you.

AMBASSADOR MORNINGSTAR: Yes, that’s something that we are working on. There were no conclusions during the trip. In fact, there was actually very, as it turns out, very little discussion on that during the trip. But this is something that we’re talking to the Europeans about, with respect to this trilateral commission that was set up at, I guess, at a – what, a U.S.-EU summit last year?

And, obviously, we’re going to have to have a very strong energy dialogue with Ukraine, but the formal structure has not yet been established. But it will be, I am sure.

MODERATOR: We’ll go back to Brian.

QUESTION: Two more specific questions. Again on Ukraine, I believe Prime Minister Tymoshenko is asking the European Union for a $4.2 billion loan. What is your view on that? And should Europe help out there?

And the European Commission is working on a new proposal on securing Europe’s energy, and one of the clauses – controversial clauses – is the so-called anti-Gazprom clause, whereby if any country does a deal with Gazprom, they have to notify that to the European Union, so it can’t be confidential. What’s your view of that?

AMBASSADOR MORNINGSTAR: Okay. First of all, with respect to the $4.2 billion, I don’t have a specific comment on the amount. There has to be a determination made by the – particularly by the international financial institutions by going in there and examining exactly how much gas can be put in the gas storage facilities, what the needs are, as to what that amount should be, whether it be $4.2 billion or some other amount. But it’s also going to be important, from the standpoint of the international financial institutions, that there be agreement on steps that Ukraine will take with respect to its gas sector.

With respect to an anti-Gazprom rule, again, not to dodge the question, but I don’t have any specific comments on the specific clause. But I do think that, in general, there needs to be transparency. And transparency would include knowledge of what any company is doing in any given country.

QUESTION: One more –

MODERATOR: Sure, go back to Zaur.

QUESTION: Mr. Morningstar, just one more question on Nabucco. Did you hear in Baku that there is a kind of letter from the State Oil Company which they sent to the government of Azerbaijan, requesting at least eight billion cubic meters of gas delivered to Europe. And what we’re hearing from Baku, Azerbaijan is that it’s kind of another impediment for the implementation of Baku project.

AMBASSADOR MORNINGSTAR: Well, I guess I don’t – I’m not sure of the specific letter. But the point that you mention is actually an important point. Azerbaijani gas is a prerequisite to whether we’re talking about Nabucco or the Italy-Turkey-Greece interconnector. And the question then becomes, well, how much gas is going to come from Shah Deniz? We don’t know, for sure. There are various estimates that there would be, what, up to 15 or 16 BCM? But that, again – those are estimates.

I do think that the issue that you’re referring to is, well, how much gas ends up going to Turkey to meet their internal demand, and how much gas ends up going to Europe? And there’s some – you know, some companies – and I can’t tell you specifically which ones at this point, but some companies have been saying that you really need to have eight BCM available to get Nabucco started.

And now, whether that’s – the real number is six, seven, eight, or nine, is – you know, that’s a question. But eight is as good a number as any. And that – and our feeling is that once that is established, and Nabucco is sanctioned, that’s going to make more likely Western gas coming from – Western gas coming from Turkmenistan. It may make a difference in ultimately opening up northern Iraq.

And there’s a lot of potential in Azerbaijan for – even the Azerbaijani Government thinks that Shah Deniz and in other sites there may be more gas. But eight is probably as good a number as any, as sort of a prerequisite for getting Nabucco going.

QUESTION: (Inaudible) that’s all together, right – not only from Azerbaijan?

AMBASSADOR MORNINGSTAR: Well, but I think the initial gas is going to come from – frankly, the initial gas will come from Azerbaijan, because it will probably take longer to get some of the other gas across the – or into the system.

MODERATOR: The next question will go to New York.

QUESTION: In your negotiations with Turkmen officials, did you raise the issues of human rights and transparency?

AMBASSADOR MORNINGSTAR: I hate to avoid the question, but that’s not for me to answer, because that’s not within my portfolio. And whatever discussions have come up with respect to other officials in the U.S. Government and the Government of Turkmenistan, that’s either for Turkmenistan or other people within the State Department to talk about.

MODERATOR: Next question.

QUESTION: Laszlo Szocs, from Hungary. I apologize, I was late. Maybe this question has already been raised.

How important do you think the cleavages are within Europe, the European Union, when it comes to Nabucco? There is a clear support from the European Commission, but the member states are still divided, and there is controversy over the German viewpoint.


QUESTION: Do you think Nabucco needs more political support from Europe? And, if so, in what form?

AMBASSADOR MORNINGSTAR: Yes, I think that’s a good question. And I think, in general, even though there’s still, with respect to energy issues, a lot of differences among EU member states – not just with respect to Nabucco, but just in general – I think it’s actually better, a lot better, than it was a couple of years ago. And I think the January gas crisis was, in fact, a wake-up call to Europe. And so, I think there is more cooperation.

Obviously, the intensity with respect to Nabucco can be found in those member states that were most directly affected by the gas crisis. And that would be the central and eastern European countries. They’re getting support from other member states, as well. And where I see – what I see as promising is, you know, in politics there is a concept of intensity.

And things end up happening because there are some – like in a legislature, for example, there are some members of a legislature who feel very strongly about something. Other members may be somewhat indifferent. But, given the strong feelings of the proponents, they’ll go along with that. And then there are all sorts of trade-offs that take place in a legislative process. The EU is sort of like that, I think.

And so, what I see happening – and this, again, is just – not to sound like I’m – like a prophet, and this may turn out to be not the case, but given the intensity of those countries who feel strongly about a southern corridor, I don’t think that any opposition is that significant. There may be countries that care less because they’re not as directly affected. But the hope that I would have is that those countries would be fully supportive, looking at the overall European energy situation, and looking at it from a more overall European standpoint.

MODERATOR: Go back in the front here.

QUESTION: Mr. Morningstar, what is your impression from the meeting with top Russian energy officials? Are they going to escalate the trade problems in gas (inaudible) Ukraine? And how do you feel?

AMBASSADOR MORNINGSTAR: Are they going to – I’m sorry, escalate what problems?

QUESTION: The trade problems in gas (inaudible) with Ukraine.

AMBASSADOR MORNINGSTAR: With respect to the Ukrainian gas issue? Is Russia going to escalate the problems with respect to Ukraine, is basically what you’re asking, right?

QUESTION: Are they going to escalate the commercial problem in gas trade with Ukraine?

AMBASSADOR MORNINGSTAR: Trade issues beyond gas?


AMBASSADOR MORNINGSTAR: Yes, I don’t know. That, obviously, we didn’t discuss.

I am hopeful that Russia believes that it’s in its interest that there not be another gas crisis, and not be another shut-off of gas. Gazprom lost – apart from the politics of it, Gazprom lost a lot of money when that shut-off took place in January. So, I would like to think that Russia will take every step possible to avoid a problem.

Then they have sent some good signals. They’ve waived penalties on the take-or-pay provisions. And I think they really want to see financial help from the international financial institutions. In the trip last week they encouraged us, the United States, to work with the international financial institutions to find some solutions.

So, I – you know, you never know what’s going to happen. And I would hate to predict what will happen. But I believe that Russia will act in its self interest, and that it’s in Russia’s interest to avoid another crisis right at this moment. But you know, you never know. I mean, July 7th there’s another payment due, and you know, there’s no predicting what will happen. I think Russia is happy that Europe is taking the steps that it’s taking to try and find some financial solutions to the issue.

MODERATOR: Right here, you’re next.

QUESTION: Ana (inaudible), First International Resources. Ambassador Morningstar, could you talk a little bit about your general impression about the political situation in Ukraine, based on who you spoke to and what they told you?

And my other question is, do you know anything about the agenda Vice President Biden is going to have in the Ukraine during his trip a month from now? Thank you very much.

AMBASSADOR MORNINGSTAR: I’ll answer the second question, first. Of course, it’s just been announced that Vice President Biden will be going to Ukraine and Georgia. There is no agenda that I am aware of that has yet been set. And I am sure there will be much preparation for that trip.

I mean, you can guess as well as I can as to what – you know, what some of the issues will be that, you know, that will be discussed on the trip. But, you know, there has been no formal agenda that has been set, or agreed upon at this point.

With respect to the political situation in Ukraine, you know, it’s no secret that it’s difficult, and that it’s very difficult, given the different parties involved, and figures and people involved, very difficult to get things done.

The hope is that they – that the three principal figures in Ukrainian politics, the president, the prime minister, and Mr. Yanukovich can agree on certain actions that can be taken now, even before the elections, and will look at Ukraine’s national interest to agree to those steps, and that whoever wins the election, hopefully that that will – that there will be more cooperation within the government of Ukraine, itself.


QUESTION: Can you say a little bit about – you were in Sweden, I believe, or –


QUESTION: I was wondering if the Nord Stream project came up, and what’s your view about whether that’s – the Nord Stream project is good for Europe’s energy security or not.

AMBASSADOR MORNINGSTAR: Yes, the Nord Stream issue came up. We talked about other things, as well. We talked about the general European energy issues that we’ve discussed, that we’ve already discussed today. We talked about different ways in which we could possibly increase our energy dialogue on all sorts of issues between the U.S. and Europe.

But with respect to Nord Stream in particular, the – our position is – and we’ve said this to our European friends, we said it in Russia, is that we are not opposed to Nord Stream, that Nord Stream has the support of different European countries, including, first and foremost, obviously, Germany. There are some countries that are – that have some issues. We think that those issues should be – you know, should be looked at, and looked at and resolved.

But again – and it goes back to your earlier point – you know, what’s our – what business is all of this of ours? This is basically a European issue, as to whether Nord Stream ends up being constructed or not, and it’s also a commercial issue. So we don’t – you know, we’re not opposed and – as such, and you know, it’s going to be up to the countries involved to – as to whether it moves forward or not. And we’ll see what happens.

QUESTION: Just a quick follow-up, sir. Will you be present in the talks with Chancellor Angela Merkel when she is in the White House, or in the –


QUESTION: Would the energy issue come up, do you think?

AMBASSADOR MORNINGSTAR: Good question. I assume, in some form, it will. But I don’t have – at this point, I have no knowledge of that.

MODERATOR: Maria? Wait for the microphone, please.

QUESTION: I am Maria Tabak, Russian News Agency, Novosti. More general question is that, speaking about the results of your trip to Russia, do you think that it will help to boost the bilateral relationship between the two countries, in terms of energy?

AMBASSADOR MORNINGSTAR: I think so. I’ve had – I had a very good meeting with energy minister Shmatko at the Sofia summit several weeks ago. I met with him again in Russia last week, as well as several other officials.

We’ve made clear that we want to engage on the energy issue. That has been received very favorably by our Russian counterparts. We are going to work hard to try and find areas that we can – where we can agree on, and where we can work on. Russia is very interested in efficiency questions. They’re very interested in energy technology issues.

We talked about investment opportunities, both in Russia and in North America and in third countries, and we want to continue to explore that. We want to talk about issues that we don’t necessarily agree on, whether it’s with respect to pipeline strategy, or whatever, but we also want to lessen any – or depoliticize those issues, as much as possible. And I think that, you know, I certainly listened to my counterparts and they listened to us. And I think we have already a better understanding on some of those issues.

So, we’re very hopeful – I’m very hopeful, and I think our government is very hopeful, that the summit between President Obama and President Medvedev will further this dialogue, and that – you know, we don’t need to agree on everything, but we feel that there are a lot of places where we can agree.

And also, you know, all of this is getting very expensive. We have a global financial crisis. We – you know, I think none of us should be looking in terms of zero sum gains. It’s too expensive. And that we should look at more ways to cooperate.

We recognize that, you know, Russia is a reality in the energy area, and will be, as far – you know, as long as we can foresee, and that they’re going to be a major player, with respect to European energy. That doesn’t mean we shouldn’t be looking at diversifying and building up production in other places and, you know, like a southern corridor. But that, you know, is – that’s just normal from, you know, common sense – even from a common sense commercial standpoint.

But, you know, we don’t see that as a threat to Russia. Russia is going to continue to be a very major player in Europe for as long as we can foresee.

QUESTION: Just to follow up on that one, you are saying that you don’t have to agree on everything with Russia, but how about South Stream? I mean, for many people, South Stream is just to kill off Nabucco.

AMBASSADOR MORNINGSTAR: Well, you know, first of all, you know, a lot of people, a lot of experts who know more about it than I do, from a technical standpoint, would say that you can have both a South Stream and a Nabucco. I don’t know. But then a lot of people believe that.

With respect to South Stream itself, I’d say, you know, what – basically I would make – our position is similar to what I said about Nord Stream. We don’t oppose it. There are countries that support it. There are central and eastern European countries that support South Stream as well as Nabucco. So who are we to say that they – you know, that they shouldn’t do it?

You know, there are questions as to whether South Stream is commercially viable. There are questions, you know – I suppose other questions, as well. But that’s for the countries, you know, the countries in the region to decide, and for the companies that are involved to decide, whether or not, at the end of the day – whether, at the end of the day, it makes sense. But we don’t oppose it, as such.

MODERATOR: Any other questions?

Thank you very much for coming today.


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