U.S. Treasury Secretary Janet Yellen said the United States and Europe needed to “go further” in confronting Russia’s war against Ukraine, while expanding the “potent transatlantic cooperation to address many of the other shared challenges we face.”
Speaking at the Brussels Economic Forum on Tuesday, Yellen said “we must address the present energy security emergency to ensure supply for Europe and the world, while using this as our moment to rapidly accelerate the transition to clean energy.”
In a bid to limit Russian energy flows, the White House said it would send another 15 billion cubic meters (Bcm) of liquefied natural gas (LNG) to Europe this year and 50 Bcm annually through at least 2030. The United States also has pledged to expedite approvals for LNG projects, which take years to build.
How Much Natural Gas Can U.S. Provide?
There has, however, been some doubt about the ability of U.S. companies to meet European gas demand in the short term given that LNG export facilities are essentially at full capacity. The U.S. and European governments also said they would work with international partners to ensure demand for the super-chilled fuel.
The Europe Union (EU) imported about 45% of all its natural gas from Russia in 2021 and is aiming to cut them by two-thirds before the end of the year. The EU also aims to eliminate Russian oil imports by the end of the year. The Biden administration already has banned imports of Russian fossil fuels.
“I know that Europe is facing a uniquely difficult situation, given existing infrastructure and supply contracts with Russia over the near term,” Yellen said. “That is why I commend European leaders for their proposal to phase out all Russian energy supplies within six months. And I recognize the solidarity of the European people in accepting the implications of this proposal.”
Russia recently stopped natural gas deliveries to Poland and Bulgaria for not complying with its requirements to pay in rubles. This has led to further market uncertainty, fueling sky-high European prices for natural gas.
“Russia’s war and its recent decision to cut gas supplies to Poland and Bulgaria, threatening other countries with the same, show that it is not a trusted partner,” Yellen said. “Russia is using energy as a weapon to deploy against those who stand against its aggression. The United States is committed to working with Europe in your efforts to meet your energy needs, while also breaking dependence on Russian energy.”
On Wednesday, the European Commission announced an emergency energy plan worth 210 billion euros ($220 billion). The plan would cut red tape on new renewable energy projects. It also singles out Angola, Nigeria and Senegal as potential sources of additional LNG for the continent.
Yellen said “we will likely see an uptick in coal and other fossil fuel usage as countries seek to keep legacy assets online longer.” However, “if this blunts some of our immediate climate goals for a short period, let it also prod us to redouble our efforts on clean and renewable energy.”
‘Friend-Shoring’ Critical Minerals
These efforts would entail changing geopolitical realities. Given the towering input needs of electrification and a changing energy grid, demand for critical minerals could rise up to six times by 2040, according to a new study by the International Energy Agency (IEA).
Yellen stressed that the energy transition would require a new strategy to source critical minerals and other raw materials in order to prevent a repeat of the current crisis.
“We have become too vulnerable to countries using their market positions in raw materials, technologies or products to exercise geopolitical leverage or disrupt markets for their own gain,” she said. “For example, the development of dependence on Russian oil favored cost and convenience over concentration risk and considerations of security.”
Yellen cited Russia being a key supplier of minerals, and a global dependence on China for its rare earth mining. The pandemic also led to supply chain disruptions while driving up the prices of commodities, exposing economic risks.
The Treasury Secretary also called for the “friend-shoring” of supply chains “to a greater number of trusted countries for a variety of products, so we can continue to securely extend market access, with lower risks to our economy, as well as to those of our trade partners.”
According to the IEA, the production and processing of many minerals such as lithium, cobalt and some rare earth elements, are highly concentrated in a handful of countries. The top three producers account for more than 75% of supplies.
“What I am proposing is that we properly account for the externalities stemming from these other considerations – concentration, geopolitical concerns, security risks and values,” Yellen said. “In the case of rare earths, numerous other countries possess these resources. It is in our collective interest for them to pursue greater extraction with care for environmental and other consequences.”
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