Oil, Gas, and the Russia-Ukraine conflict

Guest

Meghan O'Sullivan and Angela Stent

Russia’s continued military aggression towards Ukraine has become a full-blown humanitarian crisis. At the same time, energy prices are soaring as markets react to Russian oil and gas disruptions, including President Biden’s announcement today to ban US imports of Russian oil. The global energy ramifications of the conflict are profound. As a major oil and gas supplier – to Europe in particular – Russia has the power to weaponize its fossil fuels. And that has markets worried.

For a deeper look at how the Russia-Ukraine conflict is impacting energy markets globally, host Jason Bordoff speaks with two foreign policy experts on energy: Angela Stent and Meghan O’Sullivan.

Stent is senior adviser to the Center for Eurasian, Russian and East European Studies and professor emerita of government and foreign service at Georgetown University. She’s published extensively on Russia-related foreign policy matters including “Putin’s World: Russia Against the West and With the Rest.”

O’Sullivan is the Jeane Kirkpatrick Professor of the Practice of International Affairs and the director of the Geopolitics of Energy Project at Harvard University. She served as a national security advisor to President George W. Bush, and has written various books and articles on international affairs.

Together, they discuss the complex energy security and resource management challenges during this time.

Transcript

Meghan O’Sullivan [00:00:03] The idea of really freezing this kind of energy power out of the global system in a moment of otherwise, market tightness is an enormous undertaking with a lot of risks to the global economy.

Jason Bordoff [00:00:17] Russia continues its aggressive military campaign against Ukraine, with more and more Ukrainian civilians caught in the middle in what is rapidly becoming a dire humanitarian crisis. Meanwhile, energy and commodity prices across the board are soaring as traders and investors worry about growing Russian supply disruptions. This conflict has significant not only humanitarian but climate and energy ramifications to a consequence of Russia’s status as one of the world’s largest energy suppliers and a critical energy supplier, particularly of natural gas to Europe. What might be the consequences of the Russia Ukraine conflict when it comes to geopolitics and energy markets? Where does this leave us next week, next month and in the years to come? This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Today on the show, we have Angela Stent and Megan O’Sullivan. I’m here with them at CERAWeek, a global energy conference being held in Houston, Texas. Angela is senior adviser to the Center for Eurasian, Russian and East European Studies and Professor Emerita of Government and Foreign Service at Georgetown University. She’s also a nonresident senior fellow at the Brookings Institution. She’s published extensively on Russia related foreign policy matters, including a wonderful recent book Putin’s World Russia Against the West and With The Rest. Joining us is my friend and coauthor and collaborator Megan O’Sullivan. Megan is the Jeane Kirkpatrick Professor of the Practice of International Affairs and director of the Geopolitics of Energy Project at Harvard’s Kennedy School. Megan served as deputy national security adviser for Iraq and Afghanistan to President George W. Bush, and she has written several books and many articles on international affairs. Fortunately for us, she is also a member of the Center on Global Energy Policies Advisory Board. We spoke about where the current Russia Ukraine conflict goes from here and what it means for oil and gas resources, energy security and the energy transition moving forward. Please enjoy. Angela Stent Meghan O’Sullivan. Thanks for joining us on Columbia Energy Exchange. It’s great to be with you both here in Houston and CERAWeek quite a week to for the energy world to come together and talk about the intersections of energy markets and geopolitics. Obviously, the topic of the day is Russia’s barbaric aggression into Ukraine and how the West is responding to it. I’m going to come to what it means for energy and just have a conversation about it, but I want to sort of start stepping back from the energy focus on how to think about what’s happening in Russia right now. Angela, you’ve been studying Russia your whole career. Help people understand what Putin is doing. Why he’s doing it. What’s motivating him is he. Should we think of him as a rational actor, then I want to talk to you about how this ends and what the potential outs are for face saving ways to de-escalate the conflict.

Angela Stent [00:03:18] Well, thank you and thank you for having me on your podcast. Putin has been nursing these grievances against the West, against Ukraine for a very long time. We have to remember that when he says that the collapse of the Soviet Union was the 20th century’s greatest geopolitical catastrophe, it was a personal catastrophe for him at the time. He was a mid-level KGB agent in East Germany when the Wall came down. The mob came to the KGB headquarters and demanded to see their files, and he he stayed up all night, burning the files in the furnace collapsed, and then he had to go back to the Soviet Union, as it was then under Gorbachev. He was unemployed for a while. Of course. Then he found work as the deputy mayor of St. Petersburg after the Soviet collapse. But for him, it was a humiliation. I guess he had envisaged this career in the Soviet Union as a KGB agent. I mean, of course, one would say now he hasn’t done badly from the Soviet collapse. But I think he associates this with personal humiliation. And then what he now depicts as the humiliation of the 1990s, when Russia had to follow an agenda set by the West, by the United States and, you know, was in economic chaos. And so he’s been determined since he came to power to restore Russia as a great power, as a great state and to get the West to recognize that Russia’s interests are as legitimate as those of the United States and Europe. And 15 years ago, he gave a remarkable speech at the Munich Security Conference, where he laid all these grievances out. He blamed the United States for dictating to the world what it should do for threatening Russia and for not treating Russia the way it should. And he seems to have a particular animus against Ukraine, believing that the Ukrainians have no right to be an independent state. And what really bothered him was after 2014, seeing Ukraine move further to the West. And so all of this has come together now at a time when he’s looked out at the United States and sees what happened with the withdrawal from Afghanistan. He sees the United States that’s polarized an administration that can’t get its legislative agenda through. He looks at the Europeans and also sees them distracted by COVID in their own domestic problems. And he got particularly upset, if you like, with President Zelensky, whom he thought in the beginning was going to be much more pliant and wanted to make peace with Russia. And so for all of these reasons, he’s decided to strike now completely unprovoked by anything that’s actually happened on the ground.

Jason Bordoff [00:06:03] Megan, what’s your sense of where things are right now in Ukraine and the potential for escalation? For misunderstanding, for accidents, for spillover in? non-NATO countries potential nuclear unraveling.

Meghan O’Sullivan [00:06:18] We’re at a very worrying time now. Most of the scenarios that people think are likely over the coming days are in the direction of escalation and to the extent there have been, you know, probes or conversations with Putin to try to discern if there’s any interest in looking for a way to bring down the temperature of the conflict right now, the sense is that that’s not where Putin’s head is at right now. Angela would be able to comment on that better than I, but with a sense of of Putin being in an escalatory mode and the conflict getting ever more complex, I think we have to brace ourselves for worse outcomes in the coming days. And when I say getting ever more complex, we think about just the magnitude of arms shipments going into Ukraine very, very big increases just in the last week or so. And we think about the millions of Ukrainians moving out of Ukraine. So there are a few roads, as I understand it, where we have millions of Ukrainians who will soon become refugees, moving in one direction and big arms shipments moving in the other direction on the road. And the potential, of course, for bringing in any Naito country either advertently or inadvertently. More likely, I think, is very real. And of course, there’s also the calculation of what Putin’s mind is right now. Is he in a mode where he feels very cornered? The sense is right now, from what I understand from various leaders, is that it is to pressure him to a point where there may be some room to de-escalate. But right now, it doesn’t seem like he is in that mindset.

Angela Stent [00:07:57] I agree with that. I mean, I think, you know, the for whatever reason, he was really misinformed about what it was going to be like to invade Ukraine. They thought this was going to be over in two days that the Ukrainians would surrender and that they would have taken Kiev and they didn’t prepare their army to fight. They didn’t prepare these teenage recruits for the fact that they were invading Ukraine. So now that’s all come apart. It’s taken much longer for them to achieve any objectives. They don’t really have control over any major city completely. They have control over some cities in the in the south, but not total. And I don’t think Putin’s in a mood to back down. I mean, now they’ve made an offer to the Ukrainians where they said, Well, you know, they can be a cease fire if Ukraine declares it’s going to be neutral forever, if it recognizes Crimea as part of Russia, if it demilitarize is and if it recognizes those two republics as independent countries. And that’s of course, a nonstarter for the Ukrainians. So it is a very volatile situation. And we, you know, we think that Putin only listens to just a few people around him. We’ve had negotiation attempts by the Israeli prime minister over the weekend, who then went to Berlin. We’ve had the German chancellor, the French president who’ve met with Putin or talk to him frequently. Everyone’s communicating with President Biden. So it’s not as if there aren’t offers on the table, but he just doesn’t seem to be in the mood to take them. And he really wants to pursue this, you know, subjugation of Ukraine and having a government there that will turn its back away from the West.

Jason Bordoff [00:09:36] Well, you you wrote Putin’s world a great book explaining how Russia thinks about its relationship with the West and the rest of the world, and to the extent anyone knows what’s in his head. Does this surprise you or what do you see? How does how does this end? And I guess when I heard you say a moment ago is the possibility of strategic off-ramps that you escalate economic pressure, but there’s a place to go that can de-escalate or can provide some face saving round. You seem skeptical.

Angela Stent [00:10:07] Yeah, I’m very skeptical about that. I mean, you know, I’ve seen very little evidence that the Russians are really interested in an off ramp. What they’re interested in is getting the Ukrainians to make these concessions. It’s not clear where this ends. You know, if the Russians do succeed in changing the government in Ukraine and in conquering Kiev unless they have an occupation force that remains there, the new government that they would install wouldn’t be in power for one day after the troops had left. I mean, we’ve seen the resistance. This isn’t the first time the Ukrainians have fought the Russians over the centuries, and that resistance will continue. So this could be, you know, a real mess for the Russians, too. Now, if for some reason they succeed in in their goals and they do put it in the government and somehow it stays in power, you know, the sites don’t stop there. I mean, the next thing he would like to do would be to create a Slavic state, you know, consisting of Russia, Ukraine, Belarus, maybe even northern Kazakhstan. The Kazakhstan getting worried now to this was Solzhenitsyn’s idea a long time ago and making this already alluded to the. Possibility that his sights are further west, if you look at the treaty that was presented to NATO in December, it demanded that Nader withdraw to the to its military posture in 1997. And there have been hints that, you know, Mr Lavrov said that when the Warsaw Pact broke up, the central and East European countries were orphaned. You know, what does that mean? Does that mean that defines Russia’s sphere of influence, not only in the post-Soviet space, but in the, you know, the former Warsaw Pact states? So I don’t think anybody has any idea where this really ends.

Meghan O’Sullivan [00:11:49] When we think about the scenarios, Angela, like, how does this end? You know, one scenario out of many would be that Putin is no longer in power in Russia. And I realize that that seems like a far off scenario. But I’m wondering if you’ve seen anything in the last couple of weeks that would suggest to you that that’s in the realm of the plausible.

Angela Stent [00:12:09] So a few weeks before the war broke out, a group of former army general retired army generals published an open letter condemning what Russia was doing and saying there should be no war against Ukraine. Now, at the time, people said, Well, this is a rather fringe group of people, but there now is sentiment that they were encouraged to do this by people who are still active in the military and themselves don’t like what they see. You know, we’ve had hints that some unit in the FSB, the domestic intelligence services leaked to President Zelensky, that there was a plot to assassinate him by Kadyrov, the Chechen leader’s men. So, you know, and you hear rumors that there may be and obviously you’ve had prominent business people now speak out against this, although you know they they don’t control the levers of power. It’s possible that, you know, this could lead to people questioning maybe we need a different leader, but you know, at the moment, Putin still seems to be pretty much in control there. But we can always be surprised by what happens in Russia.

Jason Bordoff [00:13:15] Angela was talking about how this doesn’t end necessarily with Ukraine if Ukraine’s capital falls to Russian control. And that’s not only true in Eastern Europe, but it may be true elsewhere in the world. It could also have implications on countries that are looking at what’s happening now and whether the West is going to stand by a country like Ukraine. Megan, you just joined a high level delegation that the Biden administration sent to Taiwan to reassure Taiwan that the West is still committed to Taiwan. Can you talk a little bit about your reflections from that trip and what you took away from it?

Meghan O’Sullivan [00:13:51] Sure. Thanks, Jason. I was really pleased to be part of a delegation that was led by Admiral Mullen at the request of the White House to go out and visit President Tsai and some of her senior members of her cabinet to talk about what the global situation is looking like and how America is thinking about things. One can pick up really any newspaper or journal and see speculation about what what does the Ukraine? What is the Russian invasion of Ukraine mean for Taiwan? Does it mean that China might take advantage of this moment to try to reclaim the the island of Taiwan? I found that the Taiwanese were not as concerned about that as they were concerned about. Is Asia going to be able to be central in the mind of the United States? At the same time that it is playing an increasingly challenging role in Europe and that was the primary purpose of our mission was to sit down with the Taiwanese, see how they’re seeing things help them as they tried to distill the lessons from the Ukraine conflict and for what it means for Taiwan. And there it was incredibly interesting how front and central Ukraine was in Taiwan. The Taiwanese politics and in Taiwan’s conversations right now, the Taiwanese are looking at an authoritarian regime, invade a democratic neighbor, completely unprovoked. And the Taiwanese are now asking themselves, Well, what would we do in that circumstance? Of course, this question is never far from their mind, given the tensions with China. But they look at how Ukraine has managed to galvanize much of the world behind it and some of that some of what their thinking is suggesting that that global response was really related to the fact that the Ukrainians have demonstrated to the world that they’re willing to fight for themselves. And so that part of the security or part of the outcome in Ukraine has to do not only with the extent of support that Ukraine will get from others in terms of military weaponry or other kinds of support. But it also comes from the fact that they have demonstrated the world they’ll fight for themselves and the world in fact responds to that. So I think the Taiwanese are thinking a little bit more in that direction. Do they have to be prepared to undertake an insurgency that looks like the one the Ukrainians have begun to wage against the Russians? So very much a critical time in Asia? I think there’s no question that America intends to meet its commitments in Asia at this at this point in time and going forward for the future.

Jason Bordoff [00:16:23] And speaking of China. Angela, your thoughts about how China is and will react to this crisis and how important they are to it? How much exposure will they want to have to Russia moving forward?

Angela Stent [00:16:36] Yeah. So I don’t think Putin would have invaded Ukraine had he not believe that the Chinese would support him. And he was in Beijing on February the 4th. You know, he and Jinping signed this long declaration where the Chinese bought into all of the Russian grievances about NATO’s enlargement, about, you know, respecting the need for indivisible security. So we have to assume that the Chinese knew that this was going to happen or some version of it. But I think that now once turned out that this is a much bloodier more than maybe they thought that all these civilians are being killed, the humanitarian catastrophe, all the refugees. You know, you did have at the Munich Security Conference, the Chinese foreign minister saying, we do believe in territorial integrity and sovereignty and that, you know, applies to Ukraine, too. You had the Chinese abstaining in the United Nations Security Council instead of voting with the Russians. And now, of course, China faces the dilemma. Really, to what extent does it comply with Western sanctions? Because again, Chinese economic interests are much bigger with the United States and Europe than they are with Russia. You know, it’s a much smaller economic partner. So on the other hand, you know, they haven’t criticized Russia directly. And, you know, they understand that the partnership with Russia is important for them, too. I think. And now people have called upon the Chinese to maybe step in as mediators. We haven’t seen that happen yet, and we do know that the Biden administration has been in contact with the Chinese before the invasion and since then to try and get them to use their influence to somehow moderate what the Russians are doing, although I’m not sure whether they really would have that influence. So I think going forward, China will be, I think, under more pressure to be clearer about how it views all of this. But I mean, we should not expect to sort of turn against Russia and criticize it, but maybe do something more actively to try and get the Russians to the negotiating table.

Jason Bordoff [00:18:40] Megan, which other countries are you kind of watching that will matter most to how this plays out outside of Europe and the United States? The U.S. just sent a delegation to Venezuela. We saw Israeli Prime Minister reach out who who matters the most here and how are you seeing what they’re doing right now?

Meghan O’Sullivan [00:18:58] Well, if this brings us to some extent to the energy angle, certainly we’ve seen the Biden administration as oil prices have climbed very steeply day by day in the last few days. Look around the world and say, Where else can we bring oil to market the first and obvious places Iran. So maybe that’s the the country that’s going to be

Jason Bordoff [00:19:17] we’re sitting here in Houston. Many here would say the first and obvious places is Texas, but

Meghan O’Sullivan [00:19:21] OK, OK, well, you said country. So you know, Texas, I guess maybe some people would call Texas like, I’d like

Angela Stent [00:19:27] to be like the

Meghan O’Sullivan [00:19:28] big guy. Exactly. So I would say Iran and Venezuela. I’ll just say a little bit on these two countries, which are obviously places to watch in this current energy, the tightness of the oil market. So there has been this desire to reach an Iran deal for some time. And before the invasion, there was a sense that the Biden administration was getting close with Iran and that there might soon be a deal. There were a few back and forth, but I think this has reached a new level. Or there’s yet another reason why there’s so much interest in this deal being clinched. And that has to do with the fact that Iran is maybe the most obvious place where you could get some amount of oil quickly on to the markets to help alleviate the shortages that we’re seeing because of what I would call an over compliance of Russian sanctions. So legal business not being done because of fears of potentially something being illegal the next day and

Jason Bordoff [00:20:25] the ability to get that deal done depends in part on Russia.

Meghan O’Sullivan [00:20:28] Exactly. So there’s there in lies the rub. You know that actually Russia has decided that it is not particularly interested in giving the Biden administration a win or not particularly interested for obvious economic reasons and bringing down the price of oil and actually bringing more or helping the Iranians bring more crude to market. So I think that’s a dynamic that will play out, you know, in the in the short term, in the coming days, maybe even weeks to see whether or not Russia can be convinced to play a more neutral role or if we need to look for another country to play the role that Russia has been playing in the deal. And that would obviously create some obstacles not necessarily insurmountable, but certainly not welcome. You mentioned Venezuela, Jason, and you know, here is an example of how this crisis and we are. Only, you know, 11 days into this war, and already you can see how it’s influencing foreign policy priorities all over the world. So Maduro is suddenly someone to be courted. Maybe as two things the

Jason Bordoff [00:21:27] last time CERAWeek happened in person, they were trying to figure out a way for Guaido to come. And now the Biden administration sending a delegation to the Maduro government.

Meghan O’Sullivan [00:21:37] Right. So, you know, that is particularly interesting. I think there and Jason, you’ll have your own very good, well informed view on this as well, that Venezuelans can bring some oil to market in the short term, but probably not a lot. I don’t know if you want to comment on that.

Angela Stent [00:21:51] So but in a hundred thousand,

Meghan O’Sullivan [00:21:53] yes, we’re in a market where a few hundred thousand,

Jason Bordoff [00:21:55] there’s been a lot of destruction. So a lot of destruction to the industry there.

Meghan O’Sullivan [00:21:58] Exactly. So but I think, you know, we’re looking at a situation where a few hundred thousand barrels here and there is going to matter. We heard today from Chancellor Schulz that even if the US bans the import of Russian crude and refined products, that Europe does not intend to do that. I believe that is true today. I would not necessarily believe that is true tomorrow or the next week or the week after. And I’m sure markets feel the same way because there has been such movement in reaction to this, the brutality that we’ve seen on the part of the Russians on the ground. And you know, my expectation is we’re going to see more rather than less of that. So there’ll be increasing pressures on governments, as we’ve seen on companies who will increasingly be accused of funding Russia’s efforts against Ukraine. And when it’s put in that language, it gets very political. And so I think we we will we’ll see more of that. So there will be an effort to scurry around the world and see who can add more barrels in. That, of course, brings us to Saudi Arabia, which again, is another really important and obvious player that has capacity to help alleviate some of the pressure on the oil markets probably hasn’t done as much as it could for a variety of reasons, but that will, I imagine, also be a focal point of the Biden administration in the coming days.

Angela Stent [00:23:16] Let me just reinforce what you said about Europe. I mean, I really think the Europeans have been much more shocked by this even than people in the United States. They really thought by the Russian invasion, by the Russian invasion, right? You know, they really thought that this was a Europe at peace, the idea of a major war on their doorsteps, with a lot of hints of what happened in World War Two, by the way, if you just see, you know, what’s happening in Ukraine now, and that is and this is why Germany has made this remarkable about-face in terms of supplying weapons to the Ukrainians, closing down Nord Stream and and and really supporting the Ukrainians. So of course, they they’re not going to stop importing oil from Russia now. But I think we should watch as the weeks go by. And if this conflict really drags out and the humanitarian crisis becomes worse, I think the Europeans will be willing to take actions that they would wouldn’t have dreamed of doing, you know, three months ago.

Jason Bordoff [00:24:16] And by that, you mean things like saying, we’re going to try to get off Russian gas, even though that’s deeply painful for us.

Angela Stent [00:24:23] I mean, they’ve been, you know, the Germans, Italians, they’ve been importing Soviet and Russian gas for 50 years. But maybe, maybe they will, or at least though. And I know this can’t be done quickly, but they will think about other ways of meeting their energy needs.

Meghan O’Sullivan [00:24:36] Those who can point out to all of your energy listeners, this will be obvious, but just underscoring how different oil and gas is here in the circumstance that it could be disruptive for both the United States and Europe to move away from using Russian oil. But it may not be cataclysmic in the sense that there’ll be disruption as the global oil market shifts, things, moves things, moves oil that used to be flowing to Europe, to China.

Jason Bordoff [00:25:04] But as you said, it probably wouldn’t end there. You start with a ban to the U.S. and maybe then to Europe, and then eventually others get wrapped into it, whether through coercive measures like sanctions or social pressures like Shell is being, you know, having a PR problem because they are doing any business with Russia at all.

Meghan O’Sullivan [00:25:20] Yeah. Well, if we move in that direction, I don’t think we’ll ever see China moving in that direction. However, you know, there could be secondary sanctions that are put in place to try to coerce countries. That was what we voluntary. Exactly. And what is so? Fascinating that’s to clinical a word in this circumstance. But, you know, this is not Iran, this is not North Korea. This is a large semi European economy that is the largest exporter of crude and refined products in the world. Second to Saudi Arabia, when it comes to crude and the idea of really freezing this kind of energy power out of the global system in a moment of otherwise, market tightness is an enormous undertaking with a lot of risks to the global economy. And I think that’s, you know, that’s the thing that I would imagine many policymakers really have their eye on is how is this going to affect the economy? How is this going to affect inflation? Is this, you know, are we looking at something that will have too many similarities to nineteen seventy three than we had

Jason Bordoff [00:26:27] ever hoped for? Natural gas prices have eased a bit, but you know, this morning they were the equivalent of $600 per barrel of oil. So I mean, prices are kind of it and unfathomable levels. And as you said, it’s not Iran. But even with Iran, the US, when I served in government in the Obama administration, carefully designed a sanctions regime and it was the two to several dimensions. But two I’m thinking of. One is it was not pulling Iranian supply off the market immediately. It was a gradual, phased reduction, in part because you wanted to impose pain on them, but not pain on yourself by forcing a price spike. And we did not sanction Iranian natural gas exports because neighboring countries like Turkey or Iraq depended on those supplies. You know, in the same way that you could think about pulling Russian oil off the market, but Russian gas to Europe, it’s just incredibly difficult in the near term this winter or next to think about how Russia, how Europe would survive without that. But what I hear you saying, Angela, is it’s not just about this winter or next, even if there is hopefully some peaceful resolution to this conflict. The mindset has shifted the idea that Europe will feel comfortable depending on Russia for its gas supplies years into the future. You think that’s gone?

Angela Stent [00:27:38] Well, I mean, it’s been such a shock, I think, to the Europeans now. Having said that, it’s possible that if the conflict ends relatively soon and in such a way that the Ukrainian government isn’t destroyed, then of course there could be a rethink. But at the moment, you can just see the impact of what’s happening and the shock. But in the longer run, you know that there may not be the need felt in Europe to completely get off the import of Russian gas.

Jason Bordoff [00:28:07] And we think we often talk about 1973, the Arab oil embargo. But you know, that was the use of energy as a weapon to try to affect you. But here Russia has not done that. Yeah, it’s right. There are measures being taken to hurt Russia by pulling their oil off the market. Gas supplies from Russia. We’re going up since the invasion. Not down, do you again? You look carefully at Russia and Putin. Do you see as a as someone who’s kind of a caged and cornered backed into a corner? Do you see Russia actually trying to use its energy dominance as a as an aggressive tool?

Angela Stent [00:28:42] So interestingly enough, they haven’t done that yet. I mean, we know that before this war, the supplies of gas to Europe, you know, had diminished and there was obviously something deliberate about that, too. But of course, then they forfeit the revenues and with all of the other sanctions against Russia. You know, of course, with oil, you know, what is it? One hundred and fifty dollars a barrel today that still, you know things, it’s not that high, but I don’t think that

Jason Bordoff [00:29:08] it’s headed there. It’s headed

Angela Stent [00:29:10] potentially. So I, you know, they haven’t done that yet. You can’t rule anything out. But at the moment, at the moment, they haven’t done that because, you know, that would also have very serious implications for them going forward if they now, you know, cut off supplies of gas.

Jason Bordoff [00:29:27] And do you think to Megan’s point about how to think about sources of supply that exist elsewhere, like Iran or OPEC? Russia is kind of part of OPEC now. So I’m just, you know, you’re carefully studying everything that’s happening in Russia, but also a careful watch or two of energy markets. Do you what do you see? Russia’s posture being toward the Iran deal is their goal to scuttle that and prevent that from happening?

Angela Stent [00:29:52] Well, they’ve threatened that now. I mean, they’ve said that they won’t go ahead because they were being very helpful, you know, up until the invasion. We were relying on them to help get the US back in that deal. Now they’re saying that unless some of these sanctions are lifted, you know they’re not going to be helpful anymore. So I don’t know whether that calculus will change

Jason Bordoff [00:30:11] and posture toward OPEC’s. Do you see Russia continuing to be part of that alliance? Does it?

Angela Stent [00:30:18] Well, I would think so. I mean, it’s still in Russia’s interest to be part of that alliance. I mean, the key thing is, you know, Saudi Arabia, I mean, you started to mention that, you know, whether the Saudis are more willing to be more cooperative with the United States. And at the moment, you know, that’s a question of.

Jason Bordoff [00:30:35] Megan, what do you see? How do you see the use of energy kind of unfolding? Does it come from the Russian side? Does it come from escalating social pressures and economic pressures? How quickly this economic campaign ratchets up that one will be willing the U.S. and Europeans just to bear the economic pain because we have to find all the tools we can to apply pressure to them.

Meghan O’Sullivan [00:30:54] I I can imagine or I can foresee without too much imagination, even the oil coming into play from the side of the consumer. You know, so going where this conversation has taken us before that, you could see Western governments now banning the import of Russian oil going to Russian gas. I think I share the concerns that Angela mentioned that this would be, you know, potentially a step too far for European economies. So on that side, I imagine if there is a disruption, it would be more likely to come from the Russian side. I mean, the the Russians, as we know gas is very important to their economy, but it’s not nearly as important as oil is to their economy. So I think a lot of this could could if Putin feels like he has to use a tool that is at his disposal and he hasn’t used yet. I mean, this is one of the remaining tools that he has to increase the pain on consumers. But you know, as we’ve seen thus far, he doesn’t seem inclined to use that.

Jason Bordoff [00:31:58] What are you? So when I say what he how does this end or what are you most worried about? It seems, Angela, like you’re you’re worried that there’s not an easy way to see that this is going to be de-escalated any time soon.

Angela Stent [00:32:12] And what worries me really is the nuclear angle. I mean, Putin has made these veiled threats that the sanctions threaten Russian statehood and that the response to that could be something that we’ve never dreamed of before. Russians have been talking about the potential use of tactical nuclear weapons in a limited nuclear war. I mean, the, you know, for years, one hopes that doesn’t happen. I mean that that’s one of the things that I really worry about, but I also worry about closing Russia off. One of my Russian friends said to me the other day, This isn’t going back to the 1990s, we’re going back to the 1970s. I mean, the borders will effectively be closed. You know, they’ve arrested 13000 people already for demonstrating against the war that they’re going to be cut off from Western sources of information. I mean, they already are now. And just cut off from the outside world. And that’s, you know, that’s terrible for the people who live there because, you know, it’s the ordinary Russians aren’t responsible for this war. So that’s one thing that you know that I worry about in terms of Russia itself. But yeah, I mean, I think the most worrying thing would be the nuclear angle. But and then, you know, just the continued wanton destruction of human life there of civilians.

Meghan O’Sullivan [00:33:26] I would rank those two things top of my list of things to worry about as well. I put a third in. There is the relationship between Russia and China. And as Angela suggested, we don’t really have a good sense of what is in Xi’s head and exactly where China will want to go with this relationship. But I think it is worrying to have two leaders of such powerful countries seemingly quite isolated in the sources of information that they get in the in the circles that advise them being in lockstep. So out of step with the West and the rest of the world. And so it’s not hard to foresee that you could have these two countries really aligned against the West. So we could be on the cusp of something that is very globalizing where you have Russia and China really on one side, you’ve got the West on the other side in. This won’t just be in the world of politics. This will also obviously very much be in the world of economics. So, you know, I’m concerned about that alliance as well, not only what it means strategically for the United States, but also what it means for for the globe.

Jason Bordoff [00:34:33] And coming back to the question that Meghan put to you, Angela. Going a little deeper along those lines, the speculation or hope that when much of the Russian economy is dysfunctional and broken and people can’t use their credit cards and can’t pay to get on the metro, that that that’s not a regime that Putin can survive in. I mean, do you think that chatter about regime changes is something you can foresee or that’s kind of just wishful thinking?

Angela Stent [00:35:05] It’s always possible. I don’t think you know the you know, there are no regularized succession mechanisms in history for Russia. And so you’ve had revolutions and then you’ve had palace coups. I think revolution is unlikely. I mean, the vast majority of Russians apparently still believe what they’re being told now. And there are stories in all of our media that when people outside, you know, cold people in Ukraine call their relatives in Russia, they don’t believe what’s happening right? Because they believe that this is a limited, you know, quote unquote an anti-Nazi move, so. So we shouldn’t exaggerate. You see the urban elites obviously opposing this going out in the streets. That’s not, I do not believe is going to bring down this current regime now. It could be that you then do have a group of people inside the elite who decide that, you know, this doesn’t serve Russia’s interests. It’s happened before in history. It’s hard to see that happening now again, because Putin is eliminated really any potential rivals. You know, just last week, he humiliated his National Security Council in a meeting where he dressed them down, you know, for not being fully supportive. This was just before the invasion began. But you can’t rule it out, and then you have to ask what comes? Let’s say they were another leader. I mean, it would still be someone who presumably is part of the system, but they might at least understand that it’s in Russia’s interests to not be in a state of war with Ukraine and to have some of these sanctions lifted into so interact with other countries in a more acceptable way.

Jason Bordoff [00:36:45] Megan, you wrote a great book on the US shale revolution, you as the new emergence of the US that one of the world’s when Saudi Arabia and Russia top energy producers and what the geopolitical ramifications of that are. So I was wondering how you’re thinking about that now, given what we’re seeing transpire in the world where I’m sitting here at CERAWeek in Houston, I suspect many of the speeches we’ll hear this week will be people from industry leaders saying, we we told you so like, why are we depending on all of these petro states around the world when we have this resource here at home? What’s real? What’s not real about that? And what do you think the longer term implications will be for how people think about the role of the U.S. as a major energy supplier in the world in the context of the energy transition, too?

Meghan O’Sullivan [00:37:27] Interesting. I was just thinking quietly that we’re this far into the conversation. We haven’t really talked about the energy transition or climate change, which obviously is another important backdrop of what’s unfolding. I think it’s interesting. We talked about Iran and Venezuela potentially being additional sources of supply OPEC. But of course, there’s the United States. There’s not the same mechanism. It’s not going to be as quick. But the United States can also potentially fill in some of the gaps in the market that might arise over the coming year. And I think there’s an expectation that that could, you know, we we certainly will see more of that as shale begins to respond to higher prices. Obviously, there’s a recalibration on the part of the industry, which has up until now decided to return more of its more to shareholders than to reinvest. But now, when prices are moving as high as they are, I think there’ll be a lot of pull to bring some of that capital back into investing in production and that we’re probably going to see more shale brought to market than had been anticipated even a couple of months ago. And I think this will underscore what many of us, how many of us came to understand the shale industry, that it’s very important in global markets, but it’s not a substitute for Saudi Arabia in the sense of being able to turn on and off more production. And I think the US will continue to play that kind of role. What I think is very interesting and I’m just noodling with this now is whether or not there may be an opening for a much more bipartisan approach in the United States towards energy and even climate policy. So when I think about the last time that you had sort of a more conservative, national security oriented part of the American politic aligned with environmentalists on energy, this was in the mid 2000s when the United States was really looking at very, very heavy import dependance. You know, two thirds of the oil we consumed came from abroad and came from regimes that people didn’t want to be supporting. And so there you had some alignment with these two groups that would normally be aligned to kind of look at alternative energies more significantly. And right now we have this current situation. There’s a real national security imperative to it. Is it possible that you have conservatives, you know, understanding that developing alternative energies and being more self-sufficient around the world is going to be in the national security interest? And you have environmentalists perhaps understanding that there are national security imperatives around oil and gas production at home. And you know, is there something there where there can be an agreement that spans the short in the long term? In the short term, we’re going to need to supply more oil and gas to markets, in part because the US is now underpinning European energy security. That’s a huge deal for our assets because of U.S. gas exports. You know, Angela mentioned how Russian gas exports went down and the US LNG ones went up considerably. So, you know, there’s I think there’s some.

Jason Bordoff [00:40:35] But what’s interesting about it could come around about the point you’re making, as you said, you know, shale can’t substitute for Saudi Arabia in the sense of spare capacity. You can’t ramp it up in weeks or months to get displaced, you know, to replace a million barrels a day disruption. But there’s an element of shale that is that might be considered more transition friendly than a 30 year offshore oil project with billions of dollars. That takes a long time to recoup your investment because we’re another thing that’s so you know, we responded to the Arab oil embargo responding to the energy crisis in the 1970s. No one has written about this more than Angela. Your husband, Dan Yergin, who brings us together here, then with coal, right? The the G7 in the late 70s, President Carter’s administration, that was a big part of the response get off of oil and use coal instead. We have a new binding constraint now, which is going to just say people, maybe you can ramp up existing coal capacity, but we don’t want to invest huge amounts of money in new coal infrastructure because we’re trying to deal with today’s crisis. But also the clean energy future we want to build shale can be ramped up quickly. It can also be ramped down quickly. So if you sort of need to meet today’s energy reality, but also have the ability to pivot when we get on track to do so. And we’re not doing that today. That might mean that there might be something there,

Meghan O’Sullivan [00:41:49] right, and something that you and I have written about, Jason, is how this energy transition, as at some point will we start seeing demand come down for commodities like oil? This will mean there’s more market power and therefore geopolitical power centered in low cost producers, be that Russia, be that Saudi Arabia. I think this moment might lead global actors governments to think we’re not that comfortable with that. If that’s where it’s heading, we’re not comfortable living through this period, even if it’s only a decade long where those producers are going to have so much economic and geopolitical power. If I don’t know if I’m allowed to do this, but can I read one sentence from Washington Post editorial?

Jason Bordoff [00:42:34] Yes, as long as you have an accent.

Meghan O’Sullivan [00:42:36] Oh, no, no, but I’m afraid I’m going to decline. So this is from The Washington Post. Just a few days ago, as we work toward less reliance on fossil fuels, the United States and its allies must make sure that oil and gas we do use comes in sufficient quantities from suppliers politically compatible with the West. And so this is the idea that, OK, it matters not just that there’s adequate amounts of oil, but that that oil is coming from sources that that we can depend on and that we’re comfortable with. And that really says to me, Hey, if I were a Canadian oil producer, if I were, I don’t know, some Europeans and Norwegians. I mean, we’re going to take a new look at how we’re going to meet these energy needs, not just in terms of volumes, but also in terms of sources.

Jason Bordoff [00:43:24] That quote has echoes of what I recall President Obama saying in State of the Union address about a decade ago that we need to triple down on the transition and move faster a clean energy future that will not happen immediately. And on the way, from here to there, it is better for the US, economically and geopolitically as an oil and gas come from certain places rather than than others.

Angela Stent [00:43:46] Unfortunately, oil and gas and other was found in countries with democratic governance.

Jason Bordoff [00:43:51] That is true as well, but they they are where they are. But and more maybe people pay a premium if in order to get them from places that are more politically stable, we only have a minute or two left, but I just want a final reflections to step back and sort of help people understand because you both look at the situation, both Russia, but also energy so closely where we’re headed, what people should be taking away from this right now. We’ve talked about what you’re most worried about, but but leave our listeners with a few thoughts on what maybe signposts they should be looking for in the coming weeks about how this is going to play out and what you’re going to be, what you’re looking most closely at in the days and weeks to come. What are you going to be paying close attention to? What’s going to help us understand how this is going to unfold?

Angela Stent [00:44:41] Well, first of all, I think people should continue to pay attention to the diplomacy and see if it is possible both the Russian and Ukrainian talks and then with other world leaders. If it is possible to get the Russians to agree to some kind of an off ramp, they should definitely look at that. And then I guess they have to look at the progress of the war itself. You know, are the Russians able, you know, will they advance on Kiev? Will they be taking more more cities or is it just going to be this kind of indiscriminate bombing? Obviously, people have to pay attention to the humanitarian crisis that’s there. As you know, more millions, possibly of refugees are are flowing out then and then. I think the other thing is we are in uncharted territory here in terms of Russia’s relationship with the West. It seems to be broken now. The whole consensus that we had had since the collapse of the Soviet Union, about security in Europe and about how to deal with each other, it’s now seems to be under question. On the other hand, you’ve had a revived U.S. European relationship. I mean, we are now more united with our allies than we’ve been for a very long time. And there are obviously differences, but they’re completely submerged by this overwhelming sense of having to respond to this threat from Russia. And everything will have to be recalibrated going forward in terms of assessing how much of a threat Russia is to Western security. That’s sort of in the longer run. But I think just the recognition that this is, we are entering a different era now. You know, the post-Cold War era is over where in the post post-Cold War era and we are probably entering into a new phase of a Cold War, it’s not going to be like the previous one, it’s going to be different. But the idea that that we in the West at least has to do everything we can to make sure that to contain the Russians. I mean, I tell students. Everything go back and reread George Cannon’s, you know, essay from nineteen forty seven, seventy five years ago about how to deal with the Soviet Union and the Russians. But I think the other thing and I think Meghan’s hinted at that too. We we are in a different world also because there are a number of countries around the world that, you know, are not going to condemn Russia, and they want to continue to do business with Russia. It’s not only China, it’s India, which obviously which has abstained in all these United Nations Security Council votes and has its own equities in its relationship with Russia, partly because, of course, it’s the tensions it has with China. But then looking at Latin America, I mean, to be interesting to see whether President Maduro, as the US is now trying to persuade him, seeks to distance himself from Russia countries in the Middle East that have not taken sides in this and won’t. So it’ll be if it’s a new Cold War and new divisions. It’s it’s the United States, you know, Europe, Australia, Canada, Japan, South Korea against probably a whole grouping of countries which why, while they may not support everything that Russia does, are not going to vote against it or some of their ties with it.

Jason Bordoff [00:48:03] Yeah, really, really fascinating reflections, Meighan. Same final thoughts to you on kind of what you’re looking at and also in the context of what you and I have been working on together. We have a piece in this foreign affairs issue on the geopolitics of the energy transition. Everyone should also read Angela’s recent piece in foreign affairs, which was excellent as well. But are you thinking feeling like we were validated or are you thinking differently about that topic in response to what’s happening?

Meghan O’Sullivan [00:48:27] Well, I think speaking for both of us that our thinking is evolving. We wrote that piece of before this crisis unfolded in the way that it has, and it seemed almost theoretical when we were talking about how the energy transition was going to empower traditional suppliers before it diminished them. We’re now seeing a very clear example of that, and I think the possibilities for changes in how policymakers were thinking about the future are very much on the table now where they weren’t a few months ago. A few things that I’m watching. First is just the evolving sanctions, as we talked quite a bit about in this podcast. To what extent are we on a slippery slope? Every week, there’s going to be something that didn’t seem feasible. Last week is now going to be on the table when it comes to sanctions and of course, the implications that we’ll have for energy markets. Second thing we’ll be looking at, like everyone else in the world, is looking at the price, but particularly at what price do we start to see demand destruction? You know, at what price does the world start moving into more recessionary territory? And that, I think, will be concerning not only for global economies, but also for oil producers like Saudi Arabia that have always been very interested in ensuring that, you know, high prices don’t result in that reality, but I think it is out there. And thirdly, you know what happens to the climate agenda? I think this is, you know, extremely important. We have a climate crisis on top of a national security crisis. And as you and I have talked about in that foreign affairs piece and elsewhere, you know, when these two things seem to be pitted against one another, it seems likely that the climate crisis is the one that loses out. This crisis, of course, is not about energy. It’s not about climate is the backdrop to it. It is. It is the kind of chessboard along which a lot of these things are being played out. So I think there’s certainly scope for this to lead to a doubling down of maybe Europe, maybe the United States approach towards the energy transition, but that’s not yet clear. That’s not yet clear. What is clear is that policymakers really need to find a way to encourage the market and others to take actions that will ensure we have enough affordable and available supply of energy during the transition, but that those policies don’t prevent us from realizing the energy transition over the medium and longer term. I think that’s a very hard basket of policies to identify and to build political consensus around. I think given the gravity of the moment, as Angela has just described it, there is opportunity for people to step back and rethink old ways of thinking. So I’m hopeful that we’ll get some creative policymaking out of that, which will better secure our short term without jeopardizing the climate agenda over the longer term.

Jason Bordoff [00:51:20] Yeah, we’ll have lots more podcasts and papers and discussions about what it all means for for the transition, but not not the focus of this conversation, but a really important point to end on. Because, as you said, there may be conflict in the near-term where we need sources of other hydrocarbons to maintain energy security and reliability. And in the long term, there may be overlap where, you know, Europe would probably be more energy secure today if it depended. US on global trade and hydrocarbons, and we shouldn’t forget that the problem is we always look for what we can do in the immediate crisis. And you say, well, all of these things to reduce dependance on hydrocarbons are too long term. And then when you get past the immediate crisis, you forget to do stay the course on the longer term stuff, which we have to do for climate. Not to mention energy security. This is a super busy week here, and carving out an hour for a conversation is not easy. So I want to thank you both for your time. Megan O’Sullivan and Angela Stent the really fascinating conversation about something that’s so critically important far beyond energy markets, but including energy markets. So thank you for your insights. It was really great conversation. I appreciate it.

Meghan O’Sullivan [00:52:21] Thank you. Thank you. Thank you, Angela.

Jason Bordoff [00:52:27] Angela and Megan, thank you again. Thanks to all of you, our listeners, for joining us on this episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show was hosted by Bill Loveless and by me, Jason Bordoff. The show was produced by Steven Lacy, Jamie Kaiser and Alexandria her from PostScript Media. Additional support from Tori Lavelle, Kirsten Smith, Daniel Prop, Natalie Voke and Q Lee, Sean Marquand, engineer of the show. For more information about the podcast or the Center on Global Energy Policy, visit US online at Energy Policy The Columbia that EDU- or follow us on social media at Columbia Energy. And please, if you feel inclined, give us a five star rating on Apple Podcasts. It really helps us out. Thanks again for listening. We’ll see you next week.

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