HomeBureau of Energy ResourcesRemarks & Releases…Assistant Secretary for Energy Resources Geoffrey Pyatt Financial Times Global Commodities Summit 2024

# 											Assistant Secretary for Energy Resources Geoffrey Pyatt Financial Times Global Commodities Summit 2024									

Remarks

Geoffrey R. Pyatt, Assistant SecretaryBureau of Energy Resources

April 8, 2024

**Moderator:** It’s a pleasure to have you here. In case you don’t know, Geoffrey Pyatt’s the Assistant Secretary of State for Energy Resources in the US and he’s held that position since 2022. He was previously the United States Ambassador to Greece from 2016 to 2022. Directly before that, Ambassador to Ukraine from 2013 to 2016. So, he has a wealth of experience on many of the topics that we’ve been discussing today.

Assistant Secretary, let me start here. When I interviewed you in November you told us that Washington was aiming to half Russia’s oil and gas revenues by the end of this decade. You said at the time that the ambition there was even if the Ukraine war ended in the next two or three years, you didn’t want Putin to be in a position where he could use three or four years to rearm and go again.

Do you believe this effort on halving oil and gas revenues is working? How much progress have you made?

**A/S Pyatt:** Thank you, Tom, and I think you recall the conversation very correctly and our goal remains exactly as we discussed it back in October in London. The fact is, Putin has continued with this incredibly brutal war against the people of Ukraine. We’ve seen it over the past two weeks with the dramatic escalation of Russian attacks on Ukraine’s own energy infrastructure with extraordinary costs in terms of damage to civilians and civilian infrastructure, but also the damage to Ukraine’s economy.

So we’re absolutely committed to our goal. You’ll recall when I was with you in London, we talked a little bit about the US determination to step up our enforcement of the price cap mechanism, and I think you’ve seen that, including last February when we added Sovcomflot to the list of designated entities. You’ve seen a laser-like focus on especially thwarting Russia’s future energy revenue, and you’ve seen the steps that we’ve taken against future oriented projects like Arctic LNG 2. And I was very glad to see just last week Reuters reporting that Arctic LNG 2 has had to defer their commencement of commercial operations because of the sanctions that we’ve imposed. So, we’re absolutely committed to the goals.

We believe that the price cap mechanism is working and you only need to look at the significant reduction in the Kremlin’s oil tax revenue, down nearly 30 percent compared to where we were in 2022, but also the overall reduction in Russia’s oil export revenue, down $2.6 billion compared to November of 2022 before the import ban and price cap mechanism were put into place.

So we’re going to stick to this course of action and we’re going to stick to it as long as is necessary in order to change Russia’s behavior in this brutal and unprovoked war.

**Moderator:** I’m going to pick up on both of those things. First on LNG sanctions. Did you say Arctic LNG 2 sanctions have been effective at this point. I think Reuters have also reported that Chinese and Japanese shareholders have applied for OFAC exemptions which if granted would allow them to lift cargoes. I know you don’t speak for Treasury, but is there a world in which that could be granted? Or it’s your ambition to make sure that Arctic Energy 2 is dead in the water?

**A/S Pyatt:** I have said publicly on many occasions, our goal is to ensure that Arctic LNG 2 is dead in the water. I can’t speculate on the conversations going on between partners like Japan and Korea and OFAC, but what I can say is that as the G7 we are collectively committed to doing everything we can to thwart Russia’s future and energy revenue and we see Arctic LNG 2 as a future project. There have been very, very constructive conversations that I have been part of, including with the governments of Korea and Japan on all of these issues. And I think all of us in the G7 and the broader coalition that has been part of this effort recognize the challenge that Russia’s behavior represents to the rules-based international system and the importance of taking clear action to penalize Russia for its invasion and to provide the incentives for Russia to eventually come to the peace table and to end its illegal occupation of Ukrainian territory.

**Moderator:** Sticking with LNG, Russia has other LNG projects under development or potential development. I’m thinking of Novatek’s Murmansk LNG project, Gazprom’s Ust-Luga LNG project. Will you sanction those in the same way?

**A/S Pyatt:** I can’t preview future sanctions actions, but what I can tell you is we’re very focused on ensuring that Russia is not able to develop new projects in order to re-destine the gas that it previously sent into Europe. And I think especially because I’m talking to an audience in Europe, one of the points that’s worth emphasizing for a second is just how extremely successful Europe has been over the past two years in dramatically reorienting its energy system, de-risking its exposure to Russian oil, gas, coal supplies. Now we’re also working on the nuclear fuel account, as you know. This is an area of very, very strong transatlantic agreement and an understanding that we have to be working as hard as we possibly can both to reduce our exposure to Russia, but also to address something which the previous panel was talking about which is accelerating our respective energy transitions because that’s the best formula of all for our energy security.

**Moderator:** To move on to oil, the sanctions you mentioned from February where OFAC added the Sovcomflot fleet were effective. We’ve seen those vessels often no longer welcome in Indian ports, for example. Should we expect you to continue to sanction the shadow fleet? And why not just sanction all shadow fleet vessels tomorrow?

**A/S Pyatt:** Well, let me answer your second question first. The reason why we’re proceeding in a deliberate fashion is because we’re trying to achieve two objectives. We’re trying to drive down Russia’s oil and gas revenue as fast as we can without destabilizing a global energy market that has already been profoundly destabilized by Putin’s weaponization of his energy resources.

To answer your first question, the answer is yes. You should expect a continued steady drumbeat of US and coalition enforcement actions. We announced that, and you and I discussed it back in October, the coalition’s agreement to begin a second phase of price cap enforcement actions including tightening scrutiny of attestation and seeking to raise the cost on the Kremlin of its actions.

What you’ve seen emerging is the bifurcation of global energy markets. You’ve got one market which is deep and transparent and well integrated with the global economy, and you have another market which is shallow, opaque and unreliable. Our objective in that second market is to raise the costs to the Kremlin as high as possible in order to drive down the revenues that Russia enjoys which it in turn uses to pursue this brutal and unprovoked invasion.

**Moderator:** Is there any chance that the administration’s resolve to tighten sanctions on Russian exports could weaken in an election year with prices going up?

**A/S Pyatt:** I don’t think so. In fact there has been a strong bipartisan consensus in the United States to hold Putin accountable for what he has done, to strengthen the ability of the United States to be a reliable energy ally with our partners around the world, and you’ve seen that in the growth, for instance, of our LNG exports and the critically important role that that has played in helping to fill behind some of that Russian product that now is off the market.

There is very strong bipartisan consensus on these issues in the US Congress, and I hear that whenever I’m talking to Republican and Democratic members.

So I don’t see any shift coming. In fact I think what we’ve seen is a permanent change of the international energy landscape. Russia is never again going to be viewed as a reliable energy supplier. It has lost its principal market in Europe. It’s struggling to hold onto the markets that it retains. And in those markets where it remains active, it is facing a smaller and smaller audience. You mentioned, for instance, the decision in India to stop offloading from Sovcomflot vessels and not just the vessels that have been designated. And I think you’re going to see, as I said, a steady tightening of the noose as we seek to drive down Russia’s energy revenues and ensure that Russia is never again in a position to use its energy resources as a tool of coercion against our allies and partners around the world.

**Moderator:** In one of your responses you mentioned the Russian attacks on Ukrainian energy infrastructure. I think they were also preceded by Ukrainian attacks on Russian refineries. There’s now a billion barrels a day of refined Russian capacity off the market.

Are you concerned about that impact? And it’s my understanding also that there is effectively a tacit agreement, maybe even negotiated by Washington between Russia and Ukraine that neither would target each other’s energy infrastructure. Now that that’s been broken, you have concerns both for the potential disruption to Russian production and disruption in Ukraine.

**A/S Pyatt:** I want to be very clear. The responsibility here rests with the Kremlin which is systematically attacking Ukraine’s energy infrastructure. We’ve made clear that the United States doesn’t support or enable Ukraine’s attacks on military targets inside the Russian Federation, but we are very, very clear that Ukraine is in a war of self defense.

As my boss, Secretary Blinken says all the time, if Russia stops its military action the war will end tomorrow. If Ukraine stops its military action Ukraine will end. Ukraine is in a fight for survival and we have to bear that in mind. We have to understand that this is happening because of one man in the Kremlin who could end the war tomorrow with a phone call and has chosen not to because of his unwillingness to accept the sovereign choice of the Ukrainian people to build their future in Europe.

**Moderator:** If we could shift topics. Your brief also includes responsibility for the US critical minerals policy. So let’s talk a little bit about that. There are a lot of metal traders in the room who have been pleased with the US government talking positively about looking to support companies producing and trading metals around the world.

But I sense some frustration from the trading community that despite these positive noises, there’s a lack of concrete progress. How do you feel about that effort? What do you feel you’ve achieved so far?

**A/S Pyatt:** Let me start with a couple of points, sort of pivoting off of the discussion I caught the end of just before me which is just to emphasize the dramatic transformation that’s happening in the US energy economy. Because of the Inflation Reduction Act, because of the Bipartisan Infrastructure Law.

I was in Houston two and a half weeks ago for the CERA Conference and it was really striking to me there to hear how the US energy industry, whether it’s oil companies or renewable companies or something in between, are all focused on how to leverage the opportunities that the infrastructure law and the IRA are creating in our economy, the super-charging of America’s energy transition which we believe is going to bring benefits to the whole international energy system. Not just because we’re going to meet our Paris climate objectives but because innovation and investment in the United States is going to drive down the cost of that energy transition. And that’s hugely important.

But we have to be very, very careful that as we work through that energy transition we don’t put ourselves in a position where we have traded an era of European dependence on Russian oil and gas for an era of collective dependent on one country’s processing and extraction of critical minerals.

So we have been focused in a very systematic way on how to deepen and broaden the international supply chain for all of these key clean tech components, especially the critical minerals.

I was interested to hear the discussion just before me on market trends, for instance around the pricing of lithium and nickel. When I look at that market what I see is a huge future demand stream which justifies as much investment as we can muster around the world in order to diversify both the extraction and the processing. Recognizing there’s going to be a lot of innovation to come also in terms of the technologies in which these energy minerals are extracted and employed.

But we have to be very, very cognizant and very cautious about anything that leads to the further concentration of those markets. We only need to look at recent Chinese export controls on gallium and germanium and graphite to understand the risks that come from over-dependence.

So we are working as the United States both to boost our own industry here at home, the ability of the United States to extract these resources, to process these resources, but we can’t fill our domestic requirements through domestic production so we have to build international coalitions. And that’s where the State Department has been focused.

**Moderator:** China spent 30 years building up supply chain dominance over minerals processing in many of these metals, but I’m just struggling to see whether the West can ever really replicate that. And if not, then is the option truly just to ensure better relationships with those producers and processors rather than setting up, trying to compete with them, rather than setting up an antagonistic relationship with them.

**A/S Pyatt:** We don’t want an antagonistic relationship. What we do want is to reduce our exposure on a single source of supply.

I had the opportunity a couple of weeks ago to be in Western Australia. I was in Perth talking to all of the big mining companies that are present in Western Australia, but also with startups that are working in the critical minerals space. For example, Liontown, which is working in the lithium area. We talked a lot with our Australian allies about what we are doing in the context of the Minerals Security Partnership. MSP is an initiative of the State Department that brings together now 15 governments and economies, more than half of the world’s GDP, in order to identify new projects which will help to accelerate that diversification process exactly as I described.

And I think we recognize that we are rushing to catch up. As you said China has a 15 or 20 year head start in terms of developing these industries, and we’re not talking about ending our commercial and trade relationship with China on these issues. But what we do need to do, and we need to do it urgently, is to de-risk our exposure so that we don’t have the kind of concentration that you see, for instance, on graphite which creates the kind of vulnerability and the concerns about supply security that have been provoked by China’s recent actions.

That’s why MSP has a number of projects, for instance, which are focused on alternative streams for graphite provision, and then figuring out how do we mobilize the resources of our respective governments, our trade and development finance institutions — in the US case institutions like our Export Import Bank, our Development Finance Corporation — but also our diplomatic leverage, and then working with allies and partners around the world to bring those alternative streams to the table.

I should put a particular spotlight on the quality of our cooperation in this regard with the European Union and my boss, Secretary Blinken, was in Leuven, in Belgium just last Friday with Vice President Dombrovskis where we announced the expansion of our work together under the MSP forum which is another aspect of this MSP initiative specifically targeted on fostering dialogue with the resource-endowed countries, with the producers, and helping to ensure that we’re working to uphold high ESGs, that we’re working to ensure that the benefits of those resources also derive to the countries where those resources are extracted, and then figure out how we deliver as fast as we can the dramatically increased volumes of materials that we’re going to need in order to meet our energy transition targets.

**Moderator:** I see there’s one question in the room to close, in a second, but we’ve covered Russia, we’ve covered China. Very quickly, one final geographical region. Is your office doing anything from the energy perspective to prepare for a potential escalation in the war in the Middle East following the recent airstrike on the consular section of Iran’s embassy in Damascus?

**A/S Pyatt:** We pay a lot of attention to our energy relationships across the Middle East. We’re going to have Prime Minister Sudani from Iraq here in Washington next week. I understand he’s also planning on travel to Houston which tells you how central the energy issues are there. I was in Riyadh and Dhahran earlier this year. So we are talking to all of our energy partners around the region. We talk about security of supply. We also talk about decarbonization because it’s really, really important as the world continues to use fossil energy that we identify opportunities to lower the climate impact of that fossil energy which means focusing systematically on fugitive gasses, methane venting and flaring, looking at how we can electrify everything and in particular looking at how we ensure that those fossil resources, to the extent they remain necessary, flow to markets in a reliable and secure manner.

We are of course very, very closely watching what’s happening in the region. My boss, Secretary Blinken, has spent countless hours working on the challenges as a result of the Israeli war against Hamas. But the good news is that markets are deep. The United States has played a role in helping to stabilize global markets in part through the output of our energy producers. And we make no secret about the fact that we are now the world’s largest oil and gas producer, so we face a burden in terms of delivering those resources in the most climate-neutral way possible, but also working very, very hard to ensure stability and predictability in international markets.

**Moderator:** We have time for one question in the room if anybody would like to pose one. In the back.

**Question:** Thank you. My name is [Ilini Kananstila] from [Inaudible].

I’m just curious when you say you are supporting the mining industry. What exactly is the promise for it? Is that really the Inflation Reduction Act? Because it’s my understanding that only the refinery and processing of critical minerals are included while mining as an activity is not. Is there any plan of creating any investment side on [vehicle] like the European

Union is using the EBRD? Just more tangibly, what is expected of this so far to the mining industry?

**A/S Pyatt:** Thank you for the question because it’s really, really important.

What we’re trying to do first of all is work with partners around the world, and these resources, geologically they are where they are, which means a lot of the resources were found in developing countries which is why this conversation about ESGs, about derivative benefits is so important.

But the United States also has significant resources and our North American neighbors in Mexico and Canada have significant resources. So we’re very focused on that as well.

We have a domestic program in the United States administered by our Department of Energy, the American Battery Minerals Initiative, looking specifically at how to stimulate increased production in the United States. We also have issues that we have to work through in the United States on permitting and this is one question, Tom, you asked earlier about politics. If there’s one thing that every Republican and every Democrat I talk to agrees on it’s the importance of permitting reform in the United States in order to help make our energy transition move faster. I know that the White House is focused on this in a very systematic way. And John Podesta who is the White House czar for implementation of the Inflation Reduction Act talks about this all the time.

So we are very much focused on how to unlock the hugely increased volumes of material that we’re going to need as we look to the world of 2050 where, let’s face it, there’s going to be a lot less global commerce in coal and crude oil and a lot more international trade of cobalt, lithium, nickel, zinc, copper, rare earths, and that’s a commerce that we want to proceed in a way that delivers benefits for all of our citizens and in a way that delivers the massively increased volumes we’re going to need as we accelerate the deployment of electrification as we see the huge build-out of our electricity grids, as we accelerate the deployment of wind and solar and geothermal and zero carbon energy options.

So we need to work on all of these things at once. We need to do so very closely aligned with our allies and partners in the world. And we have to do so in a way that meets the opportunity which was talked about in the last panel created by a moment where technology has gotten to the point where the renewable energy option is no longer more expensive than the traditional fossil alternative.

**Moderator:** Just a final question from me, just to wrap up.

In a way the way that you speak I think is probably really reassuring and positive in this audience, but do you think this position for the US government will live on post-election if there were a Republicans administration? People are concerned if this is going to be the position of the US government for the next decade regardless of who’s in the White House.

**A/S Pyatt:** Thanks for asking, Tom, and I of course am a career official so I come to these issues with that perspective.

I am not worried about the durability of America’s energy transition in this regard. You only need to look at what’s happening in the United States, the transition of our energy system, and the billions of dollars of investment that have already been mobilized in thew United States. A lot of that investment is in Republican-leaning states and it reflects how our governors around the US, whether they’re Republicans or Democrats, have identified this energy transition as one of the great economic growth and job creation opportunities of the century and are interested in grabbing hold of those opportunities.

I think also because there’s an understanding that as the energy transition unfolds the United States wants to be in a position where we continue to leverage our energy abundance and the natural resources that our country enjoys in order to not just deliver for the economy and the security of Americans, but also for the economy and the national security of our allies around the world.

You talked earlier about Japan and Korea. Huge markets for American LNG. I talked earlier about our very close cooperation with the European Union. Our cooperation with Australia is another example of that, and India for that matter.

So I am quite confident that in the context of the shifting geopolitics of the global energy map, the United States is going to remain a very reliable partner and that there will be a bipartisan consensus on the importance of that.

I can’t predict what’s going to happen in terms of our future politics, but I think one of the things that’s important about the Inflation Reduction Act that I talked about earlier is that $36 billion a year of incentives is written into law at this point with a ten-year horizon in front of it. It’s very, very hard, especially in our finely balanced political system, to take something that’s been written into law and to undo it.

So I am quite confident that while elections matter and we’ll have to see what the American voters deliver in November, the direction of our energy system and our energy relationships around the world is clear and is going to remain consistent.

**Moderator:** Fantastic.

Assistant Secretary, that’s all we’ve got time for, but I’m very, very grateful for you to take this time to speak to us here in Lausanne. I think the audience has found it incredibly useful.

**A/S Pyatt:** Thank you, Tom. It’s great to see you and I look forward to continuing the conversation.

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