Do We Need a Transatlantic Energy Security Policy?

TRANSCRIPT Do We Need a Transatlantic Energy Security Policy? Discussants: Egemen Bagis General James L. Jones Peter MacKay Andris Piebalgs Radek Sikorski Robin West Moderator: Frederick Kempe

KAREN DONFRIED: Good morning, is that better? I’m Karen Donfried with the German Marshall Fund. I’m substituting for Craig Kennedy on this session. I’d like to welcome all of you this morning. I ask you to please turn off your cell phones. And, when you ask questions if you could just introduce yourselves and that is my honor to welcome Fred Kempe as our moderator for the Transatlantic Energy Security session, so Fred, take it away.

FRED KEMPE, WALL STREET JOURNAL: Yes. Just want to get a feeling for the room, just see if anyone has any tomatoes or other weapons. First of all, welcome to the energy security panel. First of all, I’m at a disadvantage to the panelists yesterday in the sense that I’m not a television moderator, so I will keep my coat on. And, I may actually use the seat once in a while to sit down. But, otherwise I — we will play by the same rules that we’ve been playing by all weekend, which is this is an active Q & A. There are no prepared statements, or maybe they’re prepared statements, but they’re not going to be an (ph) answers, but they’re going to be an answer to questions I pose. We’ll try to leave as much time for your questions as possible.

We have six, if you’ll avoid — if you’ll forgive me — the association, we have six high octane discussions. We have a supreme allied commander, we have a Polish defense minister, we have a Turkish parliamentarian and advisor to the president. We have a Canadian foreign minister, we have a European commissioner, and then we have one of the leading private sector experts who will keep us all honest and tell us when we’re getting too wonky. I decided to write my own joke this morning to start the panel. An advisor — and therefore please laugh when I indicate that there’s a punch line. An advisor walks into Barroso’s office and he says, “In January, I’ve got some good news, but I’ve also got some very bad news.” And, Barroso says, “Well why don’t you start with the bad news.”

And he says, the Russians are at it again; they’re threatening us and this time I don’t think the Americans can help us and Barroso says, well that’s just terrible. What could possibly be good about that and he says, well, they’re not using nuclear weapons, this time, they’re using oil pipelines and Barroso says, well that’s a relief. He says, well no, there’s bad news on top of that and he said what’s that? He said they’re far more willing to use them.

So, energy security; let me quote Robin West, who I talked to in preparation for this; as you know, all journalists’ knowledge is derivative. The — and he defined — we defined energy security as reasonable supplies, at reasonable…

ROBIN WEST, CHAIRMAN, PFC ENERGY: Reliable supplies.

KEMPE: Reliable supplies at reasonable price.

WEST: That’s reasonable price.

KEMPE: And Robin says, so how do we define energy insecurity?

WEST: Unreliable supply at unreasonable cost. KEMPE: Unreliable supply at unreasonable cost, which is where we are now. We’re in an age of insecurity, unreliable supply and unreasonable price. To say the very least, our subject is topical: Gazprom CEO Alexei Miller this week threatened to redirect gas supplies aimed at Europe to Asia. This is in answer to a Europe that seems to be up cooking countermeasures, both Gazprom’s acquisitive instincts and also, was pressing Russia to sign the energy charter treaty that would’ve required Russia to open up its pipelines in much the same way that telecom companies have to open up their bandwidth to competitors.

President Putin, essentially, supported him as Russia moves to consolidate and expand its de facto natural gas monopoly in many parts of Europe. Last week as well, a couple of days ago, Secretary of State Condoleezza Rice was in Ankara and she was calling on Greece and Turkey — we’ll come back to our Turkish discussant about this — to reduce their energy dependence on Russia through advancing projects that would rely more on Azerbaijan. If I’m not mistaken, Dick Cheney is off to Kazakhstan this week, also in a move to try to break the lock on central Asian gas that the Russians seem to have.

George Soros, in the world’s second most important business newspaper, wrote this week that the planned IPO for the oil company, Rosneft would be a further threat to Europe’s oil security. So, in short, I realize this panel is not about Russia. This panel is about the broader question of energy security but it was Russia’s cutoff, over New Year’s, to Ukraine that sent a wake-up call, across Europe, though many people say after that wake-up call a lot of people are nodding off once again and it has prompted a great a deal of emergency meetings, a green paper and all sorts of action, so that’s where we’re going to go. We’re going to discuss this. We’re going to, where possible, come up with specific transatlantic ideas that are, actually, implementable, realizing that we have a deadline in front of us, which is a July summit in St. Petersburg, hosted by Vladimir Putin, curiously, on a self-chosen agenda of energy security. So, General Jones, what I’d like to do if I could, is start with you. And, perhaps you could give us a view of how concerned you think Europe and the U.S. should be right now about energy security, have we entered the world of Robin West’s definition of energy insecurity? And, I understand you’ve been doing some thinking of NATO as it looks as though political leaders may call upon you to go out of area in a different sort of way. Here, it would be out of subject area, more into the area of energy security. I wonder if you could tell us what you think the military can provide.

JAMES JONES, SUPREME ALLIED COMMANDER EUROPE, COMMANDER OF U.S. EUROPEAN COMMAND: Thanks Fred. Just a couple of points by way of general introduction. First, the subject of energy and energy access and energy security, in fact even reaching over to the aspects of the defense of critical infrastructures has not moved to the North Atlantic Treaty Organization. You can find references to it as far back as 1949, again in 1970’s, numerous references to the importance of access to energy and the protection of our infrastructures. Again in the 1999 NATO strategic guidance and concepts recognizes the need and importance of energy security and provides a renewed emphasis and further development of an alliance response and capabilities to deal with this issue. And, the lead committee in the North Atlantic Treaty Organization on such issues presently is found in the industrial planning committee.

Now recent events and realistic scenarios for the future involving energy highlight, I think, a very relevant role that NATO could play in a collective and an emerging collective security issue that could serve as one of the key anchor points that united the alliance and its member nations and also partner nations and other nations who wish to have a collective security relationship with the alliance on this very important topic. Now the nature – the nature of the role, at least militarily that the alliance could play is certainly multi-faceted and it ranges across the gamut from proactive measures to reactive measures, and I’ll talk about a few of those.

First, the aspects of energy security as an issue have to be inclusive of a, from an alliance perspective of national sovereignty issues obviously and their responsibilities. It has to take into account the role of other international organizations, the European Union, for example, and others. And, the recognition I think that for the moment, that energy security and the protection of critical infrastructures is a response to the challenge posed by asymmetric terrorist threats, but doesn’t have to be limited to that in the future. But, at the moment I think that’s where we are, this could change rapidly.

And finally, NATO’s possible roles could include – could be inclusive of the defense of critical infrastructures as well as the security transit of products from putting (ph) nations through transit nations and to consuming nations. And, we also should be aware of the impacts of energy requirements through ungoverned spaces which is a topic that also has to be addressed, or poorly governed spaces. Alliances — the alliance’s military capabilities — which could be leveraged include really all aspects of our combined forces land, sea, and air, as well as, recently developed capabilities attendant to the emerging NATO response force; the developing intelligence fusion center that has – is really in its formative days but will, for the first time, provide the alliance and its forces with strategic intelligence, organic to the alliance and the range of issues that we could address militarily, obviously, extends from capacity building to consequence management. Maritime domain awareness, in matters pertaining to the secure transit of energy, is probably, the most readily available and immediate aspect of our capabilities, which could be developed quickly into mission status. The use of special capabilities to assist nations, where requested, in addressing the adequacy of the defense of critical infrastructures and security measures; training remedies assistance in the integration into broader security frameworks, whether they be regional or global; the exchange of information and intelligence; these are elements of a broad inventory, which NATO can bring to the table.

KEMPE: Now, General, I wonder if you can give me three specific examples of — or two specific examples — of what that means NATO would do that it hasn’t done before. In other words, are we talking about satellite intelligence over the Port of Rotterdam to make sure nothing’s going on? Are we talking about putting a maritime position in a specific place and then, finally, are we talking about something I’ll talk to Radek Sikorski about a little bit later, which is a Polish idea of, I’m probably overextending it right now, of a sort of Article 5 answer that when one of the members energy infrastructure security is attacked, all of you are attacked; is that what we’re talking about or can you get that specific?

JONES: Well, within — it’s the general context of things but to be specific, for example, it’s quite within the capacity of NATO to assure the security of transit of petroleum products, oil, LNG, whatever from the port of origin through the maritime transit sea lanes, into the national waters of a receiving country. That is something, particularly, if you look at the incident surrounding the Horn of Africa, involving piracy on the high seas; in the Gulf of Guinea and the work that probably needs to be done, in certain ports of call, in order to avoid an asymmetric terrorist attack on an LNG tanker, for example, in a port, these are, so, there’s all aspects of training, surveillance, escorting in the maritime domain that could be brought to bear. There’s also many capacities that NATO has with regard to using its aviation capabilities, which is oriented towards the protection of air space but with slight tweaks to it, you could also factor that capability into the defense of critical infrastructures, as well.

KEMPE: Thank you, General and the Gulf of Guinea will be, in the summer, the first live exercise of the NATO reaction force?

JONES: Yes, in the Cape Verde Islands, off of West Africa.

KEMPE: And very much energy security.

JONES: Very much energy security, correct, yes.

KEMPE: Minister Piebalgs, I wonder if you could take a look at where we are. Four months have passed since the Russians cut off gas supplies to Ukraine with the knock on shortages elsewhere in Europe. Lots of discussions, you produced a green paper. What specifically has changed in how Europe’s — Europe and Europeans view energy security and then secondarily, what specifically has changed in policy since then, or have we not got that far yet?

ANDRIS PIEBALGS, EU COMMISSIONER FOR ENERGY: Thank you for that, Fred. Perhaps I will start with other aspect because it’s real (ph) speaking about Trans-Atlantic link (ph). If you see, we are by far the biggest oil consumers. The United States consumes 25 percent of world oil, EU 19 percent, so all both of us, 44 percent of all are consumed by us. And, sometimes some people try to play us each against each other.

I would just mention our good friend Alexei Miller, when he spoke in front of EU Ambassadors, he said look here, American’s are visiting me, they are speaking about Stockman. And, I feel perhaps they have encouraged our bad relations just to get the company’s instrument (ph) field and I think it’s what we should avoid, I think kavoi (ph) could be of common interest. First of all it’s market, we are both really believe that the market provides the best tantra. For market provides the best tantra, they should investments should be made. So what we all should work for such a necessary investments in oil and gas are being made, and it’s not only enough.

The other issue is resilience, we have international energy agency, we could cope with emergency sufficiency soil (ph). But can we cope with emergency situation in gas, and this what we have mentioned about Ukraine. This is interesting point, because for gas we have developing market, we are competing for L and G (ph), we will continue to compete through L and G (ph). Perhaps we should be saying that the market organization could help avoid some difficulties with the supplies of the gas.

Then he could also one additional issue because we know that oil and gas resources are dwindling, at least for us North Sea, not providing what it has provided for. So it’s new technologies for carbon secrusticatin (ph) we will help (ph) carbon-free glance (ph) soon in the European Union. The same as our interest, the Chinese and Indians do the same. Hydrogen, wind, water, power, we have a lot of things that we could develop.

And last but not the least, what the general was speaking about. Now we have a reasonable amount of fallen gas transported through the seas, but they are clear bottle necks that (INAUDIBLE) box (ph) follows. And, with each years there will be more energy in the states. So any accident could provoke a lot of difficulties in the market, it’s the easiest is the thing, but it could be more difficult conditions.

Then eco (ph) also is about fives, Georgia is good example, while just five was blown up during the winter and it created short shortage of power and heating. Georgia is not companies (ph) they survived, but it’s really difficult. And the outside parties (ph) particular comes through the market. Market should be diversified. So that Russian’s are saying that they will supply China, I am not worried about because they think as long as the market is, we should diversify also productive countries should diversify.

But, we should look upon that our energy world is not so much by electoral issue where you can just saying (ph), OK I will buy that from you politically because we should look for that market prevails. If we will manage it, then we have a secure environment, but definitely general’s help is needed. The authority (ph) but inalls (ph) is critical infrastructures are provided and one particular issue that I think we cannot – we have a lot of attention through Iran but its nuclear energy. Speaking of nuclear energy provides a good answer. I would say yes, for the countries that already have nuclear technology and develop it but if nuclear energy technology would be widespread through the world, then we will have some difficulty because all the Iranian resources also are limited and you need to reprocess nuclear fuel, so then, nuclear fuel starts to travel through the world. What are the consequences? It’s difficult to predict but its, clearly, global challenge. We can’t just say, look, country X, you can’t use nuclear energy because it’s not safe for you but its safe for me, so we should think how to do it in a very secure way, so there are a lot of issues, Fred. I touched some upon it but I think these are critically important.

KEMPE: Just one follow up, I spoke with Georgian President Saakashvili yesterday and I said to him, what would be the advice you would give to the European Union in dealing with Russia on energy and his advice was one word. It was hurry and his point was that Russia’s bottling up central Asian resources, Gastroc (ph) is. It’s expanding its hold in the former Soviet realm of critical infrastructure and it’s also using its deep pockets from windfall profits to buy up assets in broader Europe and so, these are great long-term plans but what do you do now, vis-à-vis Russia and what do you say to Russia at the G8?

PIEBALGS: First of all, Russia is a very complex issue and I think whether you hurry or not hurry, we see the consolidation of oil and gas industry Russia, such as a relative. You should look up on it. What we should do (INAUDIBLE) Russia’s necessary investments, encourage necessary investments in upstream. Second issue is still to get our good friends to accept that third party access to the pipes is the best way, again, to provide for it, so we give up pipe monopoly. It’s very difficult. It will take time.

KEMPE: What’s your language on them to get them to accept that? Its very — you’ve said that energy (INAUDIBLE), they’ve said who are you kidding; we’re not going to do that. What is your leverage? PIEBALGS: Its not (INAUDIBLE), we are discussing the transit protocol, so we are working on it. It’s not one of the issue because I see their point. For them it’s very easy, if you just have pipe monopoly, then somebody that would like to pipe, the gas comes through (INAUDIBLE), so if its not, then its diversification. I think what was well done; it was backwards (INAUDIBLE) pipeline. I think this is the way how to proceed because if you build alternative, even sometimes expensive, then the ones that has monopoly has (INAUDIBLE) sink it but this one other aspect for Russia is important and I think on this we are progressing rather well, its energy efficiency.

In power generations, they use around 150 bcm of gas. One-third of it or a bit more or bit less, 40 billion, could be saved easily by using new technology for power generation. I don’t speak about this energy regulation by windmills but it makes 40 billions that could be exported, so in a way, it’s a good question also for Russia, not only in the west, in the upstream but also, to make energy efficiency measures that helping bulk gas in the stream, so Russia is one of the biggest suppliers of energy and we are respecting it but we also are keeping the principles that we would like to have and we know that they seek independence. Russia would, as well, like to sell their resources, as they would like to buy them.

KEMPE: Radek Sikorski, as you know, the European Union is not always the most unified body in dealing with Russia. You have made a proposal that the European Union or your government, I believe, has made a proposal. And, I wonder if you could tell us a little bit about that because if I’m not mistaken, it really is sort of a proposal to be all for one, one for all in terms of energy security. Could you tell us about that and what sort of response you’ve had in the European Union to this proposal?

RADEK SIKORSKI, DEFENSE MINISTER OF POLAND: Sure, but I think before we talk about solutions, let’s have a clear picture of what’s at stake and what the situation is. I recently heard an advisor to Tony Blair describe their approach to energy at number ten. When Tony Blair switches his light on he — the electricity is supplied by a French company. When he makes his toast, the gas is supplied by a Norwegian company. When he takes a bath, the water in the, in the tap is also French, I think.

So there’s on the one hand, the paradigm of competition of the regulation of multiple owners of assets and of the energy sources. And, if this is the world we were living in then we would be, we should be very happy that Russia, which has the energy, we need it, Russia needs a lot of money to rebuild its country to invest in its resources that would be perfect compatibility. But, I worry that on the one hand in Western Europe, in the European Union we have the paradigm of trade, of deregulation, of market efficiencies. But, on the other hand we have the paradigm of stock evoke the lending it’s paradigm upon of using energy as a strategic asset, as an asset of geopolitical influence. And, this is not theoretical; I was like you Fred, a journalist in my previous life.

And, I was in Lithuania in 1991 and I remember the rows of cans for petrol, because Lithuania was subjective at that time to an oil embargo to prevent it from becoming an independent country. And even before the recent Ukrainian gas cut off, we in Poland got cut off in 2004. Russia was cutting of Belarus in order to force President Lukashenko to sell his country’s transit infrastructure to Russian companies. We got cut off down stream, Germany got cut off, and the curious aspects of it was that that Germany was told that there would be a cut off, we weren’t. So this is the reality, that if one side uses the paradigm of trade, the other side uses the paradigm of power. And, the other side has a lot of money to buy up our sets and to extend its influence then it’s not difficult to guess who is going to prevail.

And, what’s also worrying is that these investments are usually followed by political influence. We’ve seen this in Bulgaria, we’ve seen it in Armenia, we’ve seen it in the Baltic states, we’ve seen it now in some western countries as well including the United States. With stage owned energy companies, what eventually follows is lobbying for political influence of sometimes quite sinister nature. And so, now is the question what do we do about it?

KEMPE: Well Radek, let’s ask about that. I mean you said it’s not hard to guess who’s going to prevail. Russia is a defector monopoly in many parts of Europe. There’s also another word that is monopsony, monopsony means a unique consumer, a single buyer. And, in the gas world where you’re connected by a gas pipeline, a unique buyer actually has unique leverage because the Russians for all the bluster can’t really change their direction that quickly and Gazprom relies on your money and will for some time. So, what needs to happen is the European Union coming together. As I understand it, you made a proposal, your government made a proposal along those lines and you were told that the language of the proposal was a little bit too anti-Russian, and it was a little bit difficult to get through. Can you tell us about that proposal, which I do think was a little bit in the direction of collective defensive energy assets, or collective response?

SIKORSKI: I’m told that the world Russia doesn’t even appear in the proposal. But, yes we want to buy the energy but we don’t want monopolies, we don’t want blackmails. So I think what needs to be done is what my predecessors said, we need to invest some money, we need to get beyond thinking of it in purely market terms because energy independent, independence costs. And so, first of all we need European solidarity on this issue.

Secondly, we need to develop infrastructure links. I would favor infrastructure links across Ukraine to the Caspian Sea basin that would be both useful, both in terms of getting to new sources of energy, but also ensuring up Ukraine’s independence — independent stands. We also need to commoditize gas, because you’re absolutely right Fred, that the problem is these pipelines, that’s what gives people the ability to cut off the tap. If gas was like oil, internationally traded, for example, as L and G, then it’s just the question of price, then at least the hard security aspect is — would be eliminated. And of course we need reciprocity, if we are opening ourselves to investments and to taking over assets on the territories of our countries, we would expect some freedom to invest and some freedom to transport the product in our part in the country.

KEMPE: Finally, and just briefly, would it be useful to you if Germany would renegotiate the Schroeder pipeline?

SIKORSKI: Well, you’ve touched on a sore point. You know, last year I was in Gdansk, we were celebrating in Poland the 25th anniversary of solidarity. And, the German President, knowing where he was, solidarity at the place where the second World War started – declared that never again will Germany make deals over Poland’s heads. And, he got a loud cheer and an ovation. Ten days later, his chancellor signs a deal without consulting with us to build a pipeline on the bottom of the Baltic Sea which is $6 billion more expensive than a pipeline that has already been contracted across Poland where all the infrastructure already exist. And whose main purpose as the Russian ambassador to Belarus declared only last week was to be able — is to be able to deliver gas to Germany without having to go through Belarus and Poland. And, to be able to cut off Belarus and Poland to presumably force us to do what we would otherwise not do. So the question is why would our ally and partner do such a thing? And, we were told that it was a purely commercial deal. We now learn that actually, there were government guarantees involved and that Mr. Schroeder is on the board of the company.

KEMPE: Have you asked — we have to move on the next panelist but have you asked Angela Merkel to renegotiate this and what has her response been?

SIKORSKI: We’ve asked; she’s refused.

KEMPE: Yes, thank you. The — Robin West, bring us into the real world. It sounds like we have this strange mixture of business and politics with politics being quite dominant and I wonder if you can tell us, as a businessman, oil is a business, what we are missing? Are there solutions on the business side to these political concerns? Are, what solutions are there to oil insecurity from your standpoint on the business side?

ROBIN WEST: Well, let me — Fred, you and I talked before and I think there are a couple things to keep in mind; first, my sense is energy is one of those words that’s a little bit like love and finance. It means different things to different people and you know, when you talk about energy, we’re actually talking about oil, which is very different than gas, which is very different than nuclear, which is different than coal, which interests me, its never been mentioned once in the last 1.5 days and it’s a very important source of energy and that in the United States, we have a sense there’s an energy crisis but its really about oil and the transportation sector. In Europe, there’s a sense there’s an energy crisis but it’s really about gas and the electricity and power sector.

The second point is, is that energy in the end is a business. It’s about investment. It’s about markets. It’s about capital flow. It’s about resources. It’s about technology, so in the end, a lot of times, politicians like to, you know, point with pride and view with alarm and make speeches but some of these things when they hit the hard reality of the market, a lot of it doesn’t work. I think, for example, one of the areas that — there’s a lot of talk about Russia here and I think there should be a lot of talk about Russia but I would argue that really that Europe should be more concerned, not about what happened on the 1st of January, when the pipelines were shut, really, because of differences between the Ukraine and Russia but rather, what happened when the temperature fell to minus 34 below zero and Russian gas supplies, the pressure in the pipes went down. Russia has enormous resources but the investment isn’t taking place in Russia and what kind of partner is Russia going to be long-term? Can they physically supply it? Has the investment, these sort of pesky details, has this been taking place and the answer’s no. Andris Piebalgs made a very good point that I think Europe should be trying to help Russia consume gas more efficiently, so that that gas can be freed to come to the West. I mean Russia has big, internal problems and I think one has to be very careful with politicians. In the United States, for example, one of the bright ideas politicians have had, is ethanol. This is a kind of a fuel made out of corn. It’s, basically, heavily subsidized and it pleases the farmers in the Midwest and they said, well, this is a great way to solve the gasoline problem; we’re going to bring more ethanol to the market. They mandated it. The farmers were delighted but there are these little problems. For example, how do you physically get this stuff to the market? It’s highly corrosive. You can’t move it in pipelines. We were calling the Energy Department; well, do you put it in regular trucks or hazmat — hazardous material — trucks? Well nobody knew. And, if you put it in hazard materials trucks, there aren’t enough hazardous material drivers to drive the trucks. So as a result the whole program has been sort of scrapped this year. And, I think that President Putin going to China, this is on the front page of all the papers this week, you know, and he’s going to sell more gas to China and he’s going to turn his back on Europe, that’s nonsense. First thing, where’s the gas going to come from? That’s not clear at all. Secondly, and we’ve done a lot of work on China. The Chinese are not going to pay as much for the gas as Western Europe pays. So, I mean I think it’s very important to, again, there’s some sort of brutal realities of the marketplace which kind of tend to make it a little tougher for the politicians.

KEMPE: Well, now you’re going to do something that we want to do at this meeting in general, which is — I’ve talked to Robin ahead of this, he has a plan for the G7 plus China. To increase production to such a level that we could reduce prices over a relatively short period. So I wonder, I wonder, as part of what I think we all should be doing here rather than just having a gab fest, which is great and the networking and all of that is incredibly valuable, is to come up with specific actionable ideas. What one should say to Russia, the G8 that would make a difference. What one should say to Germans about this router (ph) pipeline that should make a difference. But, let me start with Robin, and tell us how we could suddenly bring much more oil onto the market working together?

WEST: Well Fred, I don’t want to overstate my proposal but one of the things that’s happened in the oil business as opposed to the gas business is that the oil markets worldwide are very tight. And, there’s very, very little excess production capacity and if something happens in Iran, there’s big trouble and prices will go to over $100.

So, my theory is if you look around the world, you’ll find that there are places where due to politics and insecurity, that there’s existing production which is shut in. And, the first place I’d look at – and the first place I would suggest that the G7 countries, including Japan, the big consumers try and find a way to work together, not on big policy issues, but on a specific program. For example, in Nigeria where you have a very small group of people, it was called Mend, they are — they maintain that they represent the oppressed of the Niger Delta — now the Niger people of the Niger Delta are oppressed. But, Mend are a bunch of crooks and they’re heavily armed with very sophisticated weapons and it’s really a security issue and it’s also a development issue.

But, my proposal would be for the G7 countries to set up small offices that can cut across their own governments to bring the resources of their governments and also the good offices (ph) in it’s a network, so they could get together. And, the first place I’d look at is Nigeria and are there ways to deal with bringing the production in the Niger Delta back? Dealing with the Nigerian government, that bringing practical solutions, securities solutions, development solutions, not big policy issues. But, specifically to do that, and if you could bring the 650,000 barrels of oil that’s in the Niger Delta, if you could bring that back on the market, the price of oil will go down substantially.

But likewise, elsewhere in the world there are places where, for political reasons, particularly when prices get high, people are fighting over the money. There are domestic political areas that I think, that again, recognizing the sovereignty of countries at all times, it’s their oil. But, to help the governments bring their production back on. I think this is a doable proposition and I think that this could make a difference quickly. KEMPE: Given all the caveats, General Jones, you’d have to get political instructions; you’d have to get Niger to – Nigeria to agree to it, would you think that this is a good thing for NATO to get involved in, this sort of opening up of oil production?

JONES: Well, obviously that’ll be a political decision and not for me to make but on a military scale, there are a lot of things that can be done to help the security aspects of the delta. There’s one chief executive of an oil company, said, his company loses $1 billion a year in bunkering of …

UNIDENTIFIED PARTICIPANT: …out of the pipeline.

JONES: Exactly and theft from their pipeline, $1 billion a year for one company budgeted annual loss, coupled with the piracy, the threats to the gas and oil platforms, maritime piracy on the high seas; there’s — quite apart from whether NATO does it or not — there’s military missions there involving security that could, certainly, be helpful in bringing stability to a region that is volatile right now.

KEMPE: And Radek Sikorski, would you give him the troops for that sort of a mission? It’s not always a simple thing for General Jones to get member countries to …

SIKORSKI: Oh sure …

JONES: …all over the world.

KEMPE: That’s true. I take that back.

JONES: Its one of the things I love the most about my job.

SIKORSKI: Well, we just agreed to send a contingent to the Congo. We, also, have troops in Iraq. Remember how we were going to liberate the Iraqi oil that was groaning (ph) under Saddam’s regime and bringing it to the market? That hasn’t quite happened, has it?

KEMPE: Not entirely. Let me go to our last two discussants and there’s, actually, a reason I’ve left them until last before we go to the audience and that’s because they represent two important pieces of this picture. First of all, a Canadian Foreign Minister representing a country that actually produces a lot of energy and can have part of the answer and then, of course, my colleague from Turkey, who represents a country that doesn’t produce oil but could be an increasingly important corridor and has been appealed to by Condoleezza Rice to help us diversify from over dependence on Russia, so let me go first, to you Peter MacKay and I wonder if you can talk to me about what role – your resources are a long way away, first of all, what role can you play, as a producer and I think you may want to give just a quick statistical view because I think most people, in the room, don’t realize what a big producer you are and if you have a single transatlantic proposal that you think would help energy security.

PETER MACKAY, MINISTER OF FOREIGN AFFAIRS, CANADA: Well, Fred, I appreciate you point out that we are a major and energy producer and you know, the short answer is send money, not troops. We are very much a major, major supplier, right now, in the world. In fact, we are the second largest energy producer, with the largest oil reserves, second only to Saudi Arabia, right now and we have regions in our country, like the oil sands in a place called Fort McMurray, Northern Alberta that is producing enormous, I mean, absolutely enormous amounts of oil. The process involved is somewhat more complicated than simply taking it out of the ground and producing it, in such a fashion. We, also, have undersea gas reserves, currently, on both coasts but its more in production, now, on the eastern coast, the eastern seaboard around Atlantic, Canada, Newfoundland and Labrador, Nova Scotia; both in production now. In fact, we have a pipeline that’s running down the eastern seaboard into major markets in New York and New England and I think it surprises a lot of people when they hear just how much oil and gas production is going on and yet, it is a diverse economy.

We have different types of energy that are, also, I think, in the future going to be extremely important because they’re clean energy sources. We have a very large production at a place called Churchill Falls, it’s producing hydroelectricity. Again, a huge supplier, 99 percent of our energy exports do go to the United States of America. And so, in the Trans-Atlantic dichotomy, I guess one of the questions becomes how do we get it to market other than the market of North America?

UNIDENTIFIED MALE: I think Commissioner Piebalgs are saying, well what does this to for me, right? So what does this do, what does this do for him?

PIEBALGS: That’s (INAUDIBLE), because he brings some oil and gas in the market and helps us EU. But what I would like to mention, and on particularity I’m not big on all oil sands because when you use oil sands you produce a lot of CO2 (ph) as well, that is well such a case. And, I think what is we thinking about oil sands I’m not complaint (ph) again to set as well. I think we should try to use, capitalize on new developments on the new goal (ph) energies and energy efficiency because we have a lot of consuming, our consumers in the market. And, if you use model as the same message for promote the market, then the investors in both sides could benefit a lot because if you have wind energy experience and you do they saying (ph) on EU side (ph), why should not you be able to do the same in the United States or particular manager efficiency at landis (ph) standby fuel consumption. This is also a part, not only what brings on the market oil and gas and that’s because it’s really costly and also it’s that also CO2 emissions they are important. But, they should look upon that as a biggest consumers, we should also some necessity to think how to ease tension on the demands side as well.

MACKAY: But there’s also a politics in practicality here, and who do you want to do business with? Who do you want to involve in this very competitive market right now? The rising tensions and corners of the world, where do you want to go for the energy source and what price are you willing to pay? And, I would suggest that we’re a better place right now to do business than Venezuela or Iran, for example. And, to that extent, you know, there’s obviously going to be factors around …

KEMPE: I hear consensus in the room.

MACKAY: …you know, so those oil reserves, granted, you know, there are production costs associated with getting it to market. I would suggest that you look no further than Canada when it comes to some of the challenges that we’re going to have in the future for oil and gas supply.

KEMPE: Well after your intervention yesterday, I think you saw that other than General Jones, we’ve kept any representative of an American governmental organization off the panel to shine the light on Canada. What now is your Transatlantic proposal? Is there, is this a good idea to set up, you know, we don’t want a whole new infrastructure, but someone in each of the major offices of G7 countries of – and broader. Of NATO countries perhaps who, whose job it is to increase production and to go after things like the bunkering General Jones, bunkering where they’re siphoning, you know, pirates are siphoning off oil, going after the Niger area where you have stuff locked in and there are probably seven or eight other areas we could quote like that. Do you embrace this, or do you have a better idea?

MACKAY: Well, you know, some of it is practicality, some of it is the market forces and, you know, stability and security of the, of the energy market is the best guarantee in the global marketplace. And, having open transparent market practices, and this is what I think we have to encourage and in fact put some pressure on Russia at the G8. We have to encourage the competitiveness and the market forces to kick in. L and G was mentioned, for example. This, I believe, is going to be a growing source of energy and the way, in which, we’re going to be able to move energy sources around the world and get some of the far-off markets into the mix and so, natural gas, I think, is going to become increasingly important and Russia, again, I stress, is not the only source of natural gas, although clearly, they have the largest piece of the marketplace, in Europe, right now.

KEMPE: And bigger LNG terminals would also give Canada a larger share of the market potentially.

MACKAY: Well, we’re not opposed to that.

KEMPE: Egemen, I wonder if you could round out the discussants. The – as you know, there are all sorts of reasons that Turkey ought to be a member of the European Union but the one that has not been talked about, as much, is that your aim is to make yourself an energy corridor, hub and an aggregator. I wonder how you’re going to do this, why you’re going to do this but within that is your answer to Condoleezza Rice, yes indeed, we’re going to do exactly what you want us to do, as good allies and reduce our dependence on Russia and diversity and we’re going to do it quickly, so start with Condi and then go – Condoleezza Rice and go to the question more broadly of what you want to make of Turkey and the energy field.

EGEMEN BAGIS, MEMBER OF PARLIAMENT, TURKEY: Well, recently I read an article by one of Turkey’s prominent columnists, (INAUDIBLE), who used the Turkish coffee metaphor. Turkish coffee I’m sure most of you have heard of and have tried but we don’t grow coffee. We were introduced to coffee when we went Yemen. Its just our cooking style that gave it the name and it became very popular throughout the world, so we think being geographically situated at a place where we are the only option for Northern Iraqi oil and gas to reach the world markets, being the only country for Russian oil and natural gas to reach the Mediterranean that gives Turkey, already, a very important advantage and with the BTC pipeline finalizing, the first tanker load will be this May and in July, we’re having a big ceremony and other projects, such as, the (INAUDIBLE) crude oil pipeline, which is going to bring, mainly, the Cossack (ph) oil from the Black Sea to the Mediterranean and other future plans with the Baku-Ceyhan oil line. Turkey is already a hub but we are planning to increase it. It’s in the benefit of the West and the whole world.

People in Europe have a tendency to forget Turkey’s contribution to their safety, during the Cold War but that sense of responsibility is still in the genes of the Turkish nation, so we think we can provide a very important act, in terms of diversifying, not only the transit routes but also, the supply of natural energy. Seventy-five percent of world’s energy resources are located around Turkey, in Middle East, in Caucasus, in Russia, in some parts of Europe and 56 percent of that is consumed by OECD countries, so Turkey is a natural hub and Turkey’s EU membership, as you mentioned, is just another reason and sense of security of Europe that they’re future energy sources will be transmitted through a very secure route.

KEMPE: You also have, however, a very close relationship with Russia and I can imagine that after Condoleezza Rice’s speech last week, in Ankara that there was some communication, as well, from the Kremlin and who can play hardball when it comes to energy politics. What is Russia saying to you because you also have a very close energy relationship with Russia, so the U.S. is saying, make yourself more independent of Russia, Russia is saying we’ve been a reliable supplier, we’ve been — we have a very close relationship with you, why would you ever want to do that, what’s your answer to both?

BAGIS: Well our answer is tricky. Historically has played a very important role of being a bridge between different religions, civilizations, cultures, concepts, understandings, and we will do the same in energy. Just like in – while being a candidate for European membership, at the same time we have the secretary generalship of the organization of Islamic confidence. Just like we brought together the foreign ministers of OLCM (ph) EU, just like our efforts to contribute to the peace process in the Middle East and the border and Middle East in the North African initiative, Turkey has always played an important role in bringing different notions to understand each other through dialogue. So …

(CROSSTALK)

BAGIS: …and we think we can – we can also play a role in terms of curbing the differences.

KEMPE: And, so in the oil field Turkey will hedge its bets? In the – in the gas business, Turkey will hedge its bets?

BAGIS: Well, Turkey is going to be important in the energy sector, just like it is in the political..

PIEBALGS: (INAUDIBLE), the danger is not so much that the Russian gas is piped as a retail (ph) gas is part (ph) of Cossack gas or Iranian gas or Egypt. It’s a very important that on critical places where infrastructure, it’s a connections, it’s not broad (ph). And, it could be then that only politically, most of it usually happens at some monopolagis blocks (ph), and that’s the best price of it. Or of our televisions, and I think this is very important saying that all investments in the pipe infrastructure, and also access down on free market conditions. I think this is very important to keep all the time as a cornerstone of that transit of gas via Turkey. KEMPE: Thank you Commissioner (ph). Let me go to the audience and I’ll take as many questions as I can. Great, let’s start here and then one, two, three, we’ve got four initial questions, please.

MISHA GLENNY: Hi.

KEMPE: Yes, if you could identify yourself as well.

GLENNY: Yes, my name is Misha Glenny, I’m currently writing a book, Transnational organize crime and globalization. I’d like to point out that the energy sector is the more lucrative sector in which international organized criminals in the country (ph) involve the high rolling end. Most of them associated with various security services around the world as well. And while I would agree with Robin that Mend is a criminal organization, a bunch of thugs, and not an authentic representative of the aspirations the usual people in the Niger Delta.

I would also like to point out that the Nigerian elite and its government could also be characterized in this way. And, that the bunkering that is going on is actually undertaken by members of the Nigerian government and their, and their associates. And that while they are making hay with phenomenal amounts of money that they’re – that they’re making. Nigeria has a 60 percent unemployment rate, and in the last ten years male life expectancy in the country has been reduced from 54 to 44. And, that if we were to go around supporting people like the Nigerian government in their struggle against Mend and other organizations we may find that we run into strategic difficulties with Nigeria itself because of the tensions in the country that the larceny of the all reserves in which the government is involved or creating.

KEMPE: Thank you. I think we’ll take a couple of questions and then come back to the panel.

AMIR OREN: Amir Oren from Haaretz, Israel. My question is addressed to General Jones, though, perhaps not in your capacity as SACEUR but rather, as what used to be called CINCEUR but you’re no longer allowed to be commanders-in-chief, so you’re comm use EUCOM or something and I’d like to shift the topic from gas to Gaza.

You have more than 90 countries in your area of responsibility, half of which approximately in Africa, half in Europe and only one small piece of delevant (ph) left after you gave Syria and Lebanon to CENTCOM and, that is, Israel and Palestine. What are you going to do if, under the Hamas government, the Palestinian–Israeli front is going to (INAUDIBLE), do you have contingencies in case Hezbollah and then Iran try to exploit the situation and do you have some concrete proposals for missile defense if, as we heard Senator McCain allude to the other day, the Iranian strike to send their missiles to European capitals?

KEMPE: The rules committee will have to decide on that question, as I think the area does not involve oil but I think we’ll allow it given that we have the person who may have some expertise on this, but John.

JOHN KORNBLUM: My name is John Kornblum; I’m from Berlin. One subject that wasn’t taken up this morning but which is really on everyone’s mind is nuclear energy and the United States has had a moratorium for many years; in Europe, France depends considerably on nuclear energy; Finland is building the reactor but when you talk about it, it always comes down to crushing political problems. Almost every politician I’ve talked to recently says, of course, we need nuclear energy but we can’t do it.

Now, if politicians are talking so unanimously about that it strikes me that this is an issue which might benefit from a broader, shall we say, transatlantic approach. There are things, such as, the storage of spent fuel rods; the reprocessing; the environmental questions; locations. There are some parts of Europe, such as, Northern Finland, which are better suited to reactors than say, downtown Brussels and given that the lead time for new reactors is decades, it strikes me that there ought to be quite a large amount of urgency, also, in a transatlantic G7 context, on how, maybe, we can work together to deal with some of these political problems, which really are burdening politicians. You just need to go to any country, almost and hear how they are, almost, afraid to touch the issue right now.

KEMPE: Zeyno. ZEYNO BARAN: Zeyno Baran with Hudson Institute in Washington. You know, Fred, you started this by reminding us how we’re talking about energy security, especially, after the Ukrainian gas cut off and I was very surprised that we didn’t talk more about gas and especially, gas coming from Azerbaijan and Caspian, mainly, Turkmenistan and Kazakhstan to European markets and my question really is, I guess, to Mr. Piebalgs and to Mr. Egemen Bagis. On the green paper that we discussed there was very little attention paid to the Caspian gas issue and this is something that U.S., of course, over the last 10 years, has worked on yourself mentioned the BTC as a very good example of success in terms of diversifying. Could you tell a little bit more about the role of Caspian gas, given that the Nobuko (ph) pipeline project and the Turkey–Greece gas connection could be two of the key elements to increase your gas security. And then, to make an ambush, I was also surprised that you emphasized a lot, the gas that would come from the Middle East and Russia and only briefly mentioned the Caspian.

Although, when of course you talk about Turkey being relevant to the EU, it’s really, it’s a rule as an East–West energy corridor country helpful in getting other gas initially, and then Eastern Caspian gas to European markets. And, I, of course I don’t know what Secretary Rice said in Turkey, but it seems clear to us looking that from Greece to Turkey, to a whole set of countries, Russia seems to want to block the ability to get Caspian gas to European markets. And, Turkey of course is a critical country here and it’s not really because the U.S. wants Turkey to diversify, it’s also what’s good for Turkey as it’s sub-declared its desire for energy hub.

And then, maybe finally to Radek Sikorski, what do you, what’s your view on Turkish contribution to European gas security if minister, if Egemen Bagis’ view is more prevalent in terms of getting more of the Russian gas via Turkey to Europe?

KEMPE: I already see a couple of other questions, but I think we’re going to do a quick round now. If you could keep your answers short so that we can get to more questions easily. Let’s — with the first question from Misha Glenny, on Nigeria — perhaps I can turn to General Jones and Robin West. And,I think, General, you’re dealing with a lot of countries down there and have really created a much better working relationship with many countries. What role does the level of corruption that Misha is talking about, to what extent does this complicate your efforts in that part of the world. And then, if Robin can handle it, then I’ll come back to you if you wish to deal with a gas efficiency (ph).

JONES: Well I think, I think there is validity to the points that corruption in general that the, that senior government or government level complicates the, complicates the task. I think that Nigeria, other things that I look at are the, that we’re looking at is the Christian Islamic split that’s materializing between the northern and southern half of the country. The distribution of wealth, the fact that the average take-home pay of a Nigerian’s less than a dollar a day.

But, despite being the seventh largest supplier in the world that they have gas lines in the capital. There are a lot of difficulties but the delta is not — it is about Nigeria, but it’s also about nine or ten other countries associated with the region. So it’s a regional problem and all aspects have to be, have to be considered so that, so that you can tackle it. That — as sizeable as the problem is — it’s not one that I think we can afford to walk away from too much longer, Robin?

WEST: Yes, I think it’s important to remember that the Mend thugs that some of the leaders of the Nigerian government are thugs. But, the one important difference is that the leaders of the Nigerian government are not trying to keep production off world markets. Corruption is another big issue, and this is actually an area I would argue that the European and U.S., or really the whole North America, the G7, with the whole banking system has to deal with corruption is at the heart of a lot of inefficiency in the oil sector. That’s a totally separate issue but it’s a very important issue but at any rate, I think its, my proposal’s trying to bring oil to the market now and it can’t deal with all these problems, although, they should be dealt with.

MACKAY: Fred, can I make one intervention?

KEMPE: Yes, please. MACKAY: I think this issue around corruption, this issue around good governance, instability in regions, like the Middle East, all of this has much broader implications around the whole question of sustainable energy. If we can build stronger democracies, if we’re able to bring about peaceful situations in regions — another example of a source is Sudan. If we’re able to bring about more respect for human rights, more respect for the environment, all of this in a larger malaise is an important part that can’t be left out of the discussion around energy.

KEMPE: Thank you; Gaza. Oh, did you want to comment on this?

JONES: No, actually.

KEMPE: I’ll come back to the Caspian, yes. Did you want to say anything about the question on the Gaza?

JONES: No, I don’t want to confuse the audience. I’m here as the NATO commander and it’s a little bit far field with respect.

KEMPE: Yes, understood.

UNIDENTIFIED PARTICIPANT: (INAUDIBLE).

JONES: Again, I’m here to talk about energy security, and if you don’t mind, I’d like to stick on the topic.

KEMPE: But it was a good try. The White House press corps tries it all the time. The — I think that central gas, central Asian gas — we’ll come back to nuclear energy but the central Asian gas question; I’ve heard from so many people that this was a glaring omission, is it not there because it’s just too hot of a potato to handle in relationship with Russia? What is your view toward how proactive the European Union should be in trying to un-bottle central Asian gas, which is essentially locked up by contracts with the Russians that are not of particularly, great financial interest to Turkmenistan and to Kazakhstan, et cetera and so — and we know that U.S. diplomats are already there. Cheney is going; Rice has spoken, so why wasn’t this in your paper? Why — is it not your priority as well?

UNIDENTIFIED PARTICIPANT: I think on paper it’s everything, OK. Perhaps we have been late. That’s true. I would agree but also, energy prices completely different. Situation have been different two years ago. It was not the same urgency what was wrong and we are looking for (INAUDIBLE) very seriously, so what we would like to provide is different alternative for these countries to use as alternative pipeline to pipe gas to the consumers. It’s very important, also, for these countries that follow this way. I will also go to Kazakhstan to see what are their intentions; other, which I definitely will (INAUDIBLE) the gas but we know that Russians will not be happy but it’s not the main reason for us to act. Russia has the possibility to influence because part of the gas consumption in Azerbaijan, actually, coming from Russia, so if Russia puts higher for the gas, as they sell to Azerbaijan and we should be aware they will, definitely, there will be less gas that could be piped towards the European Union, so its more complex but we will build pipe and definitely, the countries will have a chance to pipe the gas from Caspian to the European Union.

At the same time, I think we concentrate too much on gas and I would agree with what Robin West said, coal is important. Coal; we neglect the role of coal. Gas is clean. Gas could be used for gas to liquids. Gas is fantastic but basic generation, with clean coal technologies; with carbon (INAUDIBLE) should be the base for electricity production. What concerns nuclear? This is more tricky issue.

I think Finland is the best example how to deal with it. But, it is on the basis of national sovereignty, yes you need decision on nuclear storage, you need consensus on safety and security and fenalamatic (ph). And, it’s not too easy to make that decision on final nuclear storage. Even France, way prone (ph) nuclear country has some struggle to make this decision, so it’s not so simple. So I see that it’s more difficult, it’s actually quite nuclear for us we’ll be coming from countries where is not such a gluadismalfatania (ph), the mopocy (ph), this is try to use nuclear.

Then. inside our own countries and vancer (ph) the fowl (ph) produce from nuclear in Europe, I think it’s high enough. So if you can keep it, it’s important to keep it, but I doubt that we are able to increase the power generation from nuclear. An additional point is definitely generation for directors (ph) because they solve a lot of issues we are discussing now, and nuclear fusion, let’s hope it also will provide the result.

KEMPE (?): Great.

UNKNOWN MALE #1: Well, coal has been mentioned. I agree with you, it’s a re-vital source. We don’t worry about it so much because we have it. But, I think we see now that energy is a classic transnational European issue. There’s a wide perception that European integration has stold (ph). Well here you have an issue that everybody agrees is a European issue. You can really take leadership on something that’s relevant to consumers, on something that’s, is important to national security. And, on something that the EU uniquely has a clout to make something happen.

BAGIS (?): Yes, I completely agree.

UNKNOWN MALE #2: Well, we know that by year 2030 the world’s demands will increase by 60 percent and the demands increase will continue from then on as well. So we will need all the energy resources from Canada, from Nigeria, from other place (ph), on Caspian and Russia, everywhere, Middle East.

So if you really want to avoid monopolies we have to work together to diversify. And, the transnational Caspian national gas project is very important for contribute to the diversification of the routes (ph) and for also reduce the dependency of tuchmanestanic casackisatan (ph) on Russian territories. Turkey will support all these projects and the Nabuko project is very important. The Turkey–Greece pipeline is not only important for energy, it’s also a very important peace project between two nations that historically have some issues. But, it’s now creating a dependency on each other, and I think one of the most important accuements (ph) over the last couple of years in Europe for the future of Europe and in NATO.

KEMPE (?): The — it’s very interesting, I mean in the, in the world of energy security, talking about pipelines is as sexy as it was talking about missiles in the old days because this is really the point of survival and the point of extracting your economy’s oxygen.

UNKNOWN MALE #3: One of the things to keep in mind is that pipelines aren’t like aircraft carriers. You can’t sort of move them around. And then …

UNKNOWN MALE #4: They’re more permanent.

UNKNOWN MALE #3: …they’re much more permanent. They do tend to hardwire relationships, and this is in gas more than oil, in fact. But beyond that, if there isn’t a commercial underpinning, I mean, I think that over time the Russians are going to put the reality of the marketplace is going to intrude on Russia. With high prices it’s going to take them longer, but in the end it’s either going to be high politics or it’s going to be big business. But, in the end it’s got to be one or the other and I honestly believe business will prevail over politics, but it’s going to take a while.

And pipelines I might add, pipelines are much more (INAUDIBLE), they’re …

MACKAY: And pipelines, I might add, pipelines are much more vulnerable. They’re more static but they’re also, as we’ve seen in the Ukraine, you can cut them off, very quickly. They’re also vulnerable to terrorism, as are some of the big infrastructure investments in hydro but you know, another — we talk coal and I think clean coal technology is going to be an important part of the equation but we’ve also left out wind and solar power, which are also increasingly and particularly, in Nordic countries, becoming an important source for domestic energy.

KEMPE: Great, thank you very much. Let’s take a quick round of questions and then a quick round of answers, please. I think I saw a question here. Oh, it’s so many questions. Make your questions very, very quick if you could, very brief, yes and to the point, please.

UNIDENTIFIED MALE: I just thought that the world’s second most important business newspaper should get in a quick one and I know you meant it as a compliment, Fred. KEMPE: Yes, but keep it short.

UNIDENTIFIED MALE: I will. We always used to see the energy market as the ultimate fungible market where it didn’t really matter where the hell the energy was produced, as long as it got on the market. It was there and that was to everybody’s benefit but the Chinese and the Indians are now acting as if it isn’t. They’re rushing around the world desperately trying to buy up oil supplies for their own producers. Do they know something we should know?

KEMPE: Ambassador and ambassador.

UNIDENTIFIED MALE: Doomsday scenario and I’m an optimist; Russia cut kind some of an unholy alliance with Iran and we’re kind of seeing that on the fringes every day; somebody closes the Straits of Vermouse (ph); Nigeria and its corruption; Venezuela and a situation where the president is throwing rocks at the U.S. ambassador; price of oil goes to $125; what happens?

KEMPE: Californians begin to walk — sorry.

UNIDENTIFIED MALE: Mine’s just — I just have a technical question for Commissioner Piebalgs or Robin or anyone else who knows, how close are we to clean coal technology? I mean it seems just on the horizon; everyone says we’re there; I’m skeptical. I wish were there. How much more will it take?

KEMPE: Clean coal; let me just take three more and then we — I see Bob Cooper, please — oh. One question from that corner, if you could.

UNIDENTIFIED FEMALE: No, I will then you …

PIEBALGS: Anyway, the — I think what the biggest risk for the energy security, is in fact, the fragmentation of the market through a number bilateral deals and this is the tendency, which is going on, also, thanks to the failure of — probable failure — of the Doha around. Well, if it is going on, shouldn’t we think, in a more global way, kind of reform of the international energy agency to deal with all the other forms of energy, not only oil and to have a real dialogue, also, with producers and to think of the security of various forms of energy, so I mean, trying to counter this fragmentation of the market, which seems to me — of the global market, which seems to me to be the biggest threat and then I had a technical question, a specific question to the, to (INAUDIBLE) that is, the — he spoke of NATO ensuring the security of transfer of energy, is it really possible to ensure the security of pipelines after what we see in Iraq and elsewhere and how to secure, really, with a limited (INAUDIBLE) capacity, in fact, the security of sea transfer without organizing convoys and practically, making it more difficult to transfer at increasing costs? Thank you.

KEMPE: Yes, there’s so many questions I’m just going to take a couple of more now and then we’ll see where we go. You’ve had your hand up for a long time so please.

UNIDENTIFIED MALE: I think we talk too much about challenges here, but we didn’t really talk about the opportunities. I see the challenges and there’s a lot of leverage from Russia, Iran, and others only a gender of the west and the opportunity of reducing this leverage. I see the whole challenge of globalization of global warming; Senator McCain has mentioned it yesterday. I see the possibility of a Kyoto 2 as an opportunity. I see higher revenues for Russia, where they can fuel their sort of democracy promotion in central Asia, this is a challenge. I see this opportunity to reduce this — these — higher revenues. I see Europe not having a project for the future, being in a crisis, energy could provide the project around words (ph) to build, you know, a new identity.

So there are lots of opportunities actually around energy. And, a lot of the things we discussed before come together in this energy session. Now my question would be to the commissioner. Why is the commission not focusing this whole innovation program of the EU, the whole budget of the EU on energy, on innovation, on alternative energies, on energy efficiency? This would be a real European project. KEMPE: And let me just – I’m sorry to – so many hands, but let’s just take one more and then I want to go back to the panel.

ARVE THORVIK: Thank you. My name is Arve Thorvik and I’m actually probably one of the few companies in the room who represent an oil and gas producer. When companies start early, we supply ten percent of the gas consumption in the EU, mostly from Norway but also increasingly from Algeria and Azerbaijan. One comment first, very short. That is that I think the energy security discussion needs to be enlarged in the way that Andris Piebalgs started, mainly that it is as much about how we consume energy, how much we do it, or what we do what kind of energy in how we organize the market. That is going to be as important an answer to it as to how many pipelines we have.

And, I feel that this discussion is focusing so much on the transportation part of it, or the pipelines. A new pipeline doesn’t give new gas, you have to discover the gas and the so-called square (ph), the pipeline is not going to bring new gas unless it’s rolled onto new sources. And, I think as somebody’s, some people here, have talked about cold. Give us a good political solution where governments can help together with companies on carbon capture and secretion and, we will open vast new resources of energy in the sustainable manner, at least in Europe and if the U.S. could follow, that would be great.

Final point, and which I really would like to comment on is that all the way from Senator McCain on Friday night until now, I hear a fairly confrontational attitude towards Russia and the gas problem. I wonder whether it wouldn’t make more sense to have more of an attitude or trying to bring them into the marketplace, trying to make them more working to our standards for the energy market. And, taking the collaborative approach rather than the confrontational because Europe is not going to be able to live without Russian energy, thank you.

KEMPE: Thank you very much. Lots of questions, I’ll try to direct them but if you’ve heard one that you want to answer that I don’t direct properly. But let’s start actually with Ambassador Korologos 125 scenario and I think that also leads to Besser Grace (ph) clean coal I’ll talk to you about how it’s a little bit related but the real question really is, we all have been talking about what is, what are, the economic shocks we could face. Is it pandemic? Is it an oil/energy shock? Is it a terrorist attack? You know, when people are weighing which of these is most likely, so maybe, Robin you’re sort of the expert watching the overall industry but others hop in as well, what would, what are the, what’s the likelihood of us getting into an energy shock that would take prices up that large and then the question, what does that change? What is, what impact does it have on us?

WEST: Well, as I said earlier, the markets are very, very tight. There’s very little excess capacity in the world and there’s about 1.5 million barrels a day out of 88 million produced every day, so it’s very tight and if Nigeria went down or Iran went down or Straits of Vermouse (ph) or whatever, oil could go to $125 a barrel. It’s quite a, it’s a very conceivable scenario. What happens when oil goes to $125 a barrel is the demand then collapses and all kinds of things start happening but I would argue that what we should be doing, is we should be doing everything. As my modest proposal, which is to try and find ways to increase production, which would minimize the impact if production is lost elsewhere but I think the other thing you have to do, is find ways to diverse production and I agree, the point is bring more production on but I think the other thing is, is to find ways. We have not talked about consumption and more efficient consumption and I think a huge opportunity’s been missed, is for the U.S. and for all the G7 countries, to start working together for more efficient consumption. To use our market power to pool market power and technology on a really consolidated basis and where the real step change is going to come in, is not going to be on production, you know, its going to be on how we consume it and there’s some step changes that could be made, probably, quite quickly if everyone got together and huge market power was employed.

KEMPE: Commissioner Piebalgs, what does European Union look like at $125?

PIEBALGS: It was just reminded of 1980 of $10 per barrel, now, we have 75, 125; we will survive. If it spikes we will use reserves system, stock system we have. If it will be gradual evolution then we should follow what Robin was saying, we have, also, in United States now advanced energy initiatives. This is the way to proceed because in this way we diminish shock with high oil price, so it is nothing pleasant but we should be able to cope with it that is quite clear and I would mention in answer to the clean coal what was said, yes we have projects now and end of May we (INAUDIBLE) start building – start building the first carbon capture plant in – demonstration plant in Germany but (INAUDIBLE) has announced full-scale, post-combustion carbon sequestration power plant on stream early 2011/2012 so its already full-scale, commercial. Statoil has announced together with Shell on gas, full-scale carbon sequestration with rejection for enhanced oil recovery. We are there, so we made immense progress during one year, so it shows what is the potential for high oil price. When oil price is high and market is there, you get answer or get out very fast.

KEMPE: The — I wonder if you could, also, deal with what I think was in this question.

PIEBALGS: Yes.

KEMPE: And I’ll rephrase it a little bit, we’ve seen Europe not come together, particularly, well on Iraq policy. We’ve seen Europe have the issues that it had in terms of the constitution, how important is the energy issue to existential Europe or to Europe’s existence, to Europe’s effective function compared to these sort of things? Some of have told me this is actually a more important test. Would you agree?

PIEBALGS: I would say I would never (ph) — would say that European identities, energy I would say, its common values, human rights, this is our identity …

KEMPE: But the (INAUDIBLE)

PIEBALGS: (INAUDIBLE) Sikorski said, you never should have visitation (ph), we will have this pipeline. When one member (ph) country decide of the project that not acceptable paza (ph) even not discussion (INAUDIBLE). And, I think now after the March we have done with it. So what was done is done, it was done. But now, we are have (ph) completely different situation.

So we are working together towards well-supplied market — European market — and energy for affordable prices for the European citizens. At the same time, we shouldn’t forget the energies (INAUDIBLE). Energies supplies a lot and now – and someone’s framework can do a lot, but it’s very important also the member countries where it put money for research. And, companies should be doing much more for promoting clean energy. I really believe this is where to go, but it does not mean necessarily that all the seventh (ph) framework should be just doing with energy. Companies are doing a lot if they are encouraged to do it and if this is a clear commitment for it.

And, I think what we have seen in Europe as deposit (ph) is that with carbon trek (ph) and certainly dollar (ph), certainly Euro, but donacarbo. We have achieved this breakthrough, companies see its long-term policy and gain (ph) less. And, that’s why we are moving very fast towards really (ph) Carbon three (ph) energy production.

KEMPE: OK, I think we have time only for a couple of more comments and answers to the questions. I know we had a security question and you had something you wanted to address …

JONES: And just re-comment. Yes, I don’t think we should — I think we should pay attention to the ambassador’s question because at some point if energy devolves into the, kind of the power side of the house of politics as opposed to the market side of the house, the behavior of nations is — becomesunpredictable. And, I think it would be hard to imagine at some level how nations might react if their, if they see their well-being and even their future at stake.

UNIDENTIFIED MALE: I think the high and rising oil prices could be an opportunity as well because we know that the market for all products is not really a free market. It’s determined, it’s affected by taxation and whereas I think that after 9/11 in the U.S., they could’ve put a higher tax on oil which would by now have affected consumption. I mean (ph) that’s a very controversial issue in the U.S., but with these high oil prices, perhaps one of the novitive (ph) ideas I’ve heard recently is to put a floor on oil prices that would be filled with taxation. You know, when oil is at $70 we would not be shocked by a floor at 35 or 40, and that would give the private sector the reassurance that investment in alternative technologies such as gasification of oil and all these expensive installations would pay off. And, we would also gain the resources to invest in energy sources.

MACKAY: Partnerships too were mentioned, my Turkish friend mentioned that, and I think that you’re going to see a lot of that forming up international. Business partnerships are going to take place, there’s an example right now that was brought to my attention involving an eastern Canadian company partnering in Russia, so those market forces will definitely have an impact and we don’t have to reinvent the wheel. Some of the international energy agencies that already exist; some of the forums that are there; you know, obviously, NATO is going to be involved, the UN. We’re going to have discussions at the G8 where Russia, I think, is going to be, essentially, put on the spot to answer some of these difficult questions, so I think the dialogue is going to be very important and I can assure you that Canada’s going to be a big part of that dialogue, as a major energy producer.

KEMPE: Now, I’m going to let the business expert close, here, with a final answer but I’m going to sort of set it up. I get the impression, as we discuss this, we have a couple of things that have — OK, many issues have come up but it goes back to your unreliable supplies, unreasonable price. We’ve talked about the market, as a whole, but we’ve also focused very much on Russia as a geopolitical challenge and these two things are mixed. My impression talking, in this panel, is things could get worse before they get better and that things are happening but they may not be happening fast enough, both in terms of geopolitically answering Russia ahead of the G8 summit and secondarily, coming up with more production, settling down the market before things get, perhaps, even higher priced. So, am I hearing right? Did you hear this Robin? What is your feeling? How would you sum up the situation?

WEST: Well, I think, as I say, we are in an age of energy and security. I think that the — its very important that the politicians and the people in the business recognize some sort of shared goals, what levers they really do have and what they don’t have and to move quickly and I think one of the mistakes we make often, is there’s — in America we’ve done silly things on – we’ve tried to pursue some options, which really don’t reflect the realities of the market but I think that we have to recognize that energy is a fundamental political issue and in America, we consider cheap gasoline a right, not a privilege, a right and that if the politicians don’t find ways to respond, all hell’s going to break loose politically and I think that this is something that — but also, I don’t think we’ve got a lot of time and I think that in terms of the oil markets, we’re in a situation that really is different than we’ve been before and I think that there are going to be tremendous political pressures and there’s a danger that politicians, frankly, will do harm rather than good, in their responses but also, the last point is, is that between the — in the kind of G7 — between Europe and North America, there really are a lot of things we can do together and this is an area where an intelligent agenda between business and government and people really have got to get going and focus on it and focus on it now.

KEMPE: Thank you very much. Now, before I thank the panelists, I just want to end with a quote from President Saakashvili, which I think sums it up. He basically says, we need to find more alternatives or there’s no market. If there’s no market there’s only politics and energy politics is the ugliest politics of all. So, those are our choices. Thank you very much to the panelists on behalf of myself and the audience.