The Heritage Foundation

Executive Memorandum #836 on Russia

October 10, 2002

October 10, 2002 | Executive Memorandum on Russia

U.S.-Russian Energy Cooperation Is Good Policy

Senator Conrad Burns (R-MT), Representative Curt Weldon (R-PA), and other Members of Congress plan to introduce a concurrent resolution calling for further cooperation with the Russian Federation on energy development. They have a strong case. Among their concerns are over-dependence on oil from Saudi Arabia and imports from Iraq and other rogue states. Over 20 percent of America's foreign oil comes from the highly unstable Persian Gulf. Even before September 11, the United States faced the untenable possibility that some of these imports could be, in Senator Burns' words, "rogue oil"--that is, oil from countries that use the proceeds to support terrorism or to purchase or develop weapons of mass destruction.

U.S. consumers would be outraged to find out they could be financing al-Qaeda and other radical Islamist terrorist organizations every time they filled their gas tanks. U.S. oil imports should not in any way fund Islamic academies that provide pseudo-religious brainwashing and weapons training of youth for jihad (holy war) against Americans. Substantial supplies of oil are available from other countries and regions that do not sponsor terrorism, such as Russia, the Caspian Sea littoral states, Africa, and Latin America. The United States should gradually replace its oil imports from rogue regimes such as Iraq's with oil from these areas. Doing so would have the additional beneficial effect of undermining the power of the Organization of Petroleum Exporting Countries (OPEC) to dictate supply and prices in the oil market.

Congress should fully support U.S.-Russian cooperation on energy development. Significantly, members of both houses of the Russian parliament--the Duma and the Council of the Federation--are willing to vote simultaneously with their American colleagues to show their support for the concurrent resolution.

Cooperation with Russia. Russian President Vladimir Putin has supported the United States in the war against the Taliban and al-Qaeda, even overruling his own senior officials to allow U.S. troop deployment and logistical infrastructure in Georgia and Central Asia. Moreover, after September 11, 2001, Putin muted his country's objection to the U.S. abrogation of the 1972 Anti-Ballistic Missile (ABM) Treaty and NATO enlargement to include the former Soviet Baltic republics and the Warsaw Pact states of Bulgaria, Romania, and Slovakia. Such unprecedented actions have helped to bury the legacy of the Cold War.

Russia also has moved from a planned to a market economy. In the past decade, it has come a long way toward privatizing its economy in general and the energy sector in particular. Today, as its oil production and export levels grow, Russia is developing a capacity that would enable the United States to offset some of its Persian Gulf oil imports. Russian companies such as YUKOS and LUKoil have begun to sell their oil and gasoline to U.S. markets. However, Russia will need U.S. private-sector investment and government cooperation to develop its pipeline and port infrastructure to meet increased demands. In particular, Russia will seek U.S. private-sector and government assistance to:

  • Build a 50 million ton a year deep-water supertanker terminal and a pipeline to the Arctic port of Murmansk on the Kola Peninsula;
  • Construct two oil ports in Vysotsk and Primorsk on the Baltic Sea;
  • Develop a pipeline and 7.5 million ton a year oil terminal in the Pacific port of Nakhodka, enabling oil exports to Japan, China, Korea, and the U.S. West Coast states;
  • Expand its oil fields in Timan-Pechora in Western Siberia, Kovykta in Eastern Siberia, and the Sakhalin Island in the Pacific; and
  • Conduct seismic and geological surveys for oil and gas in its Arctic regions.

Facilitating Energy Cooperation. On June 6, President George Bush granted market economy status to the Russian Federation, a step that will promote its adoption of market principles and assist in its integration into the world economy. But more needs to be done by the Administration and Congress. Any energy policy that the United States pursues vis-à-vis Russia should be in both countries' interests. In particular, as the proposed concurrent resolution suggests, the United States should:

  • Assist Russia in joining the World Trade Organization (WTO) . Russia's membership in the WTO is predicated on reforms in its financial services and banking sector, which would improve its investment environment and facilitate the flow of Western capital that is crucial to the expansion of Russia's energy sector.
  • Encourage Moscow to improve the rule of law, especially dispute resolution through the courts and alternative dispute resolution. This would make the Russian business environment, including in the oil and gas industries, more predictable and attractive to investment.
  • Expand the energy dialogue with Russian high-level government and private-sector representatives. The successful first step in this dialogue was taken in October at the U.S.-Russian energy summit in Houston, Texas. This process should be institutionalized.
  • Terminate the Jackson-Vanik Amendment (Chapter 1 of Title IV of the 1974 Trade Act), which denies Russia "most favored nation" trading status. This relic of the Cold War was enacted when the Soviet Union severely limited emigration and violated human rights. It has served its purpose. Congress suspended the application of the amendment after the Soviet Union collapsed, but this suspension requires year-to-year renewal. President Bush promised Putin that the United States would lift the Jackson-Vanik restrictions permanently, and Congress could accomplish this by amending trade legislation.

Conclusion. The war on terrorism has dictated a vital strategic re-orientation of U.S. oil imports away from "rogue oil." As an important first step on the road to U.S. energy security, Congress should support a concurrent resolution that calls for expanding energy cooperation with Russia.

--Ariel Cohen, Ph.D., is Research Fellow in Russian and Eurasian Studies in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.

About the Author

Ariel Cohen, Ph.D. Visiting Fellow in Russian and Eurasian Studies and International Energy Policy in the Douglas and Sarah Allison Center for Foreign and National Security Policy, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation
Douglas and Sarah Allison Center for Foreign and National Security Policy