During his two-and-half-day visit to Ukraine, Francis Fannon, assistant secretary at the U.S. Department of State’s Bureau of Energy Resources, said that the United States is supporting Ukraine’s energy security challenge on different fronts.
“The purpose of my visit is to underscore strong U.S. support for Ukraine and also part of that is also our strong unqualified opposition to Nord Stream 2,” Fannon told the Kyiv Post during an interview at the Hyatt Regency Kyiv hotel on July 24. “It’s also support for maintaining robust gas transit through the country.”
During his first official visit to Ukraine, Fannon met with a number of Ukrainian officials including Ukraine’s President Petro Poroshenko and Prime Minister Volodymyr Groysman.
His visit to Ukraine comes almost two weeks after U.S. President Donald Trump’s controversial visit to Brussels’ NATO Summit, as the U.S. president put pressure on other NATO allies to take immediate steps to increase defense spending. Trump also pointed at Germany for being a “captive of Russia” as it buys large sums of natural gas from Moscow, and criticized Germany’s backing of Nord Stream 2, a pipeline project that would directly connect Russia and Germany.
Trump’s NATO speech
Fannon doesn’t think that Trump was too harsh.
“I think everyone in Brussels at the time thought that it was an accurate reflection,” Fannon said.
“I was in Brussels during that (time). And I was there not for NATO, but I was there to participate and support the relaunch, if you will, of the U.S.-European Union Energy Council. This was the first meeting that was held since 2016 and it was a good framing discussion…
“And to a person, there was unqualified opposition to Nord Stream 2. There was no dissent from the European commissioners there. And, in fact, walking through Brussels, I was struck by the unanimous support for the president’s position.”
A large part of the discussion was also focusing on supporting Ukraine, he said.
But while U.S.’ strong opposition against Nord Stream 2 was positively taken by many in Ukraine, others were wondering if Trump struck a secret deal regarding Ukraine with Russian President Vladimir Putin. According to Bloomberg news agency, Putin suggested Trump to hold a referendum in eastern Ukraine during their private meeting in Helsinki on July 16.
“The U.S. absolutely opposes the unlawful seizure of Crimea. We call on the end of hostilities in Donbas region and reject any kind of incursion and any forces there, and call for the full solidarity of sovereignty of Ukraine,” Fannon said.
Asked whether there was a deal, Fannon said: “I can’t even comment, it’s not even a thing.”
A Republican, Fannon has been in office since May 29, nominated by Trump. Hopping back and forth between the private and public sectors, Fannon also worked as the head of corporate affairs at BHP Billiton (now named BHP), a multibillion multinational mining, metals and petroleum company, as well as senior director of Murphy Oil, a petroleum and natural gas exploration company.
Fannon also previously served as counsel to the U.S. Senate Committee on environment and public works drafting key legislations in the Energy Policy Act of 2005, as well as counsel for Republican senators Ben Campbell and Pete Domenici.
Fannon says that he did not meet with Trump since being in office and that he had no connection to the president prior to taking office.
Naftogaz unbundling
In regards to Ukraine, another important subject for Fannon is the country’s unbundling of state-owned gas and oil monopoly Naftogaz.
Naftogaz’ supervisory board signed a memorandum of understanding with the supervisory board of the Main Gas Pipelines of Ukraine, a public joint stock gas delivery company, to initiate the unbundling process as well as making it more transparent. It will be effective as of January 2020.
“The U.S. strongly supports continuing the calls for unbundling and we also are acutely aware and appreciate the conditions for which unbundling were to occur, given the Stockholm arbitration award decision,” Fannon said. “So it’s a matter not of whether to (proceed) with unbundling but really it’s the timing of when.”
Naftogaz won a case against Russia on Feb. 28, when a Stockholm arbitration court ruled that Gazprom, Russia’s state-controlled gas company, owed Naftogaz a total of $2.6 billion for failing to deliver gas to Ukraine.
“U.S. supports the arbitration court and expects Gazprom to fully comply and pay (the full amount),” Fannon said. “Frankly, we see the failure of Gazprom to pay as an illustration of the refusal to operate within the standards of the international community. They’re the ones who agreed to submit to the arbitration (court) and initially agreed to pay according to what they agreed to. We’re expecting them to pay.”
Business catalysts
But Russia is not the only problem for Ukraine’s energy security as internal corruption is robbing the country of more investments from countries like the U.S.
In order to “catalyze” more investment from the U.S., Ukraine needs to create the three pillars of any normal business environment – transparency, clarity of rules and a predictable environment, Fannon said.
“To that end, the ongoing (energy) reform process is meaningful to establish that operating environment and effectively take any perceived risk of investing in Ukraine away,” he said. “That’s not a thing that’s unique to Ukraine, it’s just what U.S. businesses want and expect.”
Before, there were a number of U.S. natural gas extraction companies that unsuccessfully tried out Ukraine’s business environment including Chevron and ExxonMobil.
Right now most investors are still holding off of pouring their money into Ukraine as the conditions are not clear enough.
Back in July, however, Ukraine’s President Petro Poroshenko administration struck a deal with the U.S. as Ukraine imported 700,000 tons of coal from American miner Xcoal Energy & Resources.
Dirty energy
But one of the big criticism’s against Trump’s administration on energy issues is that it is reverting back to traditional hydrocarbon energy sources rather than trying to implement more alternative and renewable energy sources.
Fannon says that the current administration is looking at all sources of energy.
“The administration present and myself have testified in support of all of the above energy strategy. So that means continued development use of energy resources of all types whether they are hydrocarbon based, renewables or energy efficiency,” he said.
And this is something that Ukraine can learn from the U.S. as well, he said.
