As the political crisis in Ukraine gets worse, the West is talking tough about putting sanctions on Russia. President Obama and the European Union have now put sanctions on Russian and Crimean politicians and a bank, but not yet on other companies. Rachel Maddow says that with these sanctions, the United States and the European Union fired the first economic shots in a larger escalation of sanctions that could be used against companies like Exxon and Rosneft, which happen to be in the middle of a huge joint venture that includes very harmful fossil fuel projects in Russia’s environmentally sensitive Arctic region.
In the current crisis, Russia is bullying Ukraine and Western Europe by exporting natural gas. Because of this, sanctions should be expanded to include companies that work in Russia’s oil and gas export sector. So far, though, Western governments have not put sanctions on oil and gas exporting companies in Russia. This is likely because oil and gas companies in the West with a lot of political power are involved in these projects.
Worse yet, the U.S. is even thinking about paying for a huge expansion of Russia’s oil and gas export sector with government money. The Export-Import Bank, which is the U.S. government’s largest agency for promoting exports, is looking into financing the huge Yamal Liquid Natural Gas (Yamal LNG) export project in Northwest Siberia. This is a very harmful fossil fuel plan led by Russia’s Novatek and France’s Total. One of the people Obama has blacklisted, Gennady Timchenko, is a co-owner of Novatek. The project could hurt the fragile ecosystem of Russia’s Arctic region, and Russian and international environmental groups are speaking out against it.
The amount of money Yamal LNG wants from the U.S. government has not been made public, but it is likely not a small amount: The Export-Import Bank has put nearly $8 billion into three recent LNG projects.
Not only do these LNG projects get wasteful federal subsidies, but they are also very bad for the environment, local communities, and the climate as a whole. Two of the projects are hurting the beautiful Great Barrier Reef in Australia, which has caused environmentalists to speak out against the Export-Import Bank and a lawsuit to be filed against it. ExxonMobil is in charge of a third LNG project in Papua New Guinea. The project has cut gas pipelines through valuable tropical forests and caused violent conflicts between tribal communities and the company.
But it is possible that the U.S. Government will do something different. In the past, the Export-Import Bank and other public finance institutions in the West have not given money to Russian oil and gas projects because of political and environmental concerns. Between 2003 and 2007, the huge sub-Arctic Sakhalin II oil and gas project in the Russian Far East asked the Export-Import Bank, the U.K. government, and the multilateral European Bank for Reconstruction and Development for billions of dollars to help pay for it. But these government finance institutions wouldn’t back the project because of environmental concerns that couldn’t be solved. After the Russian gas giant Gazprom took a controlling share in the project in a way that many Western governments saw as a form of expropriation, they finally gave up on the whole thing.
As an interesting bit of history, the Export-Import Bank was set up in 1934 to lend money to the Soviet Union. However, because of unpaid war debts, it never did. Soon after, the Export-Import Bank was changed so that it could lend money to Cuba and “any part of the world except Russia.”
Let’s hope that the Obama administration will stop public funding for Yamal LNG, which is bad for the Arctic and regional security, instead of giving in to dirty fossil fuel bullies in the US, Russia, and elsewhere.