US, between Diplomacy and Energy

US, between Diplomacy and Energy

Rita Lofano
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The former CEO of ExxonMobil, now Secretary of State, has already made it clear what the U.S. guidelines will be on international relations. Here is an illustrative overview of the issues currently on the table at the White House: from Iran to Libya, from Climate Change to the Carbon Tax

Read the Rex Tillerson Interview (Oil 10)

With President Donald Trump having already questioned foreign alliances, weaving the delicate fabric of international relations will not be an easy task for the new American Secretary of State, Texan Rex Tillerson, aged 64 years old, 41 of which he spent at ExxonMobil, 10 as CEO. Pressed in President Trump’s temperament, being capable of triggering a crisis with a simple tweet, Tillerson got away with his proverbial irony: "I have his cell phone number and he promised me that he will reply". The green light given by the Senate to appoint Tillerson came with 56 votes in favor and 43 against, after being receiving a grilling, above all for his relations with Moscow and the possible conflict of interest as the former CEO of ExxonMobil. In 2013, he was personally awarded, by President Vladimir Putin, the Order of Friendship, one of the highest Russian honors.
Below are the main diplomatic positions taken that could have implications on the global energy chessboard.

RUSSIA: FOR NOW, WE ARE MAINTAINING THE "STATUS QUO" ON SANCTIONS

"As regards sanctions against Russia, I would recommend maintaining the status quo until we are able to engage with Moscow, by better understanding what their real intentions are", said Tillerson during the Senate confirmation hearing. Although, according to the head of Foggy Bottom, the sanctions against Russia have "overlooked American interests," they remain an indispensable instrument of foreign policy to prevent negative actions or as a retaliatory weapon.  "We need," he said "a strong deterrent."

IRAN: NUCLEAR AGREEMENT TO BE REVISED

According to the new Secretary of State, the U.S. and EU sanctions against Tehran have "been extraordinarily effective as others joined." As regards the nuclear agreement, Tillerson said he agreed with President Donald Trump on the need for its "full review" to be able to see whether Iran is complying with its commitments. "Nobody is in disagreement on the ultimate goal, and that is that Iran must not possess nuclear weapons", he explained. The agreement "freezes their ability to make progress but essentially does not deny them the opportunity to obtain an atomic weapon. From what I understand," he argued, "the agreement does not prevent Iran, for example, from obtaining a nuclear weapon".

LIBYA: ITALY'S KEY ROLE

"We need the experience that Italy has with Libya," said Tillerson, interviewed by the newspaper La Stampa shortly before his appointment was confirmed. "We also need Italy as a responsible member of the European Union, capable of creating cohesion on the Ukraine issue," he stressed.

CHINA: CHAPTER CLAIMS

Beijing’s claims over a wide area of the South China Sea and violations of the air space over the disputed Senkaku/Diaoyu islands (in the East China Sea) are, according to Tillerson, "illegal actions", "similar to the annexation of Crimea by Russia." The Secretary of State, emphasizing the strategic importance that these islands represent, located on the route of major maritime flows, where $5 trillion of commercial goods pass through, specified that Beijing could be a global threat if it is allowed "to dictate the law on crossing these waters." As for the possible strengthening of U.S. presence in the South China Sea, the new head of U.S. diplomacy has specified the need to "send a clear message to China on the fact that its claims over these islands must cease and that they will not be permitted to access them".

U.S. OIL AND GAS EXPORTS CRUCIAL FOR ENERGY IN ALLIED COUNTRIES

"The greater energy supplies that the United States is able to ensure countries that live according to our values, may represent options that allow them not to be hostages to a single source of supply, or to a predominant source". Thus, Tillerson responded to senators on oil and liquefied natural gas (LNG) exports to allied countries. "From a political perspective, it is important to make these countries understand that they have the ability to make choices and opt for different alternatives. What we can do in foreign policy is ensure their access to these different options".

FOCUS ON ENERGY SECURITY, NO TO ISOLATIONISM

U.S. energy security is a priority and, in order to guarantee it, imports are essential, not only from Canada, which is one of the main suppliers of oil to the U.S., but also from other producing countries in the Middle East, such as Saudi Arabia.  This is the pivot of Tillerson’s policy. He is not an advocate of energy independence. "When a barrel of crude oil is loaded onto an oil tanker, it remains a barrel of crude oil. It does not matter to the end consumer where the oil comes from, as it has a fixed price on the global market. What supports economic activity," observed Tillerson, "is that access to and the purchase of barrels is free". Several years ago, speaking at the Council on Foreign Relations, he had demonstrated the attitude of a minister: "Should the United States seek so-called energy independence in its illusory attempt to isolate the country from global economic events, or should it follow the path of international involvement, seeking new ways to compete in the global energy market? I think that greater international involvement should be chosen".

CONFLICT OF INTEREST? COMMITMENT REGARDING COMPLIANCE WITH LEGAL OBLIGATIONS

The new Secretary of State has thrown water on the fire with regard to a possible conflict of interest related to the previous role as CEO of ExxonMobil. "During my previous role, I never directly called a Secretary of State," said Tillerson, excluding the possibility of receiving direct calls from his former colleague leaders in the industry. "I would contact the deputies, mission representatives and especially ambassadors", he specified, thus outlining the modus operandi on issues relating to individual companies. Tillerson has therefore ensured that he will refrain from being directly involved in issues concerning ExxonMobil, as required by law for former employees, for a period of 2 years.

CLIMATE CHANGE: "IS A RISK"

Rex Tillerson is ready to take action to address climate change, keeping, to a certain extent, his distance from President Donald Trump, who considers it a debatable issue. "The risk of climate change exists and could lead to serious consequences that require intervention", he said. But if "the increase in the concentration of greenhouse gases in the atmosphere is having an impact," he pointed out, "our ability to predict this impact is limited." With Tillerson the United States will not abandon "the global table on climate" to better assess its effects on the American population and on the competitiveness of U.S. companies.

CARBON TAX BETTER THAN ‘CAP AND TRADE'

To reduce emissions, the high road is that of Carbon Tax, according to Rex Tillerson, not "cap and trade", i.e., the sale of emission rights which, in his opinion, "has not produced the expected results in Europe".  Carbon Tax, i.e., tax on energy sources that emit carbon dioxide into the atmosphere, has the advantage, according to the head of U.S. diplomacy, of being applied uniformly. Moreover "all proceeds are for the benefit of the economy," he noted, "through, for example, a reduction in taxes on wages." "The impact is limited," according to Tillerson, "because the proceeds themselves are not used by the Federal Treasury for other purposes," but converted back into tax incentives.