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U.S. Push For Natural Gas Exports To Help Ukraine Won't Actually Help Ukraine

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WASHINGTON -- As much of the world focuses on Ukraine's political turmoil and Russia's military response, those at the top of the K Street influence tower see an opportunity to shape oil and gas legislation now moving through Congress with alarming speed.

Led by the powerhouse lobbying of the American Petroleum Institute, a coalition of Fortune 500 energy companies are using the Ukraine crisis to spur Congress to approve a key policy goal: Easing regulations on the export of U.S. natural gas.

Despite a decade-long boom in U.S. natural gas production, very little of America's vast gas reserves are exported.. That's because strict regulations on the transfer and storage of gas have made it impossible to profitably ship out of the U.S.

Oil and gas companies have paid Washington lobbyists millions in recent years to challenge the strict export rules -- to no avail, until now.

As Russian troops occupy Crimea and more mass on Ukraine's border, President Barack Obama and other Western leaders seek ways to apply diplomatic and economic pressure on Russia. Their goals are to support Ukraine's shaky new pro-European government in Kiev, and to weaken Russia's grip on its former Soviet satellite.

Natural gas is key to both objectives. Russia's natural gas pipelines run straight through Ukraine. These pipelines provide gas to meet Ukraine's energy needs, while also supplying Washington's European allies. Over the past five years, however, the price and availability of Russian gas in Ukraine has become increasingly politicized. Russia has cut off the flow of gas to Ukraine twice in the past 10 years.

In Washington, Russian saber-rattling lends urgency to the oil and gas industry deregulation bills long pressed by lobbyists. This time, the bills have a bigger, eager audience on Capitol Hill. For lawmakers, easing restrictions on natural gas exports is a good way to look tough on Russia, and at the same time to tout jobs for the U.S. energy sector.

No fewer than six bills have been introduced in Congress in the past two weeks aimed at speeding permits required to export liquefied natural gas, or LNG.

The lead legislation in the Republican-controlled House was handed to Rep. Cory Gardner (R-Colo.). Gardner recently announced a challenge to freshman Sen. Mark Udall (D-Colo.) that cleared the Republican primary field in the Senate contest. By handing Gardner the export bill, Republicans aim to give the congressman a winning issue of concern to his home state and to burnish his international credentials. Udall introduced a similar bill the same day.

"We certainly like the fact that the Ukraine has essentially elevated the debate over the LNG exports," said Marty Durbin, CEO of America's Natural Gas Alliance, the biggest U.S. trade group of independent gas companies.

At first glance, all six bills look like emergency relief measures, crafted to help balance Russian President Vladimir Putin's power over Ukraine. But that's not what's going to happen.

"Expediting liquefied natural gas exports from the U.S. to weaken Russia's standing is a red herring," Athan Manuel, senior director for the Sierra Club, an environmental group opposed to gas exports, told The Huffington Post in an email. "As Energy Secretary [Ernest] Moniz said last Wednesday, the United States doesn't have the physical capacity to export LNG, nor can we determine where LNG exports go. Exporting LNG is no quick fix to this international crisis."

If you listened to members of Congress in the last week, you'd be forgiven for thinking that American gas exports would be enough to save Ukraine. They're not. They wouldn't even leave American ports until 2015, long after Ukraine's revolution government either will have established itself or failed.

Industry leaders and energy experts concede that American LNG exports are not ready to flow to Ukraine or its European allies. There are no operational LNG export sites in the continental United States that can ship to non-free trade countries, although a few companies have been cleared to begin the permitting process, which can take up to five years.

Nonetheless, K Street is playing the crisis card -- whether it helps the Ukrainians, or not.

Current regulations require a special permitting process for gas exports to countries that don't have free trade agreements with the U.S. The legislation in Congress would speed the process of exporting gas to NATO allies and to other countries, including Japan and India, by waiving the permitting process and expediting permits for 24 LNG export sites in the U.S. awaiting Department of Energy approval to ship gas to those countries.

Passage of the legislation would "send a very strong signal," according to Durbin, that the U.S. would be "able to help our allies and minimize the ability of any country out there to abuse energy as a weapon."

"Our allies in Europe are eager for a reliable partner to enter the marketplace as a stable, secure source of natural gas, and American industry is ready to make that happen," Erik Milito, API's director of upstream and industry operations, said in a statement.

To help push the legislation, the oil and gas industry employs more than 760 federally registered lobbyists and has distributed more than $150 million in campaign contributions since 2007, according to the Center for Responsive Politics.

API and ANGA have spent even more on advertising aimed at voters to soften their views of hydraulic fracturing, energy regulations and other industry priorities. The two groups combined spent $245 million on advertising promoting oil and gas from 2011 to 2012, often targeted in states with important elections. API has already run ads using the names of seven vulnerable Senate Democrats ahead of the 2014 election.

The rush to weaken regulation of gas exporters in the name of helping Ukraine is not without opposition. Environmental groups have been joined by chemical manufacturers, the steel industry and power producers. Electric utilities and chemical makers fear increased gas exports will lead to higher domestic gas prices, cutting into profits.

Dow Chemical, the de facto leader of the export opposition, launched the anti-gas export group America's Energy Advantage with other major manufacturers. The group was founded after Dow quit the National Association of Manufacturers to protest NAM's endorsement of a Department of Energy study finding exports have little effect on domestic gas prices.

America's Energy Advantage has called the push to speed gas exports in light of the Ukraine crisis to be "a false hope."

Dow's vocal opposition to easier exports is not shared by the American Chemistry Council, the chemical industry's trade association, which counts Dow as a member. Dow gave more than $1.3 million to ACC in 2012. ACC states that its membership lacks a "clear consensus" on gas exports to non-free trade countries, so the group supports "further study."

Dow argues that an increase in gas exports would coincide with new pollution regulations for coal-fired power plants. Switching power plants from coal to natural gas while boosting exports of gas would increase the domestic cost of natural gas, according to the chemical industry.

Domestic gas prices have fallen rapidly as drilling and production have expanded in recent years with new technology, including fracking. According to a study last year by the pro-export Small Business and Entrepreneurship Council, natural gas prices have declined 55 percent since 2005, which experts largely attribute to the increase in supply.

Studies by independent energy experts and the Energy Department have found little evidence that gas exports would increase the domestic gas price.

The Senate Foreign Relations Committee will consider Ukrainian aid legislation on Wednesday and at least one senator has offered an amendment to ease gas export regulations.

"It's going to take through this week and maybe over the break that they have to kind of settle out where they want to go here," ANGA's Durbin said about Congress. "Our hope and where we're going to engage is we can see some proposal that has some likelihood of moving through that will expedite the [export] process."

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Senate Majority Leader Harry Reid (D-Nev.) set up a final vote Thursday on a bill that would provide Ukraine with up to billion in loan guarantees and impose targeted sanctions against Russian officials.

Reid made the announcement Tuesday after dropping a controversial provision from the Senate bill that would have boosted the U.S. quota at the International Monetary Fund. Republicans in both chambers of Congress opposed the IMF reforms, which were specifically requested by the White House to increase Ukraine's borrowing capabilities at the institution.

Senate Minority Leader Mitch McConnell (R-Ky.) said earlier Tuesday that Republicans would still want to vote on a number of amendments, but the IMF language was the major sticking point. Without it, the Ukraine aid package is expected to pass both the Senate and the House without much drama or delay.

--Sabrina Siddiqui

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From the Associated Press:

Authorities in a pro-Russian separatist region of Moldova claim to have brought down a Ukrainian drone on a reconnaissance mission.

NovostiPMR, the news agency of Trans-Dniester says Tuesday that the region's intelligence agency downed the drone on March 23.

The region broke away from Moldova in 1990. There are 1,500 Russian troops stationed there guarding hundreds of tons of weapons.

According to the agency, the drone was "launched from Ukrainian territory by people close to the Ukrainian Security Service and the Defense Ministry."

It said the plane illegally crossed into Trans-Dniester violating its air space. It added that the authorities in the region reserved the right to use "all available methods" to defend the territory which is not internationally recognized but is supported by Russia.

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Reuters reports:

Russian forces appeared to be attempting to take over the last military ship controlled by Ukraine in Crimea on Tuesday after a Ukrainian military spokesman reported explosions in its vicinity and helicopters approaching the vessel.

Russian forces armed with stun grenades and automatic weapons have seized ships and military bases from the last remaining Ukrainian troops in Crimea in recent days as part of Russia's largely bloodless annexation of the region.

Kiev, which calls Russia's annexation of Crimea illegal, ordered its remaining forces to withdraw for their own safety on Monday, but not all troops have yet left the Black Sea peninsula and some ships have been prevented from leaving.

"Around 1900 (1600 GMT) there were several explosions from the direction of the minesweeper Cherkasy in the Donuzlav bay," Ukrainian military spokesman Vladislav Seleznyov told Reuters.

"Some Mi-35 helicopter gunships were observed hovering in the area. Speedboats and a tug were seen approaching Cherkasy," he said.

On Monday Cherkasy attempted without success to break to the open sea through a blockade at the entrance to the inlet. The Russian navy blocked the route earlier this month by scuttling three hulks in the channel.

Seleznyov said he was unable to confirm whether Russian troops had boarded the ship.

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From Reuters:

Russia's military staged training exercises on Tuesday in Transdniestria, a breakaway sliver of Moldova that is a focus of tension following Russia's annexation of Ukraine's Crimea region.

NATO's top military commander said on Sunday he was worried that Russia might have its eye on Transdniestria, a largely Russian-speaking region that borders western Ukraine, after seizing Crimea, which has a narrow ethnic Russian majority.

The Interfax news agency quoted a spokesman for Russia's Western Military District, Colonel Oleg Kochetkov, as saying that Russian forces stationed in Transdniestria had "conducted an anti-terrorism drill and practiced operations to rebuff an attack on their military base".

Transdniestria, with a population of half a million, has run its own affairs since 1992 after fighting a brief war against the Moldovan government over fears that it might join Romania after the collapse of the Soviet Union, and Russia has a permanent garrison of peacekeepers there.

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Ukraine's Ministry of Foreign Affairs confirmed, in something of a Shermanesque statement, that the country will not develop nuclear weapons, one day after the Russian Minister of Foreign Affairs seized on a proposal by some Ukrainian MPs to leave the Nuclear Nonproliferation Treaty.

"Ukraine has not planned, is not planning and is not going to plan to resume its nuclear status," a spokesman for the agency said at a press briefing.

Earlier this month, several opposition MPs introduced a draft bill to withdraw Ukraine from the NPT. Russia's Foreign Ministry seized on it, saying "the dysfunctional new Kiev authorities may pose a threat to the security of Ukrainian nuclear sites under the current Ukrainian circumstances," in a statement.
"We do not trust attempts of the Ukrainian delegate to dissociate from this position. The NPT is in serious danger."

Ukraine, which suddenly became the world's third-largest nuclear state after the collapse of the Soviet Union, gave its nuclear arsenal back to Russia for disposal under the 1994 Budapest Memorandum in exchange for security assurances from Russia that it would respect Ukraine's territorial integrity.

--Luke Johnson

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The world's industrialized nations have turned their back on Russia, following Moscow's annexation of Crimea.

Though the G8 cannot expel its members, countries can refuse a member permission to attend, effectively expelling them.

With jitters in the east of Europe about further Russian incursion, and wariness in China, the state of world diplomacy could look very different by 2015.

HuffPost UK has asked military and international relations experts on five scenarios that could occur now Russia looks increasingly isolated, and as the West looks impotent.

Read here what they predict.

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Senate Majority Leader Harry Reid (D-Nev.) may drop a controversial reform to the U.S. share at the International Monetary Fund from the Ukraine aid package, according to Senate leadership aides.

The provision was requested by President Barack Obama and Ukrainian leaders, but faces widespread opposition from Republicans. Senate Majority Leader Mitch McConnell (R-Ky.) said Tuesday that his members would not support the aid bill unless the IMF language was dropped.

A Senate leadership aide said removing the provision is now "under consideration in order to move the bill." In exchange, Republicans would drop their demand to delay a Treasury Department rule that cracks down on the political activities of nonprofits, known as 501(c)(4)s.

The House of Representatives passed its own legislation providing aid to Ukraine earlier this month without the IMF reforms, and planned to move on a sanctions bill that also left the issue untouched. House Speaker John Boehner (R-Ohio) has said boosting U.S. funds at the IMF has "nothing to do with Ukraine," and his aides indicated they would not have enough votes to move the Senate bill through the lower chamber in its current form.

The Obama administration and Senate Democrats have been making the case that ratifying the IMF reforms, which were agreed upon in 2010, is critical to Ukraine's borrowing capabilities in a time of crisis. Still, some House Democrats acknowledged that the White House was complicating the process by renewing debate over a contentious issue when providing aid expeditiously is of the utmost importance.

--Sabrina Siddiqui

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President Barack Obama dismissed the notion that former GOP presidential candidate Mitt Romney was correct in saying that Russia was "our number one geopolitical foe" Tuesday, in a response to a question from Jonathan Karl of ABC News. He said that Russia was merely a "regional power" that was acting out of "weakness."

"Russia is a regional power that is threatening some of its immediate neighbors, not out of strength, but out of weakness. Ukraine has been a country in which Russia had enormous influence for decades, since the breakup of the Soviet Union, and we have considerable influence on our neighbors," he said. "We generally don't need to invade them in order to have a strong cooperative relationship with them."

--Luke Johnson

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At a press conference in Europe, U.S. President Barack Obama sidestepped a question on whether he "misread" Russian President Vladimir Putin, saying he wasn't so interested in his motivations.

"With respect to President Putin's motivation, I think there has been a lot of speculation. I am less interested in motivation and more interested in the facts and the principles that not only the United States but the entire international community are looking to uphold."

He added that the United States is "concerned" about further encroachment by Russia into Ukraine.

--Luke Johnson

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From Reuters:

Ukraine, its economy seriously weakened by months of political turmoil and mismanagement, is negotiating with the International Monetary Fund for a loan package of -20 billion, its finance minister said on Tuesday.

The minister, Oleksander Shlapak, speaking to reporters before a government meeting, said the ministry foresaw continued slowdown and stagnation in the economy with it contracting by 3 per cent in 2014.

Referring to talks now going on with the IMF, he said: "We are successfully heading towards concluding a programme. I think we shall receive (what we seek). This sum is from 15 to 20 billion dollars."

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Most Americans do not think that the United States has a responsibility to intervene in Ukraine after Russia annexed Crimea, a CBS News poll released Tuesday found. 61 percent think that the United States isn't obliged to do anything while 32 percent think it is. 65 percent -- including majorities of Democrats, Republicans and independents -- think that the U.S. should not provide military aid to Ukraine, which it has thus far refused.

--Luke Johnson

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Russian Deputy Economic Development Minister Andrei Klepach said Monday that capital flight will reach billion in first quarter 2014.

In comparison, capital flight for all of 2013 was just under billion. The minister also expected that growth for the first quarter will be "near zero."

"Unfortunately the investment slump is continuing. I'm not ready to say how long it will continue," he told reporters.

The rate of flight would be the highest since the 2008 financial crisis.

The forecast is yet another sign that the Crimean invasion is seriously damaging the Russian economy. The Russian stock index MICEX has dropped 13.2 percent on the year, compared to a 5.7 drop for the MSCI emerging market index.

--Luke Johnson

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The White House released a statement from the U.S. and Ukraine on nuclear proliferation today. After the fall of the Soviet Union, Ukraine was the third-largest nuclear weapons state. It gave up the weapons to Russia in the 1994 Budapest Memorandum, in exchange for security assurances from Russia.

Read the full statement:

On the occasion of the third Nuclear Security Summit in The Hague, the United States and Ukraine today reaffirm their strategic partnership and emphasize the important role of nuclear nonproliferation in that relationship. The United States values its 20-year partnership with Ukraine on these issues. Our nonproliferation partnership dates from Ukraine’s 1994 decision to remove all nuclear weapons from its territory and to accede to the Treaty on the Non-Proliferation of Nuclear Weapons as a non-nuclear-weapon state. In the 1994 Budapest Memorandum, the United States, the Russian Federation, and the United Kingdom of Great Britain and Northern Ireland welcomed these Ukrainian actions, and they reaffirmed their commitment to Ukraine to respect the independence, sovereignty, and existing borders of Ukraine. The United States government reaffirms that commitment today to the new Ukrainian government and the people of Ukraine, including in Crimea. The United States government condemns Russia’s failure to abide by its commitments under the Budapest Memorandum with its unilateral military actions in Ukraine. Russia’s actions undermine the foundation of the global security architecture and endanger European peace and security. Ukraine and the United States emphasize that they will not recognize Russia's illegal attempt to annex Crimea. Crimea is an integral part of Ukraine. The United States will continue to help Ukraine affirm its sovereignty and territorial integrity. As the people of Ukraine work to restore unity, peace, and security to their country, the United States will stand by their side.
The United States and Ukraine reiterate their commitment to upholding their nuclear nonproliferation commitments. The United States recognizes the importance of the 2012 removal of all highly enriched uranium from Ukraine. This removal again highlighted Ukraine’s leadership in nuclear security and nonproliferation, as we collectively work together to secure the world’s vulnerable nuclear material. As part of its support for this effort, the United States committed in 2010 to work with Ukraine to construct a Neutron Source Facility at the Kharkiv Institute for Physics and Technology. This month construction of the Neutron Source Facility was completed. The facility, equipped with the most up-to-date technology to operate at the highest safety standards, provides Ukraine with new research capabilities and the ability to produce industrial and medical isotopes for the benefit of the Ukrainian people.

This state of the art facility is representative of the modern, European state the Government of Ukraine is committed to building. To build on this important cooperation, the United States will continue to provide technical support for the Neutron Source Facility as Ukraine completes the necessary final equipment installation, testing, and start-up to make the facility fully operational as soon as practical.

This successful effort reflects broad U.S.-Ukrainian cooperation on nuclear security and nonproliferation. Our countries recently extended the U.S.-Ukraine Cooperative Threat Reduction (CTR) Umbrella Agreement and the U.S.-Ukraine Agreement Concerning Operational Safety Enhancements, Risk Reduction Measures, and Nuclear Safety Regulation for Civilian Nuclear Facilities in Ukraine.

The United States and Ukraine intend to continue to partner to prevent nuclear proliferation by improving Ukraine’s ability to detect nuclear materials on its borders, to provide physical protection at sites with nuclear or radioactive materials, and to maintain an adequate export control system in order to help realize the goals of the Nuclear Security Summits.

--Luke Johnson

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President Barack Obama and Kazakh President Nursultan Nazarbayev spoke today at The Hague, according to a White House pool report. There were no formal remarks between the two men.

Nazarbayev said in a phone call that he "treats with understanding the position of Russia" on Crimea, which appears to be a very delicate diplomatic turn of phrase. Some have speculated of a Crimean-style scenario in Kazakhstan, which has a large minority of Russian speakers.

A joint statement between the two leaders contained no mention of Crimea, instead focusing on nonproliferation.

--Luke Johnson

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The Associated Press is now reporting that Ukraine's parliament has accepted the defense minister's resignation, after rejecting it earlier.

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From Reuters:

WASHINGTON, March 24 (Reuters) - A bill providing economic assistance to Ukraine and imposing sanctions over Russia's seizure of Crimea cleared a procedural hurdle in the U.S. Senate on Monday, as backers attempted to win passage of the legislation later this week.

By a vote of 78-17, the Senate laid the groundwork for debating a bill that would back a billion loan guarantee for the government in Kiev, provide 0 million in aid for Ukraine and neighboring countries and require sanctions on Russians and Ukrainians responsible for corruption, human rights abuses or undermining stability in Ukraine.

Full story here.

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Britain's Foreign Minister William Hague said the countries of the G7 have agreed to discuss ways to reduce European dependence on Russian energy supplies in coming weeks and months.

Reuters reports:

Hague said the decision to hold the G8 meeting without Russia this year is "of course a huge blow to the G8, it means there is no G8 this year. The president of the United States was very clear in the meeting that it will then be hard to revive that in the immediate future."

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Russian news agency RIA Novosti reports that according to a Crimean official, all Ukrainian military units have left Crimea, leaving the military bases in the region under Russian control.

“All Ukrainian military personnel have either joined Russia or are leaving Crimea,” first deputy prime minister, Rustam Temirgaliyev, reportedly said.

Read the full report here.

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From the Associated Press:

Ukraine is hoping the United Nations General Assembly will adopt a resolution later this week reaffirming the country's unity and territorial integrity and underscoring that the referendum in Crimea that led to its annexation by Russia "has no validity."

The draft resolution, circulated Monday to the 193 assembly members and obtained by The Associated Press, never mentions Russia by name but calls on all countries not to recognize "any alteration of the status" of Crimea.

It also urges all parties to immediately pursue the peaceful resolution of the situation in Ukraine and exercise restraint.

The resolution is expected to be put to a vote at a General Assembly meeting on Thursday.

Unlike the Security Council, where veto-wielding Russia has blocked any action on Ukraine, the General Assembly has no vetoes.

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