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Tags: russia | putin | keystone | pipeline

Keystone Pipeline Is Essential Geopolitical Strategy

Owen Smith By Friday, 30 January 2015 11:25 AM EST Current | Bio | Archive

Once again the U.S. Senate has failed to pass legislation designed to overcome the administration's opposition to the Keystone pipeline proposed by Trans Canada to bring crude oil from Canada to the Gulf Coast to be refined.

When proposed eight years ago, the pipeline was looked upon as an economic engine geared to create thousands of jobs both during construction and operation.

It has been delayed in a never ending regulatory battle.

Everybody assumed that the newly elected Republican controlled U.S. Senate would pass the bill easily. Not so. The Democrats in the Senate mounted a filibuster which the majority was unable to overcome. The politics have not changed.

Following the installation of the new Congress, legislation approving the pipeline easily passed the Republican controlled house and has been effectively blocked in the Senate.

Had it passed the Senate, the president has promised that he would not sign it. The president has said that he opposes the pipeline because the oil that would be refined in the Gulf refineries would be sent abroad — it would not benefit the American consumer.

This is not true. Even if it were all exported. It would help the United States free Western Europe from dependence on Russian oil and gas. The underlying issue is, Should the United States use energy as a policy tool in the new Cold War? The answer is a resounding yes.

Ronald Reagan used energy policy to help bankrupt the Soviet Union and bring an end to the Cold War. The Reagan administration policies were designed to keep the world price of oil sufficiently low that it was not economic for the Soviet Union to sell its oil in the world market.

Oil was the principal commodity that provided the Soviets the hard currency needed to support their military machine and domestic economy. In a plan presented to President Ronald Reagan a small group of national security advisors including National Security Adviser Judge William Clark, then White House chief of staff and later attorney general, Edwin Meese and former Director of Central Intelligence William J. Casey, the United States encouraged Saudi King Fahd to increase the Saudi output from 2 million barrels to 9 million barrels a day.

In months the per barrel price of oil dropped from $30.00 a barrel to $10.00 a barrel. The plan worked. The Soviet Union was bankrupt. It ceased to exist. We thought the Cold War was over.

Today the cast has changed. Russia under the leadership of Vladimir Putin is faced with a similar financial dilemma. Russia relies on its exports of oil and gas to provide the hard currency needed to support the Russian economy. The world market for oil and gas has changed.

Today, rather than being a net importer of oil and gas, the United States is in a position to be a significant player in the export of petroleum. Western Europe relies on oil and gas imported from Russia. Russia is sending troops and weapons to support the separatists in the Ukraine in an effort to control access to Ukraine's deep water ports to ensure its ability to deliver oil and gas to Europe.

The United States has the necessary product to flood the European market with cheap oil and gas making the Russian product uneconomic. In the mid 1970s John Shaheen, a friend of CIA Director William J. Casey, built an oil refinery in the waterfront community of Come by Chance in Newfoundland, Canada.

When he built the refinery Sheeran contemplated bringing oil from the Mideast, refining it and shipping it to the United States. Unfortunately he was unable to make the refinery work — Shaheen went broke.

Last fall, North Atlantic Refining bought the Come By Chance refinery. It is capable of producing 115,000 barrels of oil a day. Recognizing that they have a facility for refining oil in Newfoundland, Trans Canada — the firm that is seeking approval of the Keystone pipeline — has filed to upgrade existing pipeline rights of way across Canada to Newfoundland to connect with the Come By Chance refinery.

Another Canadian company has filed seeking approval for a similar pipeline to the west coast of Canada to export oil and gas to Japan. The current administration in Washington has been blocking the Keystone pipeline since the 2008 election. Despite the delay the pipeline is still relevant — its relevance has been reduced by regulatory delay.

Yes it should be built. Not only will it crfeate tens of thousands jobs It will help the United States influence world energy policy as a player in the world petroleum market.

The pipeline would have been more important if it were brought on line eight years ago when initially proposed. The sudden drop in world energy prices precipitated by improvements in technology together with the sanctions that have been imposed on Russia as a result of their illegal intrusion into the Ukraine are prime causes for the credit rating agencies to classify Russian Bonds as junk.

The administration should take a lesson from the Regan administration and hurt Putin and his colleagues in the Russian government by cutting off their access to hard currency as Ronald Reagan did in the 1980s. His use of energy policy to bankrupt the Soviet Union in the 1980s can be used to bankrupt Russia today.

Owen Smith is chairman of the board of trustees at The Institute of World Politics. He has a rich background in local government and taxation. After attaining a law degree from St. John's School of Law, and practicing for 29 years, he spent seven years as deputy county executive of Nassau County, N.Y. For more of his reports, Go Here Now.

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The pipeline would have been more important if it were brought on line eight years ago when initially proposed.
russia, putin, keystone, pipeline
Friday, 30 January 2015 11:25 AM
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