Charles Ries interviewed by V. Nicoloulia and A. Konachou

Charles Ries, the American ambassador in Athens and a career diplomat, stresses the significance of the everlasting values of the ‘old’ principles of ‘energy security,’ established during the oil crises of the 1970s, and associates them with their importance for economic activity in the present era. Today, government cooperation, diversification of supply, as well as enhancing competition and combating market restrictive practices and cartels, remain prerequisites sine qua non in order to ensure the modern way of life of every society on the planet.

Therefore he characterizes the recent agreement for the construction of the Burgas-Alexandroupolis oil pipeline as ‘positive,’ since it can increase diversification and the factor of ‘energy security’ in the region, ‘as well as of broader parts of Europe.’

Of utmost importance is also the fact that, after the construction of the Baku-Ceyhan oil pipeline, the US is ‘interested in helping the gas resources from the Caspian come out to the world market as an alternative, as a more diverse supply of gas to Western Europe.’

Finally, in his interview with The Bridge, Ambassador Ries responded directly to all the questions put to him, questions that are of interest not only to Greece and the Balkans, but to Europe as a whole due to its high degree of energy dependence.

Since the concept of ‘energy security’ emerged in the 1970s, the world has changed a great deal. Today, we are again hearing a lot about energy and security. Can you explain what the term really means to the US and what the US energy security focus is?

We don’t have a definition of energy security that is any different than anyone else’s. The point of energy security is that energy, to put it mildly, is critical to economic activity. For that reason, governments and companies try their best to plan for a possible interruption of energy supplies by any one supplier for any number of reasons, i.e. technical, political, economic, or a change of technology. The more diversity in energy supply you have, the more energy security you have. The principles are the same as they were in the 1970s. The energy market has changed since the 1970s, but basically the principles of energy security are the same.

On the other hand, since the principles are the same, the goal is to achieve energy independence. Is this possible?

For some countries it is possible, for others it is not. For most developed countries, such as mine, such as Greece, it is not possible to have complete energy independence. But it is possible to increase energy security.

Diversification

What are the objectives that underpin energy security? To avoid any political and economic scramble that could threaten the Western alliance? Diversification, as you already mentioned, is one of them…

First of all, countries have to minimize the risk of disruption due to any reason and have to exercise and to think about their preparedness to deal with a loss of supply. They must have set aside reserves so that, in the case of a short pause in any one source of energy, they are able to make up for it on a temporary basis by drawing on reserves. They must also have relationships with allies so that the allies can share with each other in times of shortfall. That is why the International Energy Agency was established in 1975 and has a sharing agreement for oil. That is why the International Energy Agency discussed in the early 1980s the principles of energy security more broadly for coal and gas. These principles are important. If the oil market or the gas market becomes tight and there is very little surge capacity for producers to supply extra supplies and an unexpected event happens, energy security, preparedness and diversification become all the more important.

Therefore, according to your opinion, energy security is important and governments must cooperate with each other.

Sure.

Why and how could this be achieved?

There are lots of different ways, but the ‘why’ is the easiest part to answer. The ‘why’ is because our economies depend on a reliable, consistent supply of energy for economic activity and for economic growth. Energy is one of those essential inputs to modern life, along with water and food. It is a basic requirement for modern society. It’s a basic requirement for all societies, but in particular, commercial energy is important for modern society.

How should governments cooperate? There are a lot of different aspects to that. Governments can cooperate in the development of diverse energy sources, bringing new independent supplies of energy onto the market. We can cooperate by opposing market restrictive practices in the energy market, by opposing cartels, by helping develop new technologies, and by developing renewable technologies. All these are ways that governments can meet their objectives and also help their citizens be prepared for the kinds of things that are unexpected but nevertheless potentially very, very serious.

Is the USA cooperating in any way with the European Union in the field of technology?

Energy security was a key topic discussed at the US-EU Summit in Vienna in June, as well as at the G8 Summit in St Petersburg in July.

The case of hydrogen

Hydrogen is another source of energy. Does the USA cooperate with its Western allies in this field, or is there such a prospect in the future? Many years ago the EU started a pilot program for producing energy from hydrogen and I think that the USA did the same…

We spend more money on research on hydrogen fuel cell technologies for transportation than any other country or the European Union. The president several years ago, I think it was in 2003 at another US-EU summit, said hydrogen fuel cells have the possibility of providing a reliable source of energy for transportation for the future and really merit attention. The US has a program to support fuel cell development, hundreds of millions of dollars. We asked Europe to join with us, and our Department of Energy is cooperating with the European Commission in a number of other European countries to collaborate on the basic research needed to commercialize hydrogen fuel cell technology.

Investments and energy security

How important are investments in promoting this energy security framework? Are American companies interested in investing in SE Europe?

Yes, of course. Modern energy supply sources require huge amounts of investment. The easy, cheap sources of energy have already been developed. As we go into hydrocarbons from remote areas, hydrocarbons from deep in a rock, the cost of the development of one barrel of oil or 1,000 cubic meters of gas is much higher. So it takes a lot of investment. Our companies ― ExxonMobil, Chevron and the other major American companies ― are investing billions of dollars every year in the development of energy for future generations. The mobilization of capital is a very, very big challenge. In this part of the world, we have been very interested in developing energy resources in the Caspian Basin.

The first concern was as they drilled in Azerbaijan, in particular, and in Kazakhstan, when we discovered commercial-scale deposits of oil. But there is a problem in that the Caspian is landlocked. How do you get the oil out to the markets? Starting in the early 1990s, the United States supported an effort to build a major oil export pipeline from Azerbaijan to the Mediterranean. This pipeline was built from Azerbaijan to Georgia to Turkey and ends at the port of Ceyhan. That pipeline was supported originally with feasibility grant money from the US government and was built with the private investment of American as well as other international oil companies, including British Petroleum. A lot of capital, a lot of foresight, and a lot of commitment got that pipeline built.
Now, we are interested in helping the gas resources from the Caspian come out to the world market as an alternative, as a more diverse supply of gas to Western Europe. That also will take a lot of investment. The companies that are developing the gas pipeline ― companies such as DEPA here in Greece ― are building an infrastructure with significant amounts of investment, along with partners in Italy and Turkey and other countries along the route. This will help bring this diversified source of gas into the world market.

Burgas-Alexandroupolis

In Southeast Europe a new energy framework is gradually being established with the gas pipeline from Turkey to Italy through Greece, which you already mentioned, plus the Burgas-Alexandroupolis oil pipeline. Do you think that these projects will also enhance and strengthen diplomatic solutions and the stability of the region in general?

Yes, I do. I think to the extent that there are more diverse, competitive sources of energy, that all the countries of the region, as well as broader parts of Europe, will have that much more confidence that they will be secure no matter what may happen. That much more confidence that they will have alternatives, and this is a good thing.

What the Burgas-Alexandroupolis Bosporus bypass oil pipeline will do is to allow the oil to come from the Black Sea, from Russia, from Kazakhstan, from other sources near the Black Sea, bypass the Bosporus and come out into the world markets. This will reduce the costs somewhat, but it will also increase the security. Right now, when the weather is bad in the Bosporus, tankers can wait for 20 or 30 or 40 days to transit the Bosporus, which is a very twisty, turny, dangerous waterway. If there were to be, God forbid, an accident in the Bosporus involving tankers or other kinds of ships, the flow of oil through the Bosporus would stop. This pipeline, when built, together with Baku-Ceyhan and possibly other pipelines that may be built in the future, will help enhance the stability and the security of crude oil supplies.

Several million barrels a day of crude will be that much more secure to the world markets. That means that if you have a disaster, because there are alternative methods to get that crude to market, you won’t have the spike in oil prices that would hurt global economies.

Do you believe that the oil and gas agreements promoted by Russia enhance the influence of Moscow in SE Europe and the European continent in general? What are the political and economic implications of this policy?

You have to be specific about what which oil and gas agreements you are talking about. I do think that the Burgas-Alexandroupolis pipeline agreement is a very positive thing and will increase energy security. With other agreements that the Russians may be interested in reaching with individual companies or countries, you have to look at the specifics as to what their impact will be. But the principles are quite simple.

The question is: Does a supply arrangement increase diversity of supply and increase competition, or does it reduce competition and reduce diversity? If it does the latter, if it reduces competition and reduces diversity, it is probably not a good thing for energy security.

Charles P. Ries was confirmed by the Senate June 25, 2004 as the next US ambassador to the Hellenic Republic and was sworn in on December 13, 2004. He presented his credentials to President Constantine Stephanopoulos on January 11, 2005.

American Embassy website:
www.usembassy.gr