On AI and energy: ‘Infrastructure is destiny‘

In the first panel of the Forum, “Thinking big and building bigger,” Global Energy Center (GEC) Senior Director and Morningstar Chair Landon Derentz led a conversation on meeting the energy demands needed to power AI. The discussion featured Mariam Almheiri, group chief executive officer of 2PointZero and chair of the international affairs office of the Presidential Court of the United Arab Emirates (UAE); Chris James, founder, chief investment officer, and chairman of Engine No. 1; Chris Lehane, OpenAI’s chief policy officer and vice president of global affairs; and Chase Lochmiller, co-founder, chief executive officer (CEO), and chairman of Crusoe. 

“AI and energy are inextricably linked,” began Derentz, outlining the challenge that industry and policymakers face in needing to “smash through the bottlenecks” to enable technological progress. Lehane reflected on the energy-related challenges OpenAI grappled with as it became the fastest digital platform in history to reach 100 million users. On lessons learned, Lehane stated that “infrastructure is destiny,” and that AI breakthroughs can only happen when providers are able to bring together “chips, data, talent, and energy” to facilitate this game-changing technology. Lochmiller suggested that AI can help unlock a “new era of abundance”—but before material abundance can be reached, energy abundance is needed to make that a reality.  

James continued by defining the obstacles in meeting AI’s energy demands. “Energy is a fairly linear system, but the demand for compute is exponential.” James advised that if policymakers and industry can overcome bottlenecks such as project permitting, outdated regulations, and credit availability, they can foster “an enormous amount of reindustrialization across the United States.”  

Almehri then contextualized the international trends that preceding speakers had identified. “When I think of creating AI clusters, there are certain elements that regions have to combine,” she said, ranging from their ability to channel strategic investments to having adequate infrastructure and energy. Citing the UAE’s relevant advantages, Almehri counseled that “for this AI megatransition, we need a transformation on the energy side”—to do that, she continued, requires partnerships. 

Derentz continued by asking panelists about the timelines, regulatory hurdles, and geopolitics associated with AI growth. “The age of intelligence is incredibly resource intensive,” noted Lehane, “and this resource intensity is where we’re seeing bottlenecks.” Lochmiller cited Crusoe’s work in Texas as showing not only that “every aspect of the economy is required,” to realize AI’s potential, but that “every aspect of the economy will benefit.” Regarding international AI rivalry, Almehri highlighted that while the UAE has “made it clear to everyone that we are partnering with the United States,” it is important for major players to cooperate on global tech governance and “work together to build standards.”  

Derentz concluded by asking participants the top of the policy wish list. They identified regulatory adaptability, innovative capital solutions, public-private partnerships, and international collaboration. Most fundamentally for the future of AI, is a change in perspective. “It’s a mindset,” said James. “This country is at its best when it thinks big, acts big, and builds big: we need to get back to that.” 

Pathways to industrial competitiveness and trade

The panel “Pathways to industrial competitiveness and trade,” moderated by Saphina Waters, director of stakeholder engagement and communication at the Oil and Gas Decarbonization Charter (OGDC), explored the complex intersection of trade, competitiveness, and climate policy—something panelists described as a puzzle with one thousand pieces. 

Emphasizing the urgent need to reshore US manufacturing, Sarah Stewart, CEO of Silverado Policy Accelerator, called for an aggressive agenda to “build, protect, and promote” that aligns policy tools with clear construction objectives.  

Sasha Mackler, senior vice president and head of strategic policy at ExxonMobil Low Carbon Solutions, noted that the company is focused on strengthening domestic manufacturing and expanding energy exports. He stressed that climate policy must evolve from being just a matter of regulation to one integral to business models. 

Participants criticized the absence of a clear, concise, and universally accepted carbon accounting system. Without that system, panelists said international collaboration is hindered and domestic implementation becomes more challenging and that a harmonized, interoperable framework would help simplify climate-related policy and economic planning. 

On the European Union’s Carbon Border Adjustment Mechanism (CBAM), Stewart expressed concerns about potential discriminatory effects. She argued that while identical systems are not necessary, interoperability is essential to ensure fairness and global cooperation. 

The panelists argued that creating a level playing field for US manufacturers is not just a climate issue—it is a matter of national and economic security. They held that ensuring American industries are not unfairly disadvantaged must be a policy priority. 

The makings of a manufacturing powerhouse

The panel “The makings of a manufacturing powerhouse: Legacy strength and new frontiers,” moderated by Neil Brown, nonresident senior fellow at the GEC and managing director of KKR Global, explored how manufacturers are navigating today’s complex geopolitical landscape, focusing on capital flows, project financing, and talent development. 

One of the central topics of discussion was the strategic role of emissions accounting. Karthik Ramanna, co-founder and principal investigator at the E-Liability Institute, suggested that when carbon accounting is viewed merely as a reporting requirement, it tends to become a burden. He argued, however, if reframed as a tool for product differentiation, it can become a source of value creation. Brandon Spencer, president of the motion business area at ABB, added that using emissions data in a strategic—not just operational—way can become a real competitive advantage for companies. 

Catherine Hunt Ryan, president of manufacturing and technology at Bechtel, presented a two-part framework for managing complexity: “what to continue” and “what to consider.” Companies should prioritize core competencies, she said, particularly in engineering and subject-matter expertise, while also identifying and managing critical supply chains and building data-driven execution models. At the same time, organizations must consider their ability to embrace change in a dynamic global environment. 

Looking ahead to the next decade, the panel discussed which regions are likely to emerge as manufacturing leaders in this new geopolitical context. Julian Mylchreest, executive vice chairman at Bank of America, remarked that the United States is well positioned to be among the winners. 

Leveling the global playing field

In a leadership spotlight moderated by Dan Brouillette, former US secretary of energy, Sen. Bill Cassidy (R-LA) emphasized that the world must adapt to new geopolitical realities. China has gained a competitive edge by not enforcing environmental or pollution standards, allowing it to strengthen both its economy and military. Meanwhile, the United States and European Union have adopted stringent climate regulations, putting their industries at a relative disadvantage. Cassidy also argued that differing regulatory regimes have created an unfair global marketplace. He proposed leveling the playing field with a US version of CBAM: a foreign pollution fee. This fee would apply to imports from countries that do not adhere to US environmental standards, helping to protect domestic industry and workers. 

Cassidy highlighted the strategic importance of producing natural gas domestically. He noted that natural gas supports manufacturing, replacing coal and thereby reducing emissions. Moreover, argued Cassidy, by producing gas domestically, the United States can support economic policies, which supports US working families. 

Unlocking energy abundance to enable equitable access

To wrap the first day’s panels, Phillip Cornell, GEC nonresident senior fellow and principal at the Economist Impact, moderated a discussion on creating abundant, affordable, and reliable energy to sustain economic growth, foster innovation, and promote national security. The panel featured Jude Kearney, member of the board of advisors at the African Energy Chamber; Tarik Hamane, CEO of Morocco’s National Office of Electricity and Drinking Water; Thomas R. Hardy, acting director of the US Trade and Development Agency (USTDA); and Bob Pérez, Baker Hughes’ vice president for strategic projects. 

Cornell framed achieving abundance as “one of the most consequential energy questions of our time.” With 800 million people across the globe still lacking access to electricity while technology-related demand grows rapidly, Cornell said it is crucial to “build systems that can deliver energy abundantly, equitably, and affordably.”  

Hardy discussed USTDA’s role in fostering energy abundance through international partnerships. While administrations change, Hardy noted, USTDA continues to work on projects that contribute to US security and prosperity, “working with our partners and meeting them where they are” to grow different forms of energy supply. 

Next, Kearney elaborated on Africa’s role in achieving abundance. Advising that access is key, he highlighted the need for an “abundance of thoughtfulness and good governance.” Pérez, offering a private sector view, added that the formula for abundance, ultimately, is rather simple: “I’ve never seen a good project not get money,” he said, “the question is how you get to a good project.”  

Finally, Hamane expanded on the theme of partnerships by sharing lessons from Morocco. The country has achieved near-universal rural electricity access, up from less than a quarter only three decades ago. As Morocco looks to build infrastructure that can connect its growing renewable production to new markets in Europe and Africa, Cornell concluded by lauding these projects as a “a physical manifestation of the integration needed to achieve abundance.”   

2PointZero, ABB, Baker Hughes, Bank of America and ExxonMobil are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here. 

Elena Benaim is a nonresident fellow with the Atlantic Council Global Energy Center.

Paddy Ryan is a former assistant director with the Atlantic Council Global Energy Center. He is a senior writer/editor at the University of California Institute on Global Conflict and Cooperation.

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Global Energy Forum

The ninth Atlantic Council Global Energy Forum will be held June 17 and 18 in Washington, DC. Please check back regularly for updates on our programming.

For Sultan Al Jaber, the United Arab Emirates’ minister of industry and advanced technology, the race to establish artificial-intelligence (AI) supremacy is “essentially an energy play.”

Al Jaber, who is also the head of national oil company ADNOC and the renewable energy company Masdar, spoke at the opening of the 2025 Global Energy Forum, hosted by the Atlantic Council’s Global Energy Center.

“The race for AI is not just about code . . . it’s about gigawatts,” he said, explaining that one query on ChatGPT uses ten times as much energy as a Google search.

“Over the next five years, the US alone will need anywhere between 50 and 150 gigawatts of new installed capacity,” Al Jaber noted. “Meeting this demand is not just a technical challenge,” but a “once-in-a-generation” opportunity, he added.

At the same time, Al Jaber noted that AI can help “unlock its own energy challenge,” by helping energy grids optimize their efficiency and power generation.

Below are more highlights from his remarks, which also touched upon energy policy reforms and the widening conflict across the Middle East.

An engine of peace

• Speaking as the conflict between Israel and Iran continues to escalate, Al Jaber called upon “all parties” to “show restraint.” He also pushed for “peace over provocation, calm over confrontation, and progress through partnership—and only partnership.”
• “Moments like these remind us that energy is not just the engine of progress,” he said. “It is a cornerstone of peace, stability, and ensuring prosperity.”

Shift into hyperdrive

• Meeting AI’s energy demand, Al Jaber argued, will require a “systemwide shift” that brings the energy, technology, finance, and policy sectors “in sync.”
• It will also require an effort to “hyperscale” energy, by creating a “reliable base load” of energy sources such as gas, renewables backed by energy storage, and nuclear breakthroughs, Al Jaber said.
• He added that such an effort would also require placing a “pragmatic pause” on the early retirement of existing power plants, to help ensure constant supply while energy leaders work to bring nuclear back into the mainstream.

Power to the people

• “Power generation is only half of the story, though,” Al Jaber said. “Getting the power to the end user is the other half, and . . . it’s the more complex part of that equation.”
• He added that solving the equation—updating the energy grid in the United States—would require “an investment surge” of $300 billion annually. “You can’t run tomorrow’s technology on yesterday’s grid,” he added.
• Al Jaber announced that ADNOC would be increasing its US energy investments, issued through ADNOC’s XRG arm, from $70 billion to $440 billion over the next ten years. “The United States is not just a priority. It is more of an investment imperative,” he said.
• But beyond investment, policy can also help, he added, pointing to measures that de-risk capital investments and fast-track permitting.

Katherine Golden is an associate director on the Atlantic Council’s editorial team.

Editor’s note: ADNOC and XRG are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

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Global Energy Forum

The ninth Atlantic Council Global Energy Forum will be held June 17 and 18 in Washington, DC. Please check back regularly for updates on our programming.

Event transcript

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SULTAN AL JABER: Good morning, everyone. It is indeed a great pleasure to be back here in Washington, DC. And it’s a real pleasure to see so many friends, colleagues, and partners at this very important forum.

Let me begin by thanking my dear friend and partner Fred Kempe for his commitment, and his guidance, and his support throughout the years. And allow me also to thank his team for working very closely with us and for hosting this very important and relevant forum. With your focus on energy security, economic competitiveness, and global prosperity, this forum could not be more on point.

Colleagues, before I continue allow me to address the evolving situation in our part of the world. The United Arab Emirates stands for dialogue, for de-escalation, and diplomacy. We call on all parties to show restraint. And we reaffirm our belief in peace over provocation, calm over confrontation, and progress through partnership, and only partnership.

Colleagues, moments like these remind us that energy is not just the engine of progress. It is a cornerstone of peace, stability, and ensuring prosperity. And as we say—or, as we stay committed to dialogue and diplomacy, we must also stay focused on the opportunities that lie ahead. Because while the world seeks calm, a new chapter in human progress is being written. And this chapter is defined by two simple truths. The first is that artificial intelligence is driving the next stage of evolution. And the second is that AI is driven by energy. In short, AI supremacy is essentially an energy play.

And the race for AI is not just about code. In fact, it’s about gigawatts. Every advance in AI uses more energy. A single ChatGPT query uses ten times the energy of Google search. AI generated video, one hundred times more. And we are now entering the era of the one gigawatt hyperscaler, where a single datacenter consumes as much electricity as a city of the size of Pittsburgh. And over the next five years, the US alone will need anywhere between 50 and 150 gigawatts of new installed capacity.

And meeting this demand is not just a technical challenge. It is a once-in-a-generation investment opportunity. In fact, it is an opportunity that will require a system-wide shift, with energy, technology, finance, and policy all operating in sync. That’s why yesterday, and here in Washington, DC, and in partnership with The Atlantic Council and MGX, we brought together leaders from all these relevant sectors to the second ENACT forum. And we do this in an effort to answer the fundamental and pressing questions, and to help build an integrated roadmap for a systemwide action.

Our first recommendation may seem obvious, but in my view, it is very urgent: In the age of hyperscalers, we must hyperscale energy. That means reliable baseload like gas, renewables backed by storage, breakthroughs from [small modular reactors] to fusion, and perhaps most critically a pragmatic pause on early retirements of existing power plants while we bring back nuclear to be part of mainstream energy mix.

Power generation is only half of the story, though. Getting the power to the end user is the other half. And in fact, it’s the most—it’s the more complex part of that equation. The fact is, you can’t run tomorrow’s technology on yesterday’s grid. And many—and that’s a fact—many of our grids were built for a completely different century and a completely different circumstance.

Wait times for key components like transformers and turbines can take more than three years to make them available. And this is not just a supply chain problem; it is a bottleneck to industrial growth, and that’s how we should view it. It is a bottleneck to economic prosperity and to industrial growth.

And solving it will require an investment surge of up to 300 billion US dollars annually in the US alone. We must de-risk major capital investments, and here policy can and must help. Policy cannot hold up progress. And we must take the gridlock out of the grid.

Currently, there are about 2,600 gigawatts of planned capacity around the world waiting for a proper grid connection. We must fast-track permitting and unlock that great potential. Let us train the one million electricians needed for a twenty-first-century power system. And let’s not forget that AI can unlock its own energy challenge by managing peaks and dips in demand, optimizing grid flows, and supercharging operational efficiency.

Friends, colleagues, and partners, the opportunity ahead is massive, but the window to act is very narrow. And the key to success is cooperation and true partnership. That is why the UAE is wasting no time in taking our powerhouse energy partnership with the US to the next level.

Over the next ten years we plan to grow our US energy investments sixfold, from the existing 70 billion US dollars to 440 billion US dollars. And we will do this through XRG, our international energy investment company. We are an anchor investor already in the largest LNG plant here, in Texas, and we produce specialty chemicals across the United States of America through Covestro and Nova Chemicals. And through Masdar, we have developed 5.5 gigawatts of renewable energy and storage capacity from coast to coast, and we are just getting started.

And to help harness our ambition, we just opened and activated our XRG-Masdar offices here in Washington, DC. Because, for us, the United States is not just a priority; it is more of an investment imperative. This is not just capital. It’s conviction in a shared future.

Partners, colleagues, and friends, to realize the full power of AI we must give it the power it needs. And this starts with a coordinated roadmap, a holistic approach, a comprehensive, cohesive roadmap that can be applied locally and scaled globally. We need policy that clears the path, infrastructure that carries the load, and investment that meets the moment. AI and energy are the twin engines of human progress—two engines, one direction, fast-forward into the future. And I’m here to invite you all to help shape that future together. I thank you.

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This paper draws on my professional experience working on energy and climate issues in the Eastern Mediterranean, as well as many conversations with policymakers, technical experts, and civil society stakeholders from Athens to Beirut and from Istanbul to Cairo. The renewable energy revolution offers both cleaner power and a practical foundation for cooperation through shared infrastructure and capital flows. The region’s energy future is as much about finance, diplomacy, and institutional trust as it is about technology. My aim here is to explore how financial mechanisms can bridge historic divides and support a shared energy transition. My hope is that this paper contributes to reimagining the Eastern Mediterranean not as a collection of competing interests, but as an interconnected energy community bound by mutual prosperity and resilience.

• Introduction
• Rising tides: Meeting the Mediterranean’s surging energy needs
• From pledge to power: Speeding the region’s renewable revolution
• Beyond borders, beyond banks: Innovative financing for regional energy
• Shared foundations: Creating a regional energy community
• Shared horizon: Finance and diplomacy for a unified Eastern Mediterranean energy landscape

Introduction

The Eastern Mediterranean region stands at a critical juncture in its energy development. Positioned as a geopolitical crossroads with significant renewable energy resources and strategic importance, the region encompassing Greece, Cyprus, Turkey, Syria, Lebanon, Israel, Palestine, Jordan, and Egypt has the potential to become a leader in sustainable energy while strengthening regional cooperation and economic integration.

This study examines how the Eastern Mediterranean can secure a sustainable energy future through a two-pronged approach: strategically financing next-generation grid technologies that leapfrog legacy infrastructure challenges, while simultaneously developing integrated financing mechanisms that foster cross-border cooperation. This dual strategy aligns technological innovation with regional stability and market integration needs, creating a framework for sustainable development that transcends political boundaries.

The Eastern Mediterranean’s abundant renewable energy potential, particularly in solar and wind resources, presents a transformative opportunity. The region could generate approximately 144 percent of its projected 2050 electricity demand through renewable energy sources.¹ Yet despite this potential, significant challenges persist. Aging and fragmented grid infrastructure, geopolitical tensions, and uneven regulatory frameworks hinder energy integration.

Additionally, ongoing political conflicts, geopolitical tensions, and maritime boundary threats in the region complicate the development of cross-border infrastructure, while the region remains heavily dependent on fossil fuels at a time when global climate commitments push for rapid energy transition.²

Meeting these challenges requires more than traditional approaches. This paper argues that innovative financing mechanisms can serve dual purposes: funding advanced infrastructure development while simultaneously functioning as instruments of regional cooperation. By strategically structuring financial tools that encourage cross-border collaboration, the Eastern Mediterranean can transform its energy landscape while creating economic interdependencies that help overcome historical political tensions.

The analysis unfolds in four parts. First, it examines the regional context—focusing on power demand trends, the state of grid infrastructure, and the region’s renewable energy potential. Second, it analyzes how COP28 commitments (made at the 2023 climate conference) intensify the need for rapid renewable integration and technological leapfrogging. Third, it evaluates the financing mechanisms available to fund this transition, from multilateral development banks and green bonds to Islamic finance and bilateral investment. Finally, it explores how these financing tools can support frameworks for regional collaboration, including physical infrastructure development, regulatory harmonization, energy diplomacy, and governance structures.

Rising tides: Meeting the Mediterranean’s surging energy needs

The region’s energy landscape is characterized by growing demand, aging infrastructure, and untapped renewable potential against a backdrop of complex geopolitical relationships. These interrelated factors explain why the strategies of technological leapfrogging and regional integration are necessary for sustainable energy development in the Eastern Mediterranean.

Regional power demand trajectory

Electricity demand across the Eastern Mediterranean is expected to grow substantially in the coming decades. Turkey, a pivotal economy in the region, saw its electricity consumption reach 348 terawatt hours (TWh) in 2024, marking a 3.8-percent increase from the previous year.³ Projections indicate a rise to 380 TWh in 2025, 455 TWh by 2030, and 510 TWh by 2035.⁴

This growth trajectory is mirrored in Egypt, Syria, and Lebanon, driven by population growth, urbanization, and economic development. Meeting this demand sustainably requires a massive expansion of renewable energy capacity and modernized infrastructure to support it.

Recognizing the potential and cost competitiveness of renewable energy systems, countries in the region have established ambitious renewable energy targets. Turkey aims to double its electricity capacity by 2035, with renewable energy providing nearly 65 percent of power.⁵ Egypt has set a target of renewable energy providing 42 percent of its power by 2030 and 58 percent by 2040, while Greece plans to cover at least 60 percent of its power needs with green electricity by 2030.⁶

Untapped renewable potential

The Eastern Mediterranean possesses immense renewable energy potential that remains largely untapped, though Turkey and Greece have made progress in this area. The whole Mediterranean basin’s current renewable capacities stand at 90 gigawatts (GW) for solar photovoltaic and 82 GW for wind energy, with a potential exceeding 3 TW for the whole basin—a figure that underscores the opportunity for rapid expansion.⁷

The Eastern Mediterranean’s total renewable energy capacity in 2023 was around 90 GW, with research suggesting that the region could potentially generate 144 percent of its projected 2050 electricity demand through renewable energy sources.⁸ Egypt could produce 188 percent of its demand from solar and wind energy, with 76 GW of surplus electricity production. Syria could produce 592 percent of its total demand, while Turkey and Greece could produce 105 percent and 96 percent, respectively, of their 2050 demand.⁹

According to the author’s estimates, if the pipeline of solar, wind, and hydropower projects in Egypt is fully implemented—including projects that are announced, planned, or under construction—its renewables generation capacity would grow twelvefold, in line with those of other North African nations. If the pipeline of solar, wind, and hydropower projects in Greece is fully implemented, this would result in a sevenfold increase in renewable energy generation capacity.¹⁰ These estimates are not just an opportunity to enhance energy security and accelerate the energy transition. They are also an economic opportunity with the potential to create jobs, stimulate investment, and position the region as a global leader in the growing clean energy sector.

The rapidly growing power demands across the Eastern Mediterranean necessitate expanding renewable energy capacity while also fundamentally rethinking how electricity is transmitted and shared. Addressing this challenge requires examining the current state of interconnection infrastructure and identifying opportunities to transform the region’s fragmented grid systems into an integrated network.

The interconnection imperative

Cross-border transmission grid interconnections are of cornerstone importance in the development of power systems. Grids that depend on intermittent renewable energy sources, such as solar and wind, benefit greatly from interconnections for balancing the intermittent nature of renewable sources. Because different countries have varying electricity demands throughout the day, spare capacities and shortfalls can be balanced between different grids.

The Eastern Mediterranean’s grid infrastructure presents a fragmented landscape in which cross-border electricity trade is limited. Northern countries such as Greece benefit from advanced energy grids, while southern and eastern regions lag behind. Across the whole Mediterranean, northern-shore countries have sufficient, albeit underutilized, interconnections, while southern-shore countries lack interconnection infrastructure and synchronization. ​Additionally, there are few north-south interconnections, with only a link from Spain to Morocco and another from Turkey to Syria.​¹¹ This disparity creates both a challenge and an opportunity for leapfrogging conventional development paths.

Eastern Mediterranean countries continue to prioritize energy self-sufficiency through domestic power generation rather than regional power trading. With the exception of the Palestinian territories, which import nearly all (99.4 percent) of their electricity due to minimal local generation capacity, several countries maintain exceptionally low power import levels—around 1 percent of their total consumption—including Cyprus (0 percent), Lebanon (0.078 to 3.61 percent), Jordan (0.29 to 2 percent), and Egypt (0.29 to 0.41 percent). Similarly, with the exception of Greece and its integration into the European electricity market, power exports remain negligible throughout the region, with most countries exporting less than 1 percent of their generated electricity. This self-contained approach stems from incompatible technical systems among national grids that impede synchronous operation, difficulties in maintaining grid stability across borders, and persistent political tensions that discourage deeper energy integration.¹²

Some interconnections exist in the Eastern Mediterranean but are underutilized or nonoperational. Many of the interconnections are used purely on an emergency basis to cover unexpected or scheduled outages, or are not in operation at all. Key connections such as Turkey-Syria (400 kilovolts (kV)), Jordan-Syria (400 kV), and Lebanon-Syria (400 kV, 220 kV, and 66 kV) are currently inactive, largely due to regional conflicts and technical incompatibilities between national grids, including different frequencies and control systems.¹³

Yet some progress toward greater regional integration is under way. A “super grid” is slowly emerging across the Mediterranean. The Mediterranean Master Plan 2022 outlines several Eastern Mediterranean interconnectors including: the Great Sea Interconnector between Greece, Cyprus, and Israel (1000 MW); the EuroAfrica interconnector to link Cyprus and Egypt (1000 MW), the Green Energy Interconnector (GREGY)  between Greece and Egypt (3000 MW of primarily renewable power); and a number of capacity-expansion proposals such as the ones between Egypt and Jordan (1100 MW), Jordan and Syria (800 MW), Syria and Turkey (600 MW), and Jordan and the Palestinian territories (100 MW).¹⁴

These projects are designed to enhance electrical integration, facilitate renewable energy exchange, and improve security of supply. The Great Sea Interconnector, which is under construction, is expected to be operational by 2030 with a capacity of up to 2 GW, while the GREGY project is expected to be completed by 2031.¹⁵ These developments have been planned for more than a decade. An older proposal, the Mediterranean Electricity Ring, aimed to connect Mediterranean countries via a circle of interconnections to facilitate cross-border power exchange. In the Eastern Mediterranean, this included connecting Egypt, Jordan, Syria, Lebanon, Turkey, and Greece.¹⁶

However, significant challenges remain. Tensions caused by maritime disputes between regional countries such as Greece, Turkey, and Cyprus, the unresolved Cyprus question, and the protracted Israel-Palestinian conflict, all impede the development of cross-border infrastructure.¹⁷

In addition, the geopolitical diversity, uneven political stability, and limited political trust among Eastern Mediterranean countries dampen some national governments’ interest in exploring partial reliance on external electricity. Reasons cited often include the potential for electricity being used as a geopolitical lever, the risk of disruption caused by internal conflict, infrastructure failure, governance breakdown propagating across borders, and concerns about expanding cybersecurity vulnerabilities by exposing national grids to transboundary breaches.

Additionally, many countries maintain vertical monopolies in their electricity sectors—e.g., utilities such as Electricité du Liban (EDL) in Lebanon, Israel Electric Corporation (IEC) in Israel, and, to some extent, various companies in Jordan—which enable them to control generation, transmission, and distribution, thus limiting market competition and cross-border electricity flow.

Technical barriers are equally significant, as systems have evolved separately with different standards and technologies. Alternating-current (AC) interconnections require high degrees of technical compatibility and operational coordination, creating stability risks when disturbances in one location impact other areas of the network. These challenges are compounded by insufficient regulatory frameworks and governance structures needed to support cross-border trading.¹⁸

From pledge to power: Speeding the region’s renewable revolution

Developing renewable energy capacity and establishing physical interconnections form the backbone of regional energy integration, and these efforts need to rapidly scale up due to the urgency of the climate crisis. Global climate commitments and obligations provide a framework for measuring progress and highlight the gap between current trajectories and required outcomes.

Meeting COP28 targets

The commitment at COP28 to triple the world’s installed renewable energy generation capacity by 2030 provides a clear imperative for action in the Eastern Mediterranean. Nations collectively committed to this target as part of the global stocktake of the 2015 Paris Agreement.¹⁹ In addition, 130 nations—including Greece, Cyprus, and Turkey—also joined the Global Renewables and Energy Efficiency Pledge, a voluntary coalition committing to triple their renewable energy capacity and double the rate of energy-efficiency improvement.²⁰ In September 2024, nine northern Mediterranean countries (often known as the MED9) agreed to collaborate on making the region a renewable energy hub, aligning with this global target.²¹

A growing grassroots initiative known as TeraMed is seeking to mobilize Mediterranean countries to triple their renewable energy capacity and reach 1 terawatt in combined generation capacity.²²

As of 2023, Eastern Mediterranean countries had an installed renewable power capacity of 90 GW, accounting for 42 percent of their total electricity generation.²³ To meet the COP28 target, the region must reach 405 GW of capacity by 2030, requiring a steep annual growth of 45 GW. Unsurprisingly, the region is not on track. With the exceptions of Greece and Egypt, all Eastern Mediterranean countries must accelerate their efforts if they are to meet the threefold-increase target.²⁴

In my view, meeting these ambitious renewable targets requires more than simply adding generation capacity. The Eastern Mediterranean needs advanced infrastructure solutions that can both accommodate the tripling of renewable energy and overcome existing grid fragmentation. Smart grid technologies represent the critical connective tissue that will enable this rapid transition.

Smart grid innovation: The digital backbone of renewable integration

To effectively integrate the growing share of renewables and enhance grid stability, the Eastern Mediterranean must leapfrog conventional infrastructure by investing in smart grids. In addition to interconnections, smart grid technologies enable better management of intermittent renewable sources, improve reliability, and reduce losses. These technologies include battery storage, advanced metering infrastructure, dynamic line rating, and other network automation, data management, and analytics technologies for real-time monitoring and control.

Battery storage is particularly crucial for managing the intermittency of renewable energy sources, ensuring grid stability as the share of renewables increases. However, large-scale battery storage projects are still nascent in the Eastern Mediterranean—with the exception of Turkey, which set a target for battery energy storage capacity to reach 7.5 GW by 2035.²⁵

Flexibility mechanisms, including demand response and renewable hydrogen production, further enhance grid stability. Technologies such as electrolysis using solar and wind electricity for hydrogen production are gaining traction. Turkey has plans to develop 5 GW of electrolyzer capacity for green hydrogen production by 2035, and to expand capacity to a staggering 70 GW by 2053.²⁶ Similar applications are being explored in Egypt, which plans to become a transit route for renewable hydrogen.²⁷

Smart meters also help manage the grid better through demand-side management. In the Eastern Mediterranean, Greece is leading on smart meters. It plans to roll out 3.12 million units by 2026, funded by the European Investment Bank, to enhance energy efficiency and support demand response.²⁸

Deploying advanced grid technologies across borders also requires moving beyond identifying technical requirements to addressing the fundamental question of funding this transition. Additionally, this paper argues that the financing challenge is not merely about capital mobilization but also the creation of financial structures that simultaneously enable technological leapfrogging and regional cooperation.

Beyond borders, beyond banks: Innovative financing for regional energy

The transition from technical requirements to financial realities necessitates examining the substantial capital investments needed to realize the Eastern Mediterranean’s energy transformation. While technological solutions provide the roadmap, financing mechanisms will determine the pace and scale of implementation, particularly when the magnitude of required investment exceeds traditional national budgetary capacities.

Quantifying the investment challenge

The Eastern Mediterranean’s energy transition demands significant capital to expand limited renewable energy capacity, modernize aging grids, and develop cross-border interconnections.

Renewable energy projects typically cost around $1 million per megawatt of installed capacity. Their costs are already competitive, and they are the cheapest form of new generation capacity across the region. Moreover, those costs are expected to continue falling and renewables are expected to be the cheapest source of electricity in most countries—including for storage—by 2027.²⁹

However, given the sheer scale of buildup required to meet COP28 commitments, the enormity of the financing required cannot be overstated. If the region is to build 45 GW of renewable energy capacity this year, this would require approximately $45 billion just for generation capacity at current costs, excluding transmission and storage infrastructure.³⁰

Transmission infrastructure is another challenge, especially given how its cost is often borne by grid operators rather than by private developers. The Great Sea Interconnector, for example, is estimated to cost approximately €1.9 billion ($2.08 billion).³¹

By 2030, the region’s total investment needs for sustainable energy transition could well exceed $300 billion. The magnitude of investment required highlights why ordinary national financing approaches are insufficient for the Eastern Mediterranean’s energy transformation. Instead, the region needs to scale finance beyond national resources and to explore financing instruments that mobilize capital at scale and also create structures for regional cooperation, serving as both financial tools and diplomatic instruments in a region where political tensions have historically impeded collaboration.

Financing the energy transition

The Eastern Mediterranean’s sustainable energy future will require mobilizing diverse financing sources and mechanisms. A mix of public and private funding sources—ranging from multilateral lenders and climate funds to innovative partnerships and financial instruments—can bridge the investment gap and accelerate the energy transition.

In developing countries within the Eastern Mediterranean, this challenge is made more difficult by the higher cost of capital, as investors demand high-risk premiums due to country, currency, or sector uncertainty.

This section outlines key financing sources and provides case studies and examples of how each source is being applied (or could be applied) in the Eastern Mediterranean. Each financing mechanism not only brings capital but can also serve as a catalyst for regional cooperation and innovation in energy infrastructure.

1. Multilateral development banks

Multilateral development banks (MDBs) provide a foundational source of capital and risk mitigation for large-scale energy projects in the region. Institutions such as the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), the Asian Infrastructure Investment Bank (AIIB), and the World Bank offer concessional loans, grants, guarantees, and technical assistance to support renewable energy and grid modernization. For example, the EBRD has invested more than €3.8 billion in renewable energy across emerging markets, supporting 119 projects totaling more than 6 GW of capacity.

In the Eastern Mediterranean, MDB financing often underpins ambitious projects. For example, the EBRD and partners launched a $500-million framework that helped finance sixteen solar plants (750 MW) in Egypt, including in the Benban solar park.

Another notable initiative with a renewable energy component is the Southern and Eastern Mediterranean Sustainable Energy Financing Facility (SEMED SEFF), a joint program of the EBRD, EIB, Agence Française de Développement, and KfW, a German state-owned bank. With a €141.7-million budget, SEMED SEFF catalyzed investments in Jordan and Morocco to cut more than 150,000 tons of carbon dioxide annually and boost renewables (25 percent of its funds went to renewable energy projects).³²

MDBs not only supply affordable long-term loans; they also crowd in other investors. In Egypt’s Benban project, for instance, the EBRD, the International Finance Corporation (IFC), the AIIB, and the African Development Bank (AfDB) cofinanced solar plants alongside private developers, dramatically lowering financing costs and risk.³³ By leveraging MDBs’ preferred creditor status and technical expertise, such involvement signals to markets that projects are bankable.

By providing concessional finance, convening power, and technical and policy assistance, MDBs help Eastern Mediterranean countries undertake projects that might otherwise be too costly or complex, from large wind and solar farms to regional grid interconnectors. Their financing comes with due diligence and policy guidance, encouraging reforms (such as market liberalization or improved procurement frameworks) that improve the overall investment climate. Going forward, scaling up MDB capital—including through their climate-focused funds and guarantees—will be crucial to meet the region’s renewable investment needs at the pace demanded by global climate commitments.

2. Green finance and investment

Green finance refers to capital raised for climate-friendly and sustainable projects through instruments such as green bonds, green loans, and ESG (environmental, social, governance) investments. In the Eastern Mediterranean, green bonds specifically are emerging as an important tool to tap global capital markets for renewable energy and low-carbon infrastructure. The global green bond market has expanded rapidly to more than $2.5 trillion outstanding by 2024.³⁴

Eastern Mediterranean nations have started to issue their own green bonds to fund clean energy, often with strong investor demand. Egypt was an early mover, launching a $750-million sovereign green bond in September 2020.³⁵ Cyprus followed in 2022, issuing a €1-billion green bond. In 2023, Israel and Turkey debuted their first sovereign green bonds, raising $2 billion and $2.5 billion, respectively.³⁶ Greece signaled plans to issue a sovereign green bond as well. While a national issuance expected for 2024 remains pending, the Bank of Greece issued a €500-million green bond in 2020.³⁷

Other private institutions have also issued green bonds, including banks and other businesses such as renewable energy companies. Lebanon’s Fransabank SAL issued its first green bond in 2018, valued at $60 million, with support from the IFC and EBRD. The proceeds were directed to support sustainable finance initiatives. Jordan’s Kuwait Bank followed in 2023 and, in collaboration with the IFC, issued its first green bond, valued at $50 million. The funds were allocated to renewable energy, low-carbon transport, and sustainable water and wastewater projects. ​ Additionally, Arab Bank in Jordan issued a $250-million sustainable bond in October 2023 to support green and sustainable initiatives.³⁸

However, the market remains nascent and fragmented. Strengthening regulatory frameworks, standardizing green taxonomies, and building technical capacity among issuers and investors will be key to unlocking green capital at scale. For instance, Turkey developed its own sustainable finance framework in 2021, while IFC support enabled Egypt to develop green bond guidelines and the Amman Stock Exchange to produce sustainability reporting guidelines.³⁹ The European Union recently introduced the European Green Bond Standard, a voluntary framework to ensure transparency and combat greenwashing, which could serve as a model to harmonize practices in the region.⁴⁰

3. International climate finance

International climate finance refers to dedicated funds and initiatives aimed at supporting climate change mitigation and adaptation in developing countries. For Eastern Mediterranean nations (many of which are middle-income or emerging economies), these funds are an important supplement to domestic resources. Key global climate funds include the Green Climate Fund (GCF), Climate Investment Funds (CIF) such as the Clean Technology Fund, and the Global Environment Facility (GEF). Historically, the Middle East and North Africa (MENA) region has underutilized these funds: MENA has received only about 6.6 percent of cumulative financing from the major global climate funds through 2023.⁴¹

Eastern Mediterranean countries are now working to improve their access to these pools of finance by developing strong project proposals and institutional capacity. Egypt has been notably successful in tapping climate funds, securing about one-third of all GCF resources allocated to MENA as of 2023. About 85 percent of Egypt’s GCF funding has been in the form of loans. Jordan has also received international climate finance, accounting for roughly 10 percent of GCF funding in MENA (with around half in loans). Meanwhile, Turkey has benefited from World Bank funding via the Türkiye Green Fund (TGF), receiving a $155-million loan for the greening of firms through equity financing, while Lebanon has benefited from GEF grants, receiving about 8 percent of GEF’s MENA allocations.⁴² These funds often work by blending with multilateral bank financing or by de-risking projects to attract private investors (through instruments like guarantees and concessional tranches).

4. Islamic finance

Islamic finance is a growing source of funding for the energy transition and is particularly relevant in the Muslim-majority countries of the Eastern Mediterranean. Islamic finance follows sharia principles, such as prohibition of interest, and typically uses profit-sharing or asset-backed structures.⁴³ Green sukuk (sharia-compliant bonds earmarked for environmental projects) have emerged as a key instrument to raise capital for renewables while tapping into Islamic investor pools. The global sukuk market has seen strong growth and greening in recent years. The first half of 2024 set a record, with $9.9 billion in green and sustainability sukuk issuances, indicating accelerating interest.⁴⁴

While most green sukuk so far have originated in Southeast Asia and the Gulf, Eastern Mediterranean nations are starting to consider them.⁴⁵ Egypt, for example, has been considering sukuk as a financing tool. It passed a Sovereign Sukuk Law in 2021 and could issue green sukuk to fund projects under its renewable energy and sustainable transport plans.⁴⁶

Importantly, major finance institutions are steering toward climate action. In 2021, Emlak Katılım issued the first green sukuk in Turkey with a total value of 51.8 million Turkish lira.⁴⁷ The Islamic Development Bank (IsDB) has also issued sukuk to raise funds for green projects. For example, in 2024 it issued a $2-billion benchmark sukuk earmarked partly for green development programs.⁴⁸

Beyond sukuk, Islamic finance can support renewable energy through Islamic banks and funds investing in project equity or providing sharia-compliant loans (such as profit-sharing and loss-sharing musharakah (a joint-venture structure) or lease-based Ijarah financing). Islamic finance also opens opportunities for waqf (endowment funds) or zakat (charitable contributions) to be structured for community-level clean energy access or climate resilience projects, although such models are still in experimental stages.

5. Bilateral investment

Financing and development support from one country to another plays a pivotal role in the Eastern Mediterranean’s energy landscape. Bilateral investment often comes either directly from foreign governments (through aid, export credits, or state-owned banks) or via government-backed companies and sovereign wealth funds pursuing projects abroad. In the push for renewables, several powerful bilateral actors have emerged: notably the Gulf states (such as the United Arab Emirates (UAE) and Saudi Arabia) and China. They view renewable energy projects not only as commercial opportunities but also as avenues to strengthen strategic ties and influence in the region.

The UAE and Saudi Arabia have invested significantly in Egypt’s renewable energy projects, using investors such as ACWA Power, Masdar, and AMEA Power to fund new wind and solar capacity.⁴⁹ For example, Masdar has partnered with Egyptian firms to develop a gigantic 10-GW onshore wind farm, one of the world’s largest, which it announced on the sidelines of COP27.⁵⁰

China is increasingly becoming a major bilateral financier in Eastern Mediterranean energy. Chinese state-owned enterprises and funds have targeted renewable energy acquisitions and projects, especially in economies where financing gaps exist. In Egypt, Chinese banks and companies have supported the Benban solar complex; for example, the AIIB provided $210 million in debt financing for eleven solar plants (totaling 490 MW) in Benban’s second phase.⁵¹ Chinese firms have also supplied solar panels and construction for many Benban projects. China also has energy investments in Turkey, Lebanon, and Greece. China’s Silk Road Fund has acquired a 49-percent stake in ACWA Power’s renewable energy portfolio.⁵² These investment patterns are part of the increasing “greening” of China’s Belt and Road Initiative (BRI) and reflect China’s willingness to invest in lower-income Eastern Mediterranean nations, though these investments often serve dual purposes of commercial returns and strategic positioning.⁵³

The European Union (EU) and its member states also act bilaterally through programs like the EU-funded Neighbourhood Investment Platform, which gives grants to complement loans for energy projects in the Mediterranean neighborhood.⁵⁴ Europe often emphasizes grid interconnections and market integration (e.g., funding studies for a EuroAfrica interconnector between Egypt and Greece), Gulf countries favor high-profile generation projects, and China is active across the value chain from generation to transmission.

Bilateral investments bring substantial capital and can fast-track projects, but they also entail geopolitical balancing as recipient countries in the Eastern Mediterranean navigate offers from multiple suitors. When managed well, bilateral financing can complement multilateral efforts. It also can foster regional cooperation. For instance, the UAE not only invests in Arab neighbors but has discussed energy deals involving Israel (such as solar facilities in Jordan exporting power to Israel as part of a desalinated water and solar energy swap between Israel and Jordan).⁵⁵

6. Debt financing

Debt financing (i.e., borrowing funds to be repaid with interest) is one of the predominant ways to fund energy infrastructure, including renewable projects, worldwide. In the Eastern Mediterranean, debt financing takes multiple forms: loans from commercial banks or international institutions, bonds issued in capital markets, export credits or supplier credits for equipment, and concessional and blended debt.

Given that debt is cheaper than equity, developers typically seek debt to cover most of the project costs. For investors and lenders, renewable energy projects can be attractive debt opportunities because they generally generate steady cash flows once operational.

Finance for regional cooperation

A comprehensive financing strategy leveraging all of the above mechanisms is crucial for the Eastern Mediterranean to realize its energy transition ambitions. Multilateral and climate funds provide scale and patient capital, green and Islamic finance tap new investor pools, and bilateral investments bring in strategic funding.

Additionally, financing structures such as project finance, public-private partnerships, power purchase agreements, and blended finance can help reduce risk. Green investment banks can help mobilize funding for green projects, while innovative tools like fintech and results-based financing fill niche gaps.

In my view, the region’s success in meeting COP28 goals hinges less on the availability of technology and more on the ability to align financial incentives across borders.

By structuring these financing approaches with regional cooperation as their foundation, these instruments create shared financial interests across borders, incentivizing collaboration and helping overcome entrenched political obstacles. Financial mechanisms explicitly requiring cross-border participation serve as powerful diplomatic tools in addition to their capital mobilization function.

For instance, multilateral investment funds that mandate co-investment from multiple Eastern Mediterranean countries establish joint ownership stakes in critical infrastructure, creating a financial incentive to maintain peaceful relations. Similarly, blended finance structures offering preferential terms for projects with cross-border components make cooperation economically advantageous compared to purely national approaches. For example, a Mediterranean renewable energy fund requiring participation from Greece, Turkey, and Cyprus could provide a neutral financial platform in which shared economic benefits supersede maritime disputes.

The strategic design of these mechanisms must include governance frameworks that span national boundaries, with representation requirements ensuring all stakeholders have meaningful input in investment decisions. Interconnection-specific project bonds co-issued by multiple countries can create shared liability structures in which default risks are mutually borne, fostering accountability across traditional divides.

When properly implemented, these tools can transform abstract diplomatic goals into concrete economic incentives. Countries with historical tensions can begin to view their neighbors not as competitors but as essential partners in accessing capital markets and achieving energy security. Countries that once viewed energy resources as potential flashpoints for conflict can instead develop economic interdependencies that make continued cooperation the most rational choice.

Shared foundations: Creating a regional energy community

While innovative financing mechanisms provide the tools for transformation, their successful implementation depends on creating supportive physical, institutional, and diplomatic frameworks. The mobilization of capital through green bonds, MDB funding, climate finance, and other financial instruments discussed above is necessary but insufficient on its own to achieve regional energy integration.

Having participated in several regional energy dialogues, I have observed that trust between regulators remains limited. Finance can be the tool that enables cooperation in more sensitive policy areas. Yet it must be paired with robust infrastructure development, harmonized regulatory environments, diplomatic initiatives that overcome historical tensions, and coordinated governance structures that span national boundaries. The implementation of regional energy integration requires establishing concrete structures for collaboration that can transform the Eastern Mediterranean’s abundant renewable resources into a shared, resilient energy architecture that benefits all participating nations. These efforts must include

• physical infrastructure development and grid integration;
• interconnected energy markets and regulatory alignment on grid codes, tariff structures, and cross-border trading;
• regional cooperation and diplomatic engagement; and
• regional governance frameworks.

Scaling cross-border initiatives for a connected grid

Cross-border energy cooperation in the Eastern Mediterranean is advancing through several key initiatives aimed at integrating renewable energy sources and enhancing grid connectivity. There are nine interconnection projects and proposals at different stages of development across the region. If implemented fully, they can help create a more unified energy market capable of efficiently distributing energy across the Mediterranean while addressing the intermittency challenges of solar and wind.

The Great Sea Interconnection, set to link Cyprus, Greece, and Israel, is perhaps the region’s flagship project and will facilitate the trade of renewable electricity across borders. Similarly, Egypt and Greece are exploring the GREGY interconnection. Beyond the Eastern Mediterranean, Italy and Tunisia are advancing the ELMED interconnection between them, which is expected to be operational by 2027.⁵⁶ Technologies already exist to manage some of the perceived risks of interconnections. Using high-voltage direct current (HVDC) transmission lines offer greater controllability and can be isolated more easily than traditional AC interconnections. Interconnections can also be directed to non-critical loads or areas in order to reduce risk to cross-border disruptions, while robust cybersecurity standards and protocols can help protect critical infrastructure.

Harmonizing regulations for seamless market operation

Achieving a fully integrated energy market in the Eastern Mediterranean requires harmonized regulations to ensure fair access to grids, promote investment, and reduce the cost of risk capital. Countries involved in interconnection projects need to have the regulatory framework in place to allow for successful entry of foreign electricity into domestic electricity markets and successful export of their electricity to foreign markets. This is especially difficult for countries in which electricity utilities hold vertical monopolies in all sectors of the economy. Turkey, Cyprus, Greece, and Egypt have unbundled or are on the way to unbundling their electricity markets; meanwhile, Jordan, Lebanon, and, to a lesser extent, Israel have electricity utilities that hold vertical monopolies and are responsible for generating and supplying electricity to all sectors in the economy.⁵⁷

The EU’s internal energy market policies are a model for regulatory convergence, emphasizing transmission ownership unbundling between electricity generation or supply companies and transmutation ones, consumer rights, and the role of regulatory actors such as the Agency for the Cooperation of Energy Regulators (ACER).⁵⁸ The EU’s Electricity Directive 2019/944 mandates nondiscriminatory access to transmission and distribution systems, a principle that could be adapted for the Eastern Mediterranean to attract private investment.⁵⁹

However, this EU model cannot be fully replicated in the Eastern Mediterranean due to different system maturity levels. The Association of Mediterranean Energy Regulators (MEDREG), comprising twenty-seven energy regulators from twenty-two countries, recommends that regulatory frameworks must be tailored to specific subregional contexts, and that Eastern Mediterranean countries need to develop more regulatory solutions independent from those of the EU.⁶⁰

Progress in regulatory harmonization could also increase infrastructure investments significantly in the Eastern Mediterranean. However, this progress is slow due to the region’s diverse regulatory environments, with countries such as Syria, Lebanon, Turkey, and Egypt maintaining state-controlled energy sectors, while others like Greece and Cyprus align with EU directives to liberalize the energy market. Overcoming these disparities will require sustained dialogue, capacity building, and incentives for alignment.

Energy diplomacy: Transforming geopolitical challenges into opportunities

Geopolitical tensions are another major barrier to cooperation in the Eastern Mediterranean. Political and security dynamics significantly influence energy cooperation in the region. Long-standing disputes—such as those between Greece, Turkey, and Cyprus over maritime boundaries, the Syrian civil war, the unresolved Cyprus question, the recently intensified Israeli-Palestinian conflict, and the Israel-Lebanon conflict—have all historically hindered regional collaboration and the development of cross-border infrastructure, particularly affecting projects like the EastMed Gas Pipeline.⁶¹ Overcoming these challenges will require financial resources as well as diplomatic engagement and innovative governance structures.

However, the shift toward renewable energy and the EU’s focus on a green energy economy present new opportunities for cooperation. Initiatives such as the East Mediterranean Gas Forum (EMGF)—established in 2019 as a platform focused on natural gas development, it includes Egypt, Greece, Cyprus, Israel, Jordan, and the Palestinian territories, along with France and Italy—can be both reformed to become more inclusive of all Eastern Mediterranean counties and expanded beyond natural gas to include renewable energy, power infrastructure, and advancing electricity interconnection and trading.⁶² Some energy policy experts have advocated for renaming the EMGF as the East Mediterranean Energy Forum (EMEF) to reflect this broader mandate.⁶³ Such a forum should include a regulatory platform, in which each country is represented by its national regulatory authority or electricity governing body, to jointly promote greater harmonization of regional energy markets and legislation.

Energy cooperation is increasingly recognized as a tool for regional stability and economic integration. The development of renewable energy projects and interconnectors can create shared economic interests, reducing the potential for conflict.⁶⁴ This approach transforms energy from a source of competition to a platform for collaboration, potentially easing long-standing tensions through mutual economic benefits and shared climate goals.

An increased shift toward renewable energy sources not only ensures long-term sustainability and economic benefits for the region, but also has higher potential than gas diplomacy. Unlike natural gas and other tradable commodities, renewable energy systems are an undisputed resource. Additionally, collaboration on renewable energy projects through interconnections provides synergies between partnering countries due to the benefits they provide to both grids.

Shared horizon: Finance and diplomacy for a unified Eastern Mediterranean energy landscape

The Eastern Mediterranean stands at the cusp of a transformative energy transition in which innovative financing can simultaneously advance technological leapfrogging, economic development, and regional cooperation. By strategically structuring investment mechanisms that require collaboration, the region can convert financial transactions into diplomatic bridges.

Financial innovation offers three distinct diplomatic dividends beyond its direct economic benefits.

First, joint financing creates structured engagement opportunities that maintain dialogue even during political tensions. When countries coinvest in renewable infrastructure through mechanisms such as regional green bonds or mixed-ownership projects, they establish technical and financial communication channels that persist through diplomatic fluctuations. These ongoing interactions build relationships among technical experts and financial officials that can later facilitate broader cooperation.

Second, shared financial liabilities transform political calculus by creating mutual dependencies. When neighboring countries with historical tensions become co-guarantors of infrastructure loans or joint issuers of project bonds, they develop a tangible economic interest in maintaining stable relations. The economic costs of diplomatic ruptures become quantifiable and immediately visible to stakeholders on all sides.

Third, financial innovation creates positive-sum narratives in a region often characterized by zero-sum competition. By enabling countries to collectively tap into previously inaccessible capital pools—such as global ESG funds seeking large-scale sustainable investments—regional financial mechanisms demonstrate that cooperation delivers benefits unattainable through individual action.

If the Eastern Mediterranean realizes this vision of financially driven integration, it could emerge as a global model for how innovative capital structures can overcome entrenched geopolitical challenges. The region’s abundant renewable resources, which have the potential to generate more electricity than its projected future demand, provide the natural foundation, while innovative financing creates the institutional architecture for a sustainable energy future that transcends historical divisions and creates shared prosperity across borders.

The path forward requires financial creativity, diplomatic persistence, and technical expertise—but the potential rewards extend far beyond renewable kilowatts to include a fundamental reconfiguration of regional relationships built on shared economic interests rather than historical grievances.

The Atlantic Council would like to extend special thanks to Limak Holding for its valuable support for this report.

Karim Elgendy
Executive Director,
Carboun Institute;
Associate Fellow,
Chatham House

Karim Elgendy is an expert on energy transition and climate policy in the Middle East and North Africa. His research examines the intersection of climate diplomacy, energy geopolitics, and sustainable development across the region. Elgendy investigates how countries navigate energy transitions and climate change impacts within shifting geopolitical landscapes, and analyzes how regional and global power dynamics influence climate action and policy implementation. He possesses deep expertise in energy and climate policies across the Eastern Mediterranean and Gulf Cooperation Council states, with particular focus on renewable energy, climate resilience, and diplomacy.

Elgendy has authored numerous articles and policy publications in leading journals and platforms. He has presented at over one hundred public speaking engagements and has delivered guest lectures at several prestigious universities. His expert analysis is regularly featured in broadcast, print, and digital media outlets, and he has appeared in most mainstream media outlets.

The Atlantic Council in Turkey aims to promote and strengthen transatlantic engagement with the region by providing a high-level forum and pursuing programming to address the most important issues on energy, economics, security, and defense.

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The post Great sea connections: Financing the Eastern Mediterranean’s energy transition appeared first on Atlantic Council.

The gap between actual and needed global investment in renewable energy is projected to grow to tens of trillions of dollars over the next ten to thirty years while the costs of climate change continue to compound. Public finance alone—via governments, multilateral development banks, and international financial institutions—is insufficient to meet the challenge. To bridge this widening investment gap and attract private investors that will have to provide most of the funding, what’s needed is a combination of innovative financial tools that are tailored to local contexts and mitigate risk, enhance creditworthiness, and attract private capital at high leverage rates. Guarantees are especially important because of their reputation for their efficacy and effectiveness in mitigating real and perceived risks of projects, which enhances project creditworthiness and often attracts investment from the private sector.

This paper provides a comprehensive overview of investment gaps in the renewable energy industry at the global level as well as in EMDEs to achieve the global net-zero targets and discusses the risks and obstacles facing private investors in the renewable energy industry. It also reviews various de-risking, risk-reduction, and risk-transfer financial mechanisms that could boost private investment in clean energy infrastructure and nature-based solutions projects centered around a discussion of a guarantee proposal called the Emerging Market Climate Investment Compact (EMCIC). The EMCIC is a proposal for a guarantee facility funded primarily by wealthy governments that would provide guarantees to major global investors to mobilize $100 to $500 billion in private investment in climate mitigation investments, namely clean energy infrastructure and nature-based solutions, in EMDEs over ten years. The structure of the facility would be simplified so that qualified investors would assemble portfolios that would be broadly guaranteed (against most political and commercial risks), would do their own due diligence subject to standards set by the EMCIC, and would generally not require recipient country guarantees.

Finally, the paper includes case studies on clean energy investment in Brazil and South Africa—and country-specific mechanisms available for scaling up this investment.

Amin Mohseni-Cheraghlou was the macroeconomist with the GeoEconomics Center (2021-2024) and a Senior Lecturer of Economics at the American University in Washington, DC. 

Frank Willey is a program assistant at the Atlantic Council Global Energy Center. 

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This shake-up has important implications for global energy security, which has come into sharp focus since the full-scale Russian invasion of Ukraine. Considering the Trump administration’s renewed focus on an “energy dominance” agenda, including an emphasis on furthering US oil and gas production and exports, one should not overlook the equally important geopolitical aspects of the electricity sector. Increasingly relevant to global affairs, the electricity sector has experienced rapid global demand growth of 4 percent per year—often placing new energy systems at the heart of geopolitics.  

As the world enters an “age of electricity,” decisions made during this second Trump administration will have far-reaching consequences impacting the future of international conflict, competition, and cooperation around the world. 

Security, growth, and innovation

A dominant geopolitical feature impacting the electricity landscape is Russia’s military aggression against Ukraine, which has sharpened the confrontation between the West and a coalition of authoritarian states that have in various ways supported Russia’s war effort, including China, Iran, and North Korea. The conflict has illustrated and heightened the priority of electricity security, as the executive director of the International Energy Agency (IEA) recently emphasized to European Union (EU) leaders. The EU, with major help from US liquefied natural gas (LNG) exports, reduced its dependence on Russian gas for electricity, ramped up renewable energy to 47 percent of total generation, began to replace Russian nuclear fuels with Western sources, and disconnected the Baltic states from the Russian power grid.  

Meanwhile, outside of the EU, the rest of the world saw record levels of electricity demand growth in 2024, especially in Asia, with China accounting for about half of the increase. Although the International Monetary Fund (IMF) forecasts slower world economic growth given the impact of uncertainty given ongoing trade pressure from Trump’s tariff strategy, the IEA still projects substantial electricity growth over the next three years.  

Partly fueling this expected rise in demand is the explosion of digital information, along with the artificial intelligence (AI) systems to analyze this data. This trend is revolutionizing the electricity sector and creating growing demands for reliable, flexible, secure, and resilient electricity supplies for data centers and in other key civilian and military spheres. More complex and interconnected national and regional electricity grids are growing in almost all regions of the world. But these large digital systems are increasingly vulnerable to cyberattacks, especially from malign actors such as China and its Volt, Flax, and Salt Typhoon threat teams. Electricity security is therefore a vital component to national security in this new age. 

This growing demand has set off a race to innovate and deploy new energy technologies. One critical strategic area is the development of advanced nuclear power systems, with designs under development to meet needs for electricity, industrial heat, desalination, military systems, district heating, data centers, hydrogen production, and shipping. There has been a resurgence of interest in nuclear power around the world—at COP28, leading countries pledged a tripling of nuclear power by 2050 from 2020 levels.  

Competition for electricity markets 

Against this complex backdrop, the Trump administration’s expanded use of tariffs has added new dimensions to global economic competition that is affecting relationships both allies and opponents alike. These measures have also introduced added strain on already fragile electricity supply chains, including those of power transformers, switchgear, and meters. This added pressure for the West and Western-aligned countries gives China, the world’s largest exporter of electric power equipment and electronics, an opportunity to expand further its global market presence, especially in emerging markets and developing economies (EMDEs). EMDEs generate about two thirds of the world’s power and are projected to account for 85 percent of global electricity growth over the next three years.  

Moreover, over the past decade as the costs of solar and wind have dropped, EMDEs have pursued a transition to renewable energy. Although renewables supplied only 26 percent of EMDE generation in 2023, they now provide over 75 percent of new EMDE generation capacity outside of China. China’s dominance in renewables gives it significant market—and geopolitical—influence. Global installed solar photovoltaic (PV) capacity increased by 30 percent in 2024, and Chinese companies are poised to continue flooding the market with solar PV systems and components. 

EMDE natural gas demand for power, which can complement intermittent renewables and improve grid reliability, and for industry is also growing. This creates space in EMDE electricity markets for a growing US role. As the world’s largest LNG exporter, the United States is looking to increase export capacity and access markets in India, Southeast Asia, and other EMDEs. Some countries may commit to increasing US LNG imports in their trade negotiations with the Trump administration to address trade imbalances and reduce tariffs. In 2024, US volumes went to 20 EMDEs and represented about 30 percent of total US LNG exports.  

In the past five or so years, the United States has made significant progress in the development of advanced nuclear power systems, some of which are now beginning construction. This has placed the United States in a strong position to compete for new nuclear contracts in EMDEs, particularly to build small and micro reactors. These systems offer the prospect of lower total capital costs, faster construction times, and more appropriate sizes for the smaller grids in many of these countries than large 1000-MW reactors. Russia has dominated the international new-build market with Rosatom constructing  large VVER 1000/1200 reactors in India, Bangladesh, Egypt, Turkey, Iran, and China and beginning a small modular reactor (SMR) project in Uzbekistan. China has the largest number of reactors under construction (30 domestically) and is working to expand exports of its Hualong I large reactor beyond the completed units in Pakistan as well as developing several types of SMR systems. South Korean, European, and Canadian companies are also eyeing foreign markets and nuclear supply chains for new reactors are linking companies from these regions.   

Recognizing the critical role nuclear can play in meeting US electricity demand growth, the Trump administration, with bipartisan cooperation, is supporting advanced reactor development and demonstration as well as domestic uranium mining, enrichment, and fuel production efforts. Trump recently signed an executive order targeting an increase in US nuclear capacity from 100 to 400 gigawatts by 2050. Domestic growth in the sector would enable the administration to export both large AP-1000s and SMRs, with at least a dozen projects and cooperation in the works not only in advanced economies, like the United Kingdom, Canada, Poland, Romania, Bulgaria, but also with EMDEs like Ukraine, India, Ghana, Kenya, the Philippines, Indonesia, and Vietnam. Interest in SMRs is at play in most of these countries and US companies could achieve of a sizeable share of the IEA’s projected SMR global market of 120 GW by 2050.  

National security and global engagement 

Given its broad-based excellence in the electricity sector and emerging digital and AI technologies, the United States is well positioned to engage with allies on the adoption of technologies that advance grid reliability, flexibility, and resilience. US involvement in these growing overseas markets, valued at over $2 trillion annually, is vital to its commercial, technological, and national security interests and to restoring trust and confidence in the United States as a reliable partner.  

In this effort, the United States should leverage its strengths as the largest producer of both natural gas and nuclear power to help other countries build out firm, baseload, and peaking power, helping reduce dependence on Chinese solar and battery systems in an age of electricity. But US investment both at home and abroad in renewables, energy efficiency, carbon capture, hydrogen, and other technologies is also critical to US influence in the world.  

As the Trump administration reconfigures US foreign policy, it is important to forge a new partnership with industry to enhance US energy leadership and coordinate deployment of key diplomatic and economic tools—including technology and commercial agreements, policy and regulatory assistance, capital allocation, and trade and investment promotion—in a package that can be tailored to the energy needs of individual countries. In addition to bilateral efforts, successful US global leadership will require close cooperation with allies in supporting sound multilateral financial and technology cooperation mechanisms, Western-oriented regional electricity markets, and secure supply chains. 

The age of electricity is coming. Will the United States step up and recognize that being a global leader in this sector is critical to its national security?  

Robert F. Ichord Jr. is a nonresident senior fellow at the Atlantic Council Global Energy Center. 

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Robert F. Ichord, Jr.

Nonresident Senior Fellow

Global Energy Center

Nuclear Energy Energy Transitions

Issue Brief Mar 21, 2025

To win the AI race, the US needs an all-of-the-above energy strategy

By Joseph Webster

To ensure US AI leadership, the United States must harness all forms of energy, allow a level playing field, and remove red tape constraining the buildout of critical enablers, especially transmission lines and grid enhancing technologies.

Artificial Intelligence China

EnergySource May 21, 2025

Replace the Inflation Reduction Act with FUEL-AI

By Joseph Webster

To compete in the global AI race, the United States must dramatically expand its power supply. Replacing the Inflation Reduction Act with the FUEL-AI Act would reorient energy policy toward national security, fast-tracking domestic energy production and infrastructure to power America’s AI future.

Energy & Environment Energy Transitions

EnergySource May 5, 2025

Make critical mineral spending matter this time  

By Ashley Zumwalt-Forbes

The United States has a crucial opportunity to translate large-scale funding into critical mineral stockpiling and resilient supply chains—but only if Congress structures spending to create durable markets. Without clear demand signals, real commercial offtakes, and price stability, proposed funding risks falling short of delivering on its potential.

Energy & Environment Energy Markets & Governance

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The post US global leadership in the age of electricity appeared first on Atlantic Council.

The Arabian Sea and Indian Ocean (ASIO) megaregion occupies a pivotal position in the global energy landscape, both as a key transit route and as home to some of the greatest energy suppliers and consumers worldwide. This sprawling region encompasses the Gulf Cooperation Council (GCC) states, South Asia and the Association of Southeast Asian Nations (ASEAN), as well as East Africa and, further afield, Australia.

Energy cooperation within ASIO is a linchpin of economic and geopolitical stability. The GCC, with vast hydrocarbon reserves and increasing investments in renewable energy, serves as a cornerstone of energy supply for South and Southeast Asia. At the same time, the ASIO region’s energy relationships transcend supply and demand dynamics. Decarbonizing energy systems, securing critical trade routes, and addressing energy poverty all imply a growing degree of regional and interregional strategic collaboration.

The energy landscape of the ASIO region is also a key component of broader, global geopolitical and strategic change. Critical maritime chokepoints link energy trade routes with regional and international security considerations. Global powers including China and the United States actively shape the region’s energy and political dynamics, creating both opportunities for collaboration and risks of competition.

With heightened concerns about Chinese ambitions, and with a less dependable and more protectionist US partner, many ASIO countries are in a mood to balance. Geopolitical change and the need for energy are driving deeper cooperation within the bloc and prompting outreach to second-tier powers.

This publication explores the energy relationships that define the ASIO region, focusing on three key interregional dynamics: GCC-South Asia, GCC-Southeast Asia, and South Asia-Southeast Asia. It also examines the broader regional issues shared by all ASIO countries, as well as the roles of East Africa and Australia within this vast energy ecosystem. The memo also situates this discussion within the context of broader global partnerships, particularly with the United States and Western allies.

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Phillip Cornell

Nonresident Senior Fellow

Global Energy Center

Energy & Environment Energy Markets & Governance

Global Energy Forum

The ninth Atlantic Council Global Energy Forum will be held June 17 and 18 in Washington, DC. Please check back regularly for updates on our programming.

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Energy strategy across the Arabian Sea and Indian Ocean appeared first on Atlantic Council.

The importance of an effective US industrial strategy is growing amid rapid technological change, rising energy demand, and geopolitical uncertainty. In response, policymakers are focused on how US industry can stay competitive in an era of electrification, digitalization, and AI, as well as global conflict.

Key industrial sectors like steel, aluminum, cement, and chemicals must meet rising global demand for low-emissions products while countering unfair trade practices, especially from countries like China that use state support and low environmental standards to undercut competitors. Durable US competitiveness will depend on supportive policies and transparent markets that reward higher environmental and labor standards.

The question for US policymakers is not whether to compete, but how. Industrial policy is a bipartisan priority, even if strategies differ, and a national security imperative. Given its fiscal constraints, the United States must find ways to ensure its industries thrive globally while avoiding new spending.

Over the past year, the Atlantic Council engaged dozens of industrial stakeholders from private, public, and nonprofit sectors to assess how the United States can lead in sustainable industrial development. The consensus: although no specific outcome is assured, the country is well-positioned to lead if it acts decisively. This study concludes with near-term recommendations to overcome barriers and lay the foundation for a revitalized, competitive, and sustainable US industrial strategy.

David Goldwyn is the chair of the Atlantic Council’s Energy Advisory Group and a nonresident senior fellow with the Council’s Global Energy Center.

Andrea Clabough is a nonresident fellow with the Atlantic Council Global Energy Center and an associate at Goldwyn Global Strategies, LLC.

Global Energy Forum

The ninth Atlantic Council Global Energy Forum will be held June 17 and 18 in Washington, DC. Please check back regularly for updates on our programming.

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Building for tomorrow: Preparing US industry to compete in a lower-carbon global economy appeared first on Atlantic Council.

China dominates the rare-earth supply chain, with Beijing supplying about 60 percent of global rare-earths output and controlling up to 90 percent of refining capacity. For the United States, which needs neodymium and dysprosium for F‑35 fighter jet engines as badly as it needs lithium for electric vehicles, continued dependence on Beijing is impossible. The solution is not wishful “onshoring” to the United States alone; it is establishing a portfolio of reliable partners. Kazakhstan, already the world’s leading uranium producer and a top‑ten copper and zinc exporter, is a prime candidate for such a partnership.

Rare earths have become a geopolitical flashpoint. In practice, that means Beijing can throttle supply at will. In April, for example, China abruptly restricted exports of several important rare earths and permanent magnets—actions triggered by trade disputes with the United States under the pretext of “energy security.” US firms and strategists described the move as China’s latest attempt to weaponize its rare-earths dominance.

Supply shocks will recur, not recede. After Beijing halted exports of rare-earth refining technology to the United States in late 2023, it spent 2024 steadily ratcheting up export-license requirements on strategic rare-earth oxides or outright banning its exports. These moves culminated in April of this year, with Beijing placing export restrictions on seven heavy and medium rare-earth elements (samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium) on dual-use national-security grounds.

The United States has only just begun to free its high-tech supply chain dependence on China. Over the past few years, for example, US policymakers have launched some domestic projects and lured allies in Europe and Australia to develop alternatives, but many of those efforts are still nascent. New supply lines will take years to mature. Washington needs a long-term partnership strategy that goes beyond homespun mining; it needs countries capable of supplying rare earths at scale. Since 2020, Kazakhstan has ramped up rare-earth mining, increasing its exports nearly fivefold by 2024. Still, both in 2023 and 2024, 100 percent of its rare-earth output is exported to China—a telling indicator that the resource is there, but does not currently flow to the West. By moving swiftly, the United States could hedge against future Chinese disruptions—and help build a secure, diversified global supply chain for these critical minerals.

Kazakhstan’s rare earths

Unlike some prospective supplier countries, Kazakhstan already knows it has rare-earth wealth. In early April, geologists in the country announced the “Zhana Kazakhstan” discovery: an estimated twenty million metric tons of rare-earths‑bearing ore in the Karagandy region, including sizable heavy‑rare‑earth concentrations. If even 10 percent of the ore proves recoverable at today’s grades, that equates to around 200,000 tons of rare-earth oxide content—enough to meet current US neodymium magnet demand for a dozen years. If validated, the site would give Kazakhstan the world’s third‑largest rare-earth element reserves, trailing only China and Brazil. While promising, these preliminary findings are no sure thing and will require deeper study.

This find is not an outlier. Soviet‑era data and recent airborne surveys point to additional prospects across southern and eastern Kazakhstan. The geology has been there; what was missing was investor certainty. That is changing fast. In just the past few years, the government has opened scores of new exploration projects.

Kazakhstan is no newcomer to big mining. In 2024, the country led the world in uranium output (about 38 percent of global supply) and ranked among the top ten producers of copper and zinc. The national mining concern, Tau-Ken Samruk, consolidates dozens of mines and has global joint ventures in everything from gold to base metals. Kazakhstan’s energy and transport infrastructure likewise favors large-scale mining, as it already accounts for 14 percent of the country’s gross domestic product.

Kazakhstan’s “multivector” diplomacy also plays a factor. Kazakh President Kassym-Jomart Tokayev courts Beijing and Moscow, yet he also seeks deeper ties with Washington and Brussels to balance against those giants. That instinct makes Astana a willing partner for the United States, and a less risky one than conflict-scarred alternatives such as Myanmar and the Democratic Republic of the Congo. At the same time, the United States should not expect Kazakhstan to choose only Western partners over the major powers along its eastern and northern borders.

Since 2018, Astana has overhauled its subsoil code on a “first come, first served” model. New legislation helps promote fiscal stability, offers value-added tax holidays on exploration equipment, and caps royalties. As a result, majors from Rio Tinto to Fortescue have launched joint ventures, while US‑backed Cove Capital began drilling rare-earths targets near Arkalyk in 2024.

Kazakhstan also has an edge in infrastructure. The Middle Corridor rail‑and‑port network—which runs from western China through Kazakhstan to the Caspian Sea and onward to Europe—was expanded last year with European Union (EU) financing. Aktau’s Caspian port already handles uranium concentrate bound for Canada and France; rare-earths concentrates could follow the same route with minimal modification.

In short, Kazakhstan offers what many mining countries do not: favorable geology and the business environment and infrastructure to exploit it. Kazakhstan already has smelters and refineries for many ores, and it boasts production of advanced materials such as purified manganese sulfate and titanium metal. It even produces gallium (used in semiconductors) and recycles rhenium, though admittedly it still lacks deep processing for rare-earth oxides.

The way forward

Washington has learned the hard way that pledges alone won’t break Beijing’s monopoly, and its next move should elevate quiet deals into an explicit strategy. On the Kazakh side, top leaders have made it clear that developing mining for Western markets is a priority. For example, Tokayev has called critical minerals the country’s “new oil,” and he has signed a number of memoranda with foreign partners on exploration and processing. Kazakhstan’s September 2024 “Kazakh-German” forum alone produced twenty-three agreements in mining, including rare-earth joint ventures.

Here are the three critical steps Washington and Astana should take next:

1. Unlock normal trade by repealing the Jackson-Vanik Amendment and grant Permanent Normal Trade Relations (PNTR) to Kazakhstan. The United States should finish what H.R. 1024 has already teed up: removing Kazakhstan from the Soviet-era Jackson-Vanik Amendment and extend PNTR to Kazakhstan. Scrapping this relic costs no money, instantly signals strategic seriousness, and eliminates the legal ambiguity that still shadows US financing and offtake contracts with Kazakh mines. PNTR lets both sides write binding long-term supply agreements.
2. Set up a US–Kazakhstan rare-earth task force to drive the deals. The United States and Kazakhstan should co-chair a cabinet-level task force comprised of the US State Department and US Commerce Department, as well as Kazakhstan’s Ministry of Industry. This task force would set annual, public targets for the number of exploration licenses issued to Western consortia, the amount of pilot separation plants financed and built on Kazakh soil, and the export tonnage of heavy and medium rare-earth elements to non-Chinese markets. The task force could instruct the US International Development Finance Corporation and Export-Import Bank of the United States to prioritize Kazakh rare-earth projects, while Kazakhstan fast-tracks permitting and guarantees site security. Early co-location of processing near the mine head would lock in long-term offtake for US buyers and complement EU infrastructure money already pledged for the Aktau port.
3. Deploy a blended-finance and technology package along the full value chain. Washington should pair loan guarantees with technical assistance from the US Geological Survey, Oak Ridge National Laboratory, and the Department of Energy’s Critical Materials Institute. Kazakhstan should match that support by streamlining visas for engineering teams and auctioning new mine blocks on transparent terms. The Pentagon’s National Defense Stockpile could start purchasing Kazakh oxides, while the Department of Energy and Nazarbayev University co-fund recycling research and development to close the loop at home.

To be sure, there are challenges ahead, and mining remains a difficult, uncertain venture. Bringing a greenfield rare-earths mine to commercial output can take more than a decade. But doing nothing cements Beijing’s leverage for that same decade and beyond. By acting now, Washington can buy future resilience and signal to market actors that rare-earths diversification is real.

Miras Zhiyenbayev is the advisor to the chairman of the board for international affairs and initiatives at Maqsut Narikbayev University, Astana, Kazakhstan. He is also co-sponsoring the June 4 US-Central Asia Forum at the Atlantic Council.

The post How Kazakhstan can anchor a resilient rare‑earth supply chain for the West appeared first on Atlantic Council.

Total US data center energy use is estimated to reach 325 to 580 terawatt-hours, or 6.7 to 12 percent of the total US energy demand, by 2028. To date, much of the supply has been sourced from traditional, carbon-heavy sources like coal and natural gas.

However, meeting the additional electricity demand while ensuring that energy grids are resilient and sustainable in the long term will require diversifying energy sources. Geothermal energy offers a promising solution for stable, reliable baseload power. But to unlock its full potential, the US government must take action to reduce the barriers to entry for industry.

Unearthed potential

Geothermal energy has numerous advantages over other renewable sources. Most immediately, it is a reliable, constant source of power as it relies on heat sources unaffected by atmospheric changes. In addition, it has a limited land footprint (per unit of power generated), minimal workforce requirements, and flexible generating capacity. Geothermal’s advantages make it an ideal complement to intermittent sources of energy such as solar and wind. With its load-following capacity—the ability to adjust power output depending on demand—geothermal can stabilize the grid, ensuring continuous power. Its resilience to weather-related disruptions, due to being located underground, further strengthens its role in maintaining grid stability amid climate volatility.

Despite providing reliable power generation for over a century, geothermal sources currently account for just 0.4 percent of US electricity generation. Naturally occurring or conventional geothermal systems are geographically limited, primarily found in the western United States. But next-generation emerging technologies may enable access to new sources in other locations. Conventional geothermal systems rely on heat sources, water, and natural fractures. But next-generation technologies, such as enhanced geothermal systems and closed-loop systems, use engineered fractures or closed wellbore loops to circulate fluids for energy capture where fractures do not naturally exist. These innovative approaches can unlock up to ninety gigawatts of clean, reliable power by 2050, dramatically expanding geothermal energy’s role in the US power grid.

Incremental advancements have also enhanced the efficiency of current geothermal technologies. For instance, drilling speeds at the US Department of Energy’s Frontier Observatory for Research in Geothermal Energy (FORGE) site have improved by over 500 percent in just three years, substantially cutting well-development costs. Such advancements bring geothermal closer to being cost competitive, with future projects potentially lowering operating costs by 17 to 30 percent by 2030.

Widely supported

Geothermal technology currently enjoys bipartisan Congressional support. The House of Representatives passed HR 6474, a bill that would amend the Energy Policy Act of 2005 to speed up geothermal development by offering categorical exclusions for environmental reviews in areas with prior drilling. The bipartisan bill—sponsored by US representatives Michelle Steele (R-CA) and Susie Lee (D-NV)—has been referred to the Senate Committee on Energy and Natural Resources.

Another bill that has been introduced in support of geothermal development is the HEATS Act, which would exempt certain geothermal activities on state and private lands (excluding American Indian lands) from needing federal drilling permits, provided the operator has a state permit. Additionally, the Supercritical Geothermal Research and Development Act, introduced in November, seeks to advance research into geothermal systems that use water at temperatures and pressures above its critical point (around 374 degrees Celsius and 221 bar) to increase its energy generation potential. Although neither bill has passed, they highlight the growing interest in geothermal technologies in strengthening US energy independence.

Furthermore, there are signs of the US administration’s support for geothermal, with Energy Secretary Chris Wright having pointed to geothermal as an important tool for US energy security and job creation.

Equally important is the tech sector’s growing engagement with geothermal energy. Google recently partnered with NV Energy, a major Nevada utility company, to develop what it calls a “Clean Transition Tariff.” Under the model, NV Energy would enter into a power purchase agreement to acquire energy from a geothermal plant operated by Houston-based Fervo and sell it to Google at a fixed rate (that includes the “tariff,” or cost of the partnership). This model could be adapted by other data processing companies to lower operating costs and reduce carbon footprints.

But barriers to entry remain

Despite its immense potential, geothermal energy faces significant hurdles that slow its widespread adoption. A major challenge is the substantial upfront investment required for geothermal projects. Drilling is a costly process, involving multiple stages—exploration, confirmation, and development—each demanding significant capital.

Another challenge for the geothermal industry is the lengthy and unpredictable project development process (which takes an average of seven years), driven by strict federal permitting regulations. Unlike oil and gas, which benefit from categorical exclusions for exploration, geothermal developers must undergo full environmental reviews at multiple stages, including both exploration and development.

How to unlock US geothermal potential

To fully realize the potential of a promising US geothermal energy market, the US government must take coordinated, concerted action to lift the nascent industry over those initial barriers to entry:

• Empower program offices: To address the financial barrier to entry, the Department of Energy released, in its Commercial Liftoff Report, a two-phase plan for the full-scale deployment of next-generation geothermal approaches. The first phase focuses on building investor confidence in the market viability of geothermal, with an estimated investment of $20 billion to $25 billion. The second phase focuses on broadening geothermal’s footprint across the United States, requiring over $200 billion in investment. Initial investment remains a key hurdle, so the administration must empower dedicated program offices, such as the Department of Energy’s Geothermal Technologies Office and Loan Programs Office. Greater autonomy in these organizations can help de-risk projects, foster innovation, and reduce high upfront costs by addressing financial, technological, and resource-related challenges.

• Streamline the permitting process: With strong bipartisan support for geothermal energy, Congress should pass the HEATS Act to accelerate the geothermal permitting process. The government should aim to enable exploration, drilling, and resource confirmation within twelve to eighteen months of a company starting the permitting process.

• Expand federal research, development, and demonstration grants: To achieve breakthroughs in next-generation geothermal, continuous research, development, and demonstration are crucial. Congress should pass the Supercritical Geothermal Research and Development Act, currently before the House Committee on Natural Resources, to fuel innovation and development for this emerging technology.

• Build a robust geothermal innovation ecosystem: To unlock the full potential of next-generation geothermal, the US Department of Energy should lead the creation of a coordinated innovation ecosystem that brings together federal and state agencies, Congress, project developers, financiers, researchers, and communities. Such an ecosystem is essential to align policy, funding, and deployment priorities; streamline permitting; and build public trust. A Geothermal Innovation Council, led by the Department of Energy and supported by dedicated congressional funding, could formalize cross-sector collaboration, accelerate project pipelines, and ensure that geothermal development is equitable, efficient, and scalable.

Sudeep Kanungo is a nonresident senior fellow at the Atlantic Council’s GeoTech Center.

William Larivee is a resident fellow at the Atlantic Council’s GeoTech Center.

The authors would like to acknowledge the contributions made to this article by the Atlantic Council GeoTech Center Nonresident Senior Fellow Mahmoud Abouelnaga.

Issue Brief Feb 19, 2025

Unlocking America’s untapped energy potential through enhanced geothermal systems

By Chase Thalheimer, Reed Blakemore

Enhanced geothermal systems (EGS) offer a promising clean energy solution by overcoming geographical and cost barriers, providing emissions-free, reliable power while supporting US decarbonization and energy security efforts, but widespread adoption requires government support, investment, and streamlined regulations.

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One hundred years of energy transitions

By Mahmoud Abouelnaga

Thousands of energy leaders, technology developers, and climate advocates gathered in Rotterdam, Netherlands from April 22-25 along the 26th World Energy Congress. Looking back at the first Congress, then called the World Power Congress, in London in 1924, global energy systems looked very different. In 1924, global oil production was around 2.8 million barrels per […]

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The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

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The post To build tomorrow’s power grid, the United States should look to geothermal energy appeared first on Atlantic Council.

Building on the Atlantic Council’s previous report on the nuclear innovation ecosystem, this new report by Kemal Pasamehmetoglu explores the role of the United States in establishing a full domestic nuclear fuel cycle.  

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Kemal Pasamehmetoglu

Nonresident Senior Fellow, Nuclear Energy Policy Initiative

Global Energy Center

Energy & Environment Nuclear Energy

Report Feb 24, 2025

Atoms for Appalachia: The role of nuclear energy in economic development

By Lauren Hughes

Advanced nuclear technologies can drive economic security and energy security within Appalachian states.

Economy & Business Energy & Environment

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The US can reduce Russia’s nuclear energy—and geopolitical—influence

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As the Trump administration outlines its energy priorities, strengthening the US nuclear industry remains a point of bipartisan agreement. Revitalizing this sector will lead not only to domestic economic growth, but also a reduction in Russia’s dominance in global nuclear markets and its geopolitical leverage.

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Building a path toward global deployment of fusion: Nonproliferation and export considerations

By Sachin Desai, Michael Hua, Amy Roma, Jessica Bufford, Jacqueline Siebens, Andrew Proffitt

With commercial fusion on the horizon, questions around the process for regulating fusion power plants have arisen.

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1. Investment in US energy and manufacturing

Last month, the United Arab Emirates (UAE) committed to investing $1.4 trillion in the United States over the next decade. Some of the investments in the package have already been announced, including a recent commitment by Emirates Global Aluminum to fund the construction of a smelter in the United States. If built, it would be the country’s first new aluminum smelter in thirty-five years and could potentially double US production. Trump will likely push the UAE to announce additional plans to invest in US manufacturing, infrastructure, and energy production, with petrochemicals, steel, and battery production likely targets.

Trump is expected to press Saudi Arabia to announce where it intends to invest the $600 billion that Crown Prince Mohammed bin Salman committed to during a post-inauguration call in January. Just like during his first term, Trump said that if Saudi Arabia agreed to large purchases of US products, he would make the country his first foreign visit. Now, he will look to hammer out the specifics, which will likely include purchases of military equipment in addition to investments in infrastructure, technology, and mining.

2. Nuclear energy cooperation

Saudi Arabia has tried to start a domestic nuclear power program since 2006. It has signed multiple agreements with various contractors and consultants—but with very little progress other than a small research reactor in Riyadh due to come online soon. Saudi Arabia has engaged with Chinese companies to explore domestic uranium mining and enrichment—a potentially problematic move from the perspective of the International Atomic Energy Agency (IAEA) because it can easily lead to weapons production.

However, there are signs that Saudi Arabia is now interested in complying with IAEA standards. Last August, Riyadh agreed to IAEA spot inspections designed to ensure that weapons are not being developed, potentially paving a pathway for cooperation with the United States. Last week, the Trump administration announced that it was dropping the Biden administration’s demand that Saudi Arabia normalize relations with Israel as a condition for civil nuclear cooperation negations, putting Saudi nuclear power back on the table. At stake may be commitments from Saudi Arabia to use US companies and American-made materials to build future reactors, as well as deals to supply Saudi-produced critical minerals to US customers.

3. Pumping more oil

Trump has been extremely vocal about his desire to lower oil prices. While US producers don’t want to see prices fall below the sixty dollars per barrel range (breakeven prices in the most productive shale basins are currently in the low to mid sixty dollars per barrel range), consumers would welcome lower gasoline prices this summer. Middle East producers seem eager to help, as OPEC+ recently committed to increase production by 411,000 barrels per day in June and is expected to recommit to gradually put more oil on the market at its ministerial meeting at the end of May. It is unlikely that Trump will press the Gulf countries to make additional commitments, but he will expect them to follow through—and will likely say so to the press.

4. LNG purchases

Trump is likely to push Gulf countries to expand their orders for US liquefied natural gas (LNG). Kuwait and Iraq already import US LNG and Bahrain just received its first cargo last month. Both Kuwait and Bahrain want to buy more LNG to meet high domestic electricity demand over the summer while natural gas outputs decline. Trump should push them to sign long-term offtake agreements with US LNG companies rather than rely on spot market purchases. This will ensure that these countries continue buying US gas even when more LNG become available from nearby Qatar, which is expanding its production.

This should be an easy sell to Kuwait, which is already in talks with the Australian company Woodside to buy a 40 percent stake in its Louisiana LNG terminal. Kuwait is aiming to secure LNG supplies from this project, but even with assistance from the Trump administration, it won’t be fully operational until the early 2030s. Trump should push Kuwait to sign additional offtake agreements, with the idea that if Kuwait does find itself oversupplied with LNG in the future, it can always resell cargos on the spot market.

Strategically, announcing at least two new LNG agreements with Middle Eastern countries will help the Trump administration’s position as it presses Europe to move forward with long-term offtake agreements for US LNG. Europe has been dragging its feet over concerns about emissions reporting, even though Europe needs US gas to replace the Russian LNG it currently buys. Trump can use LNG deals with Middle Eastern consumers to pressure Europe to commit to US purchases before winding down imports of Russian LNG. This would also help Trump pressure Russia to negotiate on Ukraine, as it would further squeeze Moscow’s income.

It isn’t just business

The focus of Trump’s visit to the Middle East may be on strengthening economic ties, but it is tough to ignore the backdrop of rising geopolitical tensions, particularly regarding Israel, Iran, and the Houthis. Business, trade, and energy markets are important to both the president and the leaders of the Gulf countries he will be meeting, but so are security and diplomacy. In Trump’s mind, business and geopolitics operate in tandem and everything is up for negotiation.  It should not come as a surprise to see energy deals, trade negotiations, sanctions enforcement and even weapons sales materialize in concert.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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The National Energy Dominance Council must act quickly to restore stability to the energy industry amid geopolitical uncertainty.

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The US can reduce Russia’s nuclear energy—and geopolitical—influence

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The post Four energy deals Trump will look to make on his Middle East trip  appeared first on Atlantic Council.

As part of the $150 billion defense funding boost that the House Armed Services Committee is including in the budget reconciliation bill, approximately $2.5 billion is specifically earmarked for the domestic production and stockpiling of critical minerals. An additional $20 billion is allocated to strengthening munitions manufacturing and the broader defense industrial base, which will also indirectly benefit critical minerals supply chains. 

Sign up for PowerPlay, the Atlantic Council’s bimonthly newsletter keeping you up to date on all facets of the energy transition.

While this is a welcome and overdue move, the real test isn’t whether Congress can authorize new spending—it’s whether that spending can be structured in ways that create durable, investable markets. 

This wouldn’t be the first time that funds are announced with great fanfare, but lacking clear commercial pathways, private sector follow-on investments never materialize. Projects stall, supply chains remain fragile, and strategic vulnerabilities persist.  

To truly improve critical minerals security, Congress must structure these funds to create durable markets with sustainable demand signals, real commercial offtakes, and price stability. Merely handing out subsidies and building stockpiles that gather dust is not enough. 

Here’s how Congress can get it right: 

1. Use stockpiling wisely: Build “bid windows,” not just warehouses 

Stockpiling critical minerals is essential for national defense, but traditional government stockpiles have often operated outside normal market dynamics. Congress must avoid designing a system where the US government simply buys and stores metals at opaque and inflexible prices, inadvertently distorting already underdeveloped markets. 

Instead, a “bid window” structure—similar to how the Japan Organization for Metals and Energy Security (JOGMEC) operates—could ensure the stockpile acts as a price floor, rather than a ceiling, for market development. The United States could commit to buying minerals at a transparent, indexed floor price for a set volume each quarter, giving miners and refiners the demand certainty they need to invest while still letting private markets function freely above that level. 

This approach would reduce the risk for business and investors of a price collapse, thereby attracting private investment and stretching taxpayer dollars further by stabilizing—rather than dominating—the market. 

2. Focus on processing first: Without midstream, nothing works 

Many policymakers are tempted to fund new mines, but without midstream processing capacity, mines are destined to become stranded assets. 

Instead, Congress must prioritize refining, separation, and chemical conversion capacity inside US borders. It’s not glamorous work—but it’s the missing middle where China dominates and the West remains frighteningly dependent. 

The reconciliation bill’s funds should catalyze small-to-midscale batch processing plants for metals like cobalt, rare earths, gallium, and tungsten that are faster and cheaper to deploy than megaprojects. The midstream is where the supply chain bottlenecks—and geopolitical leverage—truly lie. 

A mine without processing isn’t a supply chain—it’s an orphan. The middle of the supply chain needs to be fixed first. 

3. Use the right tool for the right stage: Grants where needed, blended finance where possible 

Grants have been—and will continue to be—essential for building the critical mineral supply chain. Early-stage projects, new technologies, and first-of-a-kind facilities often cannot attract private financing without meaningful public support. Programs like the Department of Energy’s battery material processing and manufacturing grants have catalyzed activity where private capital alone would not step in. 

But as projects mature, this funding model should evolve. Wherever possible, blended finance tools—such as partial guarantees, credit enhancements, or first-loss capital—can stretch public dollars further and bring private investors alongside. 

Right now, there is not yet enough private capital chasing critical minerals to worry about crowding out investments with public spending. The bigger risk is failing to attract it at all. Structuring public funding in a way that can de-risk projects enough to make them bankable can crowd in private investment without making government funding the only path forward. 

Otherwise, critical mineral projects will survive only as long as government grants flow, instead of becoming durable parts of national security supply chains. 

4. Target strategic chokepoints: Not everything is “critical” 

Finally, not every mineral deserves public backing. Defense dollars must focus on true chokepoints: materials heavily controlled by adversaries where supply disruptions would cripple US capabilities. 

Tungsten, antimony, heavy rare earths, cobalt, and graphite fit this billing, but not commodities like aluminum or gold where deep, liquid global markets exist. 

By staying disciplined about which materials—and which segments of the value chain—the US government funds, it can maximize strategic leverage without diluting impact. 

A historic opportunity 

The United States has a rare window to reset its critical minerals strategy. The $150 billion reconciliation bill could be the start of something transformative—but only if it is structured to create a real market pull, not just government push.  

If prices can be stabilized without destroying private incentives, if the middle of the supply chain can be bolstered, and if private investment can be attracted in a durable way, the reconciliation bill may prove a real turning point. 

Done right, this bill could lay the foundation for resilient, investable critical mineral supply chains that support national security long after the headlines fade. 

Ashley Zumwalt-Forbes is a former US Department of Energy deputy director for batteries and critical minerals, co-founder and former president of Black Mountain Metals and Black Mountain Exploration, and co-founder and former senior advisor of Metals Acquisition Corp.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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EnergySource Apr 3, 2025

Profitability and power: Fixing US critical minerals supply chains

By Ashley Zumwalt-Forbes

The global critical minerals race is well underway, and the American supply chain is behind. To regain momentum, the US must make this industry viable by creating a financial framework that attracts and retains capital.

Energy & Environment Energy Markets & Governance

EnergySource Apr 23, 2025

Illicit mineral supply chains fuel the DRC’s M23 insurgency 

By Clarkson Kamurai, Brad Handler, and Morgan Bazilian

The illicit trade of mined materials is fueling the M23 insurgency in the eastern Democratic Republic of the Congo (DRC), threatening regional stability and hindering development. As the United States considers a minerals-for-security agreement with the DRC, international engagement, ethical sourcing practices, and strengthened oversight are critical to fostering long-term peace in this resource-rich region.

Africa Democratic Republic of the Congo

EnergySource Apr 15, 2025

Central Asia’s geography inhibits a US critical minerals partnership

By Haley Nelson and Natalia Storz

Central Asia holds vast critical mineral resources, but limited export capacity and complex environmental, geopolitical, and legal risks make large-scale US investment unfeasible. The US should instead focus its efforts on allied nations with established mineral export industries.

Central Asia Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Make critical mineral spending matter this time   appeared first on Atlantic Council.

It was a state-ment. Canadian voters returned the Liberal Party to power on Monday after a stunning political comeback fueled by tensions with the United States—including an election-day message from US President Donald Trump calling for Canada to become the “fifty-first state.” Prime Minister Mark Carney declared in his victory speech that the United States will never “own” Canada. “But we also must recognize the reality that our world has fundamentally changed.” Our Canada-watchers are here to diagram what this new world looks like as Carney prepares to form a government.

• Christopher Sands (@USCanada_Sands): Adjunct lecturer and the director of the Hopkins Center for Canadian Studies at the Johns Hopkins School of Advanced International Studies
• Imran Bayoumi (@BayoumiImran): Associate director at the Atlantic Council’s Scowcroft Center for Strategy and Security
• Maite Gonzalez Latorre: Program assistant at the Atlantic Council’s Adrienne Arsht Latin America Center

Flag waving

• The election was essentially a referendum on the Canada-US relationship, Chris tells us, as “a surge of nationalist sentiment swept the country, including in Quebec,” which historically has maintained its own identity.
• Carney, who took over from Justin Trudeau in March, and the Liberal Party appear to have fallen short of a hoped-for majority of 172 seats. Meanwhile, the Conservative Party stumbled—with its leader Pierre Poilievre losing his own seat. “Carney outperformed expectations, but the appetite for change remains strong. Canadians are still divided on who should lead,” Chris says.
• The Trump administration, Chris says, could view a minority government as “weak.” Therefore it could ratchet up “pressure on Canada to meet NATO’s 2 percent of gross domestic product defense spending target, strengthen border security, and unlock its critical minerals—goals first promised by Trudeau in 2019 with little progress.”

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Let’s make a deal

• Given Ottawa’s ongoing tensions with Washington, Imran says we should expect Carney “to look beyond the traditional defense partnership with the United States and to forge new, smaller defense deals with a variety of nations.”
• We got a few hints during Carney’s first overseas trip, when he went to Paris and London rather than Washington and said Canada was reconsidering its decision to purchase F-35 fighter jets from the United States. Imran also points to a radar deal with Australia, a potential submarine deal with South Korea, and a proposed closer partnership with Nordic countries. 
• Carney’s Ottawa will distance itself from Washington on defense, “except where needed,” Imran predicts, “such as on North American Aerospace Defense Command (NORAD) modernization.”

Rocky Mountain low

• Though Carney called for unity in his victory speech, that will be put to the test in the Conservative stronghold of Alberta, Maite notes, where the Liberals won just two ridings. “With blue-collar Albertans significantly impacted by US tariffs, Carney now faces a critical opportunity to demonstrate his commitment to all Canadians, not just Liberal supporters or Ontario residents.”
• Carney and Trump-aligned Alberta Premier Danielle Smith, Maite points out, “have not started their relationship on solid footing.” But the Edmonton native Carney “may leverage his Alberta connections to build bridges with Smith and provincial voters.” 
• Alberta will also be the site of global intrigue in June, when Canada hosts Trump and other world leaders for the Group of Seven (G7) Summit in Kananaskis. That trip to the Canadian Rockies, followed by a flight to the Netherlands for the NATO Summit, represent “two defining tests” for Carney, Chris says: “How he performs will shape Canada’s standing abroad—and at home.”

The post Canada’s voters send a message to Washington—and the world appeared first on Atlantic Council.

There are first the legal barriers, particularly with respect to the Nord Stream 2 pipelines. The European Union (EU) Gas Directive of 2024 imposes a supply security test on non-EU asset owners—clearly a problem for Gazprom. However, US investors may be able to take advantage of EU rules to push forward their proposal for the acquisition of Nord Stream pipelines (possibly one, two or all the pipelines) arguing they are more likely to pass such a test than any Russian entity.  

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However, there is potentially a major second barrier: civil damages. A range of multibillion dollar claims against Gazprom are now underway because of its refusal to supply gas to its long-term customers during the energy crisis of 2021–22. There is not much point in investing in a pipeline if the gas or the revenues will then be seized by Gazprom’s former customers.

Furthermore, if Chinese tariffs on US liquefied natural gas (LNG) remain, US producers will likely want to keep Russian gas out of the EU market. This factor may weigh decisively on the Trump administration.  

The Nord Stream Pipelines

The Nord Stream pipelines consist of two sets of pipelines, Nord Stream 1 and 2, which run along the seabed of the Baltic Sea. Prior to the full-scale invasion of Ukraine in February 2022, Nord Stream 1 was fully operational, while Nord Stream 2 was awaiting German and EU authorization.  Each set in turn consist of two pipelines: Nord Stream 1A and B, and Nord Stream 2A and B. Each has a total annual capacity of approximately 27.5 billion cubic meters (bcm), amounting to 110 bcm in all—equal to two thirds of pre-2022 Russian gas exports to the EU.  

Leading up to the full-scale invasion of Ukraine, Gazprom progressively cut the flow of gas to the EU via all pipeline routes—not just Nord Stream 1, but also the Yamal pipeline and Ukrainian transit routes. These supply cuts sent EU gas prices spiraling to over €340 per megawatt hour by August 2022, well over the 2009–19 range of €9–29. By early September 2022, no gas flowed through Nord Stream 1, and Nord Stream 2 remained unauthorized. Later that month, explosions ruptured three of the pipelines leaving only Nord Stream 2A intact. 

The EU responded first by providing social protection for its consumers and businesses and funding gas purchases, principally from LNG providers. This cost the EU and member states approximately €500 billion. Subsequently, the EU significantly diversified its gas market, increasing pipeline supplies from Norway and LNG from the United States, Qatar, and even Russia. The EU plans to prohibit all Russian pipeline gas by April 2027. With the end of Russia’s Ukrainian transit contract in December 2024, the only Russian pipeline gas arriving in the EU is the 15 bcm which flows via the Turk Stream 2 pipeline principally to Hungary and non-EU Serbia. 

Can Nord Stream restart?

The major US figure pushing for a restart is investment banker Stephen Lynch, who has focused particularly on the still-intact Nord Stream 2B pipeline. Lynch has also suggested that repairing the other NS2 pipeline would cost less than $700 million.  

It is natural that one would start with the intact pipeline. However, the fundamental regulatory problem is that neither Nord Stream 2 pipeline has been authorized under German or EU law. The 2024 Gas Directive imposes two key requirements on pipeline owners. First, the owner must demonstrate that it is not also the supplier of the gas. Second, a non-EU owner person must show that certification will not risk the energy or overall security of any member state or the EU itself. 

One can see how the Lynch proposal could work with the EU law provisions. A US-owned pipeline would be far more likely than Gazprom to obtain certification under the supply security test, given Gazprom’s behavior during the energy crisis. Furthermore, as the US investors would own the pipeline but not provide the gas, they would be able to pass the separation of ownership and supply test. 

However, for such a proposal to work, the sale would need to be at full arm’s length—at market prices and with no Russian money or Russian state connections on the US side. The 2024 Gas Directive imports a very broad definition of control from the EU Merger Regulation. Any below-market-price transaction or Russian participation could raise the prospect of a legal challenge against the certification of the new non-EU owner—some EU member states would certainly launch a challenge if there were any suspicion of Russian involvement on the US side. 

One also must ask whether Gazprom—which has never willingly sold one of its long-distance pipeline systems—would be prepared to do so now. Gazprom ran a half-decade campaign to get Nord Stream 2 authorized so it could run the pipeline, and it would be unprecedented for Gazprom to surrender it. 

A further problem is that in response to the prospect of Nord Stream 2 restarting, the EU could seek to deauthorize Nord Stream 1, which was authorized under an older assessment regime which did not include the supply security test. As both Nord Stream 1 pipelines are ruptured and have not been repaired in over two years, the European Commission could propose amending legislation to the 2024 Gas Directive which could provide that any significant and lengthy rupture to a major piece of gas infrastructure would require the application of the supply security test.  

Adopting such legislation would potentially strengthen US investors’ hands with Gazprom. It would mean the only way that Russian gas could flow through the pipelines would be if they were sold. However, Gazprom would probably be even more reluctant to surrender all of its pipelines to outside hands. Taking that position, however, would mean that Nord Stream 1 could never be revived. 

The damages barrier

Perhaps the most formidable barrier to US investment in the Nord Stream pipelines is the fact that Gazprom would have difficulty selling its gas in the European Union, stemming from its behavior during the 2021–2022 energy crisis.  

From spring 2021—presumably as a means to weaken Europeans’ resolve to assist Ukraine once the full-scale invasion got underway—Gazprom progressively cut gas flows to the EU. This started with a failure to respond to demand for more gas on the European spot market as COVID restrictions lifted. Then, Gazprom did not fill its own European-based gas storages and indeed drew from them as the winter heating season began. By early winter 2021–22, some of Gazprom’s EU storages were as little as 5 percent full.  

Following the invasion in February 2022, Moscow went much further. In March, the Kremlin issued a presidential decree requiring all of Gazprom’s long-term customers to pay in rubles rather than in euros or dollars as per their contracts. Because it was difficult to be sure that payments would be cleared, many customers refused to pay in rubles. By May, Gazprom began systematically cutting off its long-term customers, starting with Poland in May and finishing with Italy in October. Over the summer, Gazprom progressively cut gas flows via Nord Stream 1, reducing supplies even for those continuing customers it was nominally still supplying.  

This led to at least twenty long-term customers suing Gazprom. As these arbitration proceedings are private, it is not possible to know how many cases there are or the scale of their claims. However, it is known that Germany’s Uniper has been awarded €13 billion by the Stockholm Court of Arbitration, and that Austria’s OMV is pursuing several claims and has so far received awards amounting to €330 million. In addition, Poland’s Orlen has said publicly it has a claim outstanding for €1.45 billion.  

The problem for Gazprom is that such awards create a major barrier to returning to the EU market. Gazprom will face seizures of its gas as it enters the EU market or more likely its customers payments will be seized to satisfy outstanding arbitration awards such as that handed down to Uniper. 

However, it is not only the long-term customers of Gazprom who have claims. Gazprom was the dominant gas supplier in most of Central and Eastern Europe and parts of Western Europe. Given that refusal to supply is an antitrust abuse of dominance under EU law, and indirect purchasers (including energy-intensive industrial users) as well as consumers are able to bring claims, the potential scale of damages against Gazprom may be enormous. 

With its long-term customers, Gazprom could potentially offer very cheap gas as a means of compensation. It could adopt a divide-and-conquer strategy by doing similar low-price compensation deals with high-volume users while seeking to contest consumer cases. The question remains however, as to whether the scale of compensation that Gazprom may have to pay undermines the economic case for entry to the EU market—and thereby the economic case for US investors to acquire one, two or all of the Nord Stream pipelines. 

Chinese tariffs and US LNG interests

With the imposition of Chinese tariffs on US LNG, US gas shipments are already being redirected toward the European market. If the current tariff regime is sustained, then US producers will want to maximize access to alternative markets. This then raises the question as to whether the US government would be willing to support any Russian gas flows returning to the EU.   

Potentially, Chinese tariffs may give Beijing greater incentive to finally consent to a version of the Power of Siberia 2 pipeline, which would, for the first time, bring natural gas from the Western Siberian gas fields—the main supply fields for the EU—to China.  

If this ends up being the case, one can see the potential reshaping of global gas markets. Russia would increase its gas flows to China, while the United States—via long-term LNG contracts—would supply the EU market. In such a world there would only be a limited role—if any—for the Nord Stream pipelines. Given the formidable obstacles, restarting Nord Stream may simply be one pipe dream too far.  

Alan Riley is a non-resident senior fellow at the Atlantic Council Global Energy Center and a Professor at the College of Europe, Natolin.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Fellow

Alan Riley

Nonresident Senior Fellow

Global Energy Center

Energy & Environment Europe & Eurasia

EnergySource Apr 28, 2025

If Russian gas returns to Europe, it must go through Ukraine

By Sergiy Makogon

The resumption of Russian gas supplies to Europe as part of a potential cease-fire agreement in Ukraine is under discussion, but any such flows would need to transit through Ukraine rather than Nord Stream or other routes. To safeguard regional stability, the EU, Ukraine, and the US must enforce strict safeguards to avoid renewed dependency and prevent Russia from once again weaponizing its energy exports.

Energy & Environment Energy Markets & Governance

EnergySource Mar 28, 2025

Nord Stream could divide Europe yet again 

By Michał Kurtyka

Washington’s potential reset with Moscow, amid Ukraine peace negotiations, has revived discussions on the future of Nord Stream 2. Whether the Trump administration would cede its LNG market in Europe to Russian pipeline exports remains to be seen. For Europe, however, reopening the pipeline would be a costly mistake.

Eastern Europe Economy & Business

EnergySource Mar 7, 2025

The US can reduce Russia’s nuclear energy—and geopolitical—influence

By Marina Lorenzini

As the Trump administration outlines its energy priorities, strengthening the US nuclear industry remains a point of bipartisan agreement. Revitalizing this sector will lead not only to domestic economic growth, but also a reduction in Russia’s dominance in global nuclear markets and its geopolitical leverage.

Energy & Environment Energy Markets & Governance

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Can Nord Stream really rise from the dead?  appeared first on Atlantic Council.

Nearly three months of zero gas flows have shown that Europe can manage without the volumes of Russian gas that previously transited Ukraine—only 15 bcm in 2024, compared to 84 bcm in 2019. Nevertheless, rumors of possible restoration of Russian gas deliveries to the European Union (EU)—either via Nord Stream or through Ukraine—continue to circulate in the press. Resuming this trade could be a potential Russian condition for halting hostilities as Russia desperately needs gas export revenues. If that is the case, resumed flows might be a necessary step to create peace. But they must be routed through Ukraine and under conditions that will ensure energy security and full transparency. 

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Russia is extremely interested in resuming supplies to the premium European gas market. Since 2021, Russia has lost more than 100 bcm per year of gas exports to Europe, undermining Gazprom’s financial stability. Desperate attempts by Gazprom to redirect exports to Central Asia and China have not brought significant financial returns, as prices there are two-and-a-half times lower than European prices. Moreover, pipeline export capacity to those markets is very limited. Russia’s direct pipeline export capacity to China currently stands at 38 bcm per year via Power of Siberia. This infrastructure is not connected to the large gas fields historically used to supply European markets. Additionally, Russia’s ability to export liquefied natural gas (LNG) faces significant constraints due to US sanctions. To cushion the loss of the European market, the Russian government has been forced to raise domestic prices, an unusual and very unpopular move in the country.  

Additionally, the Kremlin is eager to maintain its political influence over Europe, including through export revenues. Hungary and Slovakia are clear examples of how this influence manifests—both nations have repeatedly opposed or diluted EU sanctions against Russia and blocked critical financial and military support for Ukraine. 

The Russian government and several members of the German far right regularly raise the issue of resuming Russian gas supplies to Germany via the surviving branch of the Nord Stream 2 pipeline, which has a capacity of 27.5 bcm per year. However, German authorities categorically rule out the possibility of such a resumption. Other Northern European countries, as well as Poland and the Baltic states, also strongly oppose restoring transit through Nord Stream, fearing increased militarization of the Baltic Sea and the potential reversion to EU dependence on Russian gas. Resuming transit through Poland is also unlikely, for both political and technical reasons, as the Yamal–Europe pipeline has now been almost fully integrated into Poland’s domestic gas system and can no longer handle flows from Russia. 

This leaves Ukraine as the most feasible route for resuming Russian gas deliveries to Europe.  

EU officials and most member states officially do not support the idea of resuming gas transit through Ukraine. However, the EU has not imposed sanctions on Russian pipeline gas or LNG, allowing Russia to retain a significant market share in Europe. The European Commission continues to reaffirm its commitment to phasing out Russian gas completely by 2027, and this month plans to present a detailed roadmap for this process. 

Unfortunately, the European Commission has been unable to fully ban Russian gas imports. Combined pipeline and LNG imports from Russia accounted for less than 19 percent of total EU gas inflows in 2024. However, there may be concern that a complete ban could significantly impact gas prices in Europe. Given that the Commission has outlined a plan—not a binding commitment—to fully phase out Russian gas by 2027, it might opt to delay sanctions on Russian gas until then in exchange for peace. The anticipated influx of new LNG volumes from the United States, Canada, and Qatar between 2026–28 could mitigate EU concerns about price volatility during this transitional period. 

The position of the United States will be determinative. On one hand, the Trump administration consistently demands that EU countries increase purchases of US LNG and may not welcome significant increases in Russian gas imports to Europe. However, for the sake of a peace deal, Trump may agree to limited imports of up to 15 bcm annually—a volume that flowed via Ukraine in 2024 and would have only a minor impact on US exports to Europe. 

As for Ukraine, estimated annual revenues of $400–600 million from Russian gas transit are a miniscule contribution to the economy. Therefore, the question of resuming transit should be considered in a broader context of cease-fire agreements and establishing long-term peace. Continued transit of Russian oil and renewed gas transit through Ukraine could allow Russia to earn up to $12 billion annually. Accordingly, Ukraine is entitled to expect not only transit fees of around $200 million for oil and an estimated $400–600 million for gas, but also significant additional concessions from Russia. 

These concessions should include Ukrainian control over the Zaporizhzhia nuclear power plant, which can produce 6 gigawatts of electricity annually, but was occupied by Russia in 2022. This would help balance Ukraine’s power system, large parts of which have been destroyed by Russian missile and drone attacks, and eliminate the need to import electricity from the EU. It is worth noting that Russian control over the plant has little economic sense, as Russia cannot restart the plant without restoring the Kakhovka Reservoir, which is unlikely without Ukrainian cooperation. 

Additionally, Ukraine has the right to demand 15–20 percent of Russian oil and gas exports—either in monetary terms or in kind—as a transit tax. These funds should go into a special fund for the restoration of Ukraine’s energy production, which has been destroyed by Russian attacks. The proposed percentage is reasonable, given the existing discounts on Russian oil and gas which, as sanctions are lifted, should disappear.   

In order to limit Kremlin’s influence on the European gas market and on political processes within Europe, the EU should place red lines on its reengagement with Russian energy. 

First, import volumes of Russian gas should be capped, both for the entire EU and for individual member states, to prevent any renewed dependency on Russian energy supplies. 

Second, gas purchases should be carried out collectively through the AggregateEU initiative, with the delivery point for European buyers located at the Russia–Ukraine border. This would eliminate Gazprom’s ability to offer politically motivated pricing to more loyal countries and energy companies. 

Finally, the EU and Ukraine should create an international consortium to manage Ukraine’s gas transmission system. This idea was explored in 2018, and its revival could increase European traders’ confidence in transit reliability through Ukraine.  

Conclusion

If a cease-fire necessitates resuming Russian gas flows to Europe, it must flow via Ukraine and be conditional on key concessions from Russia. These must include safeguards to ensure that the EU does not become dependent on Russian gas again and that Moscow can no longer use gas as political leverage. Ukraine should also regain control over vital energy assets like the Zaporizhzhia nuclear plant and secure a substantial transit tax for reconstruction of its energy infrastructure. Policymakers in Kyiv, Brussels, and Washington must remain resolute in demanding these terms to ensure any peace agreement reinforces, rather than undermines, regional stability and energy security. 

Sergiy Makogon is a non-resident senior fellow at the Center for European Policy Analysis and the former CEO of GasTSO of Ukraine (2019-2022).

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

Read more

EnergySource Mar 28, 2025

Nord Stream could divide Europe yet again 

By Michał Kurtyka

Washington’s potential reset with Moscow, amid Ukraine peace negotiations, has revived discussions on the future of Nord Stream 2. Whether the Trump administration would cede its LNG market in Europe to Russian pipeline exports remains to be seen. For Europe, however, reopening the pipeline would be a costly mistake.

Eastern Europe Economy & Business

EnergySource Mar 7, 2025

The US can reduce Russia’s nuclear energy—and geopolitical—influence

By Marina Lorenzini

As the Trump administration outlines its energy priorities, strengthening the US nuclear industry remains a point of bipartisan agreement. Revitalizing this sector will lead not only to domestic economic growth, but also a reduction in Russia’s dominance in global nuclear markets and its geopolitical leverage.

Energy & Environment Energy Markets & Governance

EnergySource Feb 24, 2025

US energy dominance is Putin’s worst nightmare as Russia enters its fourth year of war crimes

By Olga Khakova, Haley Nelson

Three years of Russia’s senseless aggression in Ukraine have caused monumental, unnecessary human suffering but also an irreversible impact on Russia’s energy sector. Sanctioning Russian LNG at the source is the most effective way to prevent future supply blackmail from Moscow.

Central Europe Eastern Europe

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post If Russian gas returns to Europe, it must go through Ukraine appeared first on Atlantic Council.

As landmark negotiations unfold between the government in Tehran and the new administration of US President Donald Trump, the prospect of a new US-brokered agreement with Iran could serve as a turning point—not merely another iteration of the Joint Comprehensive Plan of Action (JCPOA), but a wider strategy encompassing nuclear compliance, regional de-escalation, and energy collaboration. Such a deal would reframe negotiations from an exclusive focus on uranium enrichment and arms controls to a broader architecture centered on commerce, infrastructure, and regional integration.

If implemented with foresight, transparency, and inclusive governance, establishing a regional gas corridor could transform the Middle East’s fractured geopolitics into a system of mutual benefit.

Mapping a “Gas Peace Corridor”

At the center of such opportunity is South Pars, Iran’s share of the world’s largest natural gas field. Straddling the maritime border with Qatar, where it’s known as the North Dome—South Pars, holds an estimated 14 trillion cubic meters of gas and eighteen billion barrels of condensate. That’s more than forty percent of Iran’s proven gas reserves and nearly eight percent of the world’s total.

Despite this immense resource, South Pars remains significantly underutilized due to international sanctions, underinvestment, and outdated infrastructure. Although Tehran launched a seven billion dollar initiative in March 2025 to sustain pressure levels in the aging field, the scale of South Pars demands much more: international partnerships, modern technology, and access to global markets.

This is where diplomacy and energy intersect.

Under this framework, Iran would commit to placing its nuclear energy program under comprehensive International Atomic Energy Agency (IAEA) monitoring, curbing support for regional proxies, and opening its natural gas sector to foreign investment. In return, Tehran could gain access to up to $120 billion in frozen assets, kickstart its economy, and begin exporting gas at scale to neighboring countries and Europe.

The blueprint envisions a “Gas Peace Corridor,” serving as the primary conduit for this transformation—connecting Iran’s South Pars field through Iraq and Syria to the Mediterranean, with links extending into Turkey and the European grid.

An Iranian pivot from military to markets

Iran, for its part, stands to gain enormously. Home to the second-largest proven gas reserves in the world, second only to Russia, Tehran has long been isolated from the global energy economy. Its domestic sector suffers from inefficiencies, periodic blackouts, and reliance on unsustainable subsidies. Despite sitting atop the world’s second-largest proven gas reserves—33.8 trillion cubic meters—Iran struggles with domestic shortages. In winter 2023–2024, peak demand exceeded 800 million cubic meters per day, while supply hovered around 700 mcm/d, leading to rolling blackouts and industrial shutdowns. A foreign investment–backed development of South Pars would allow Iran to rebalance domestic demand and redirect surplus toward exports, reducing pressure on internal subsidies that cost the government an estimated $63 billion annually.

A strategic pivot away from militarization toward markets would allow Tehran to modernize its energy infrastructure, reenter global trade networks, and redefine its international image. A successful transition from isolation to integration could open Iranian markets to US and Gulf Cooperation Council (GCC) investment, expand regional trade, and reduce the economic rationale for military adventurism.

This would mirror and modernize the long-dormant Iran–Iraq–Syria pipeline, also known as the Friendship Pipeline, which was initially proposed in 2011 but was derailed by civil war, sanctions, and political resistance. Today, with the region searching for stability and energy markets desperate for alternatives to Russian gas, the geopolitical logic of that project is stronger than ever. A re-imagined peace corridor would also be an economic lifeline to post-conflict states and a bridge between long-divided regional powers.

In economic terms, transit revenues and associated infrastructure investments could inject billions of dollars annually into transit countries like Iraq and Syria, serving as a stabilizing force amid reconstruction efforts.

Global opportunity

This corridor has clear benefits for the West, too.

For Washington, backing such an initiative could reassert US leadership in a region where its influence has waned. If designed, financed, and operated by US and allied firms, the pipeline could generate significant long-term returns through tariffs, service contracts, and equity stakes, embedding American business interests into the region’s energy future.

Once fully operational, the Gas Peace Pipeline could transport up to one billion cubic meters of natural gas (bcm) annually, equivalent to nearly one-fifth of Europe’s current import needs. Such capacity could rival existing corridors like the Nord Stream system and significantly bolster Europe’s energy diversity and resilience.

At its peak, Russian gas accounted for over 40 percent of the European Union’s imports; even after sanctions and supply disruptions, the continent remains vulnerable to shortages and price fluctuations. By enabling the flow of Middle Eastern gas, particularly from a reserve as vast as South Pars, Europe could stabilize prices, reduce dependency on Russian supply, and align with its climate goals by replacing coal and oil with cleaner-burning gas.

Expanding gas exports from South Pars also aligns with the EU Green Deal and global net-zero ambitions, with the potential to displace an estimated 100–150 million tons of CO₂ emissions annually, particularly by substituting coal in power generation across Europe, Asia, and Africa. Natural gas emits approximately fifty to sixty percent less CO₂ than coal per unit of energy produced.

The war in Ukraine and subsequent energy crisis underscored the fragility of relying on a single dominant supplier. South Pars gas, transported through a modern regional pipeline system, would offer a reliable alternative, especially since Europe’s gas demand is projected to remain significant well into the 2030s. By aligning with this Middle Eastern initiative, the EU could secure long-term supply agreements while promoting cleaner alternatives to coal in countries like Poland and Germany, thereby supporting its own decarbonization strategy.

In March 2024, the Gas Exporting Countries Forum (GECF) released its Global Gas Outlook 2050, forecasting a 34 percent rise in global natural gas demand. Meanwhile, Europe, with approximately ninety percent of its consumption sourced from imports, would benefit from a diversified and secure energy supply at a time when energy geopolitics returns to the forefront.

Yet this vision also carries risks. Russia is unlikely to welcome a pipeline that competes for its most critical market. Moscow may respond by deepening ties with Tehran or by fostering instability in key transit zones to derail the project. Conversely, the deal could pressure Russia diplomatically, creating leverage for Washington and its allies in negotiations over Ukraine and broader European security.

A regionally stabilizing force

Turkey, already a key energy transit hub, would gain geopolitical capital as the linchpin between the Middle East and Europe. Hosting a major leg of the gas corridor would increase its negotiating leverage with both Brussels and Washington, particularly on contentious issues like NATO expansion and regional security. It would also deepen Turkey’s economic ties with Iraq and Iran, strengthening its regional position at a time of multipolar competition.

The gas peace pipeline would also serve as a stabilizing force for Syria and Lebanon—both economically and in terms of security—under the joint guarantee of the United States and Iran, whose cooperation would be anchored in their investment agreement. Syrian reconstruction efforts could be jump-started by pipeline development and transit revenues, gradually shifting the country from battleground to bridge. For Iraq, with its central geography and ties to both Tehran and the West, this project could accelerate its emergence as a regional energy corridor.

The GCC would also stand to benefit. Joint ventures in Iranian gas development would allow the GCC to diversify their portfolios, export routes, and hedge against volatility in oil markets. Economically, such cooperation would foster interdependence, while politically, it could cool long-standing rivalries.  The political dividends for all stakeholders, including Turkey and Qatar, would be no less significant than the commercial ones. Regionally, the project could foster greater cohesion and economic integration in the Middle East. Internationally, it would offer Europe a viable alternative to Russian gas, reinforcing energy security across the continent.

The broader regional effects would also be notable. Reduced Iranian support for groups like the Houthis could de-escalate the conflict in Yemen, increasing security in the Bab al-Mandab Strait—a vital chokepoint for global shipping. Jordan and Lebanon could gain access to affordable energy, easing economic crises and supporting development goals.

The pathway forward lies not in reviving failed doctrines of containment or conflict, but in embracing a pragmatic doctrine of peace and commerce. Energy, in this vision, is not merely a commodity—it is a diplomatic instrument, a stabilizer, and a platform for cooperation.

Rather than trench lines and warships, the region could be connected by pipelines and trade routes. Rather than exporting instability, it could export energy and opportunity. And rather than cycling through confrontation, regional powers—under the facilitation of the United States, and in alignment with European interests—could craft a new era where shared prosperity becomes the foundation of durable peace.

Energy talks, while unconventional, mirror the kind of transactional diplomacy that characterized the Trump administration’s foreign policy, focused on tangible economic outcomes and energy price relief for American consumers. While the stakes of energy diplomacy are high, so is the potential for a lasting impact—economically, strategically, and diplomatically. The convergence of energy needs, geopolitical shifts, and strategic opportunity makes this not only feasible but urgent. What is required now is leadership—bold, strategic, and clear-eyed enough to see that the path to peace may run through a pipeline.

Luay al-Khatteeb is the former Minister of Electricity in Iraq and a member of Iraq’s Federal Energy Council. He can be found on X @AL_Khatteeb.

The post Gas diplomacy: A blueprint for Middle East peace and global energy security appeared first on Atlantic Council.

US energy producers are growing increasingly wary of Trump’s policies and are calling 2025 the year of “uncertainty.” They see geopolitical uncertainty, volatile oil prices, and erratic tariffs as reasons to exercise capital discipline, potentially shut in production, and forgo planning for future operations. One executive told the Dallas Federal Reserve that he has “never felt more uncertainty about our business in my entire forty-plus-year career.”

The National Energy Dominance Council must act quickly to restore stability to the energy industry. The council can take advantage of this juncture to craft reasonable, achievable energy strategies that aren’t driven by ideology or underpinned by untested technology. To ensure real progress toward energy security, the council should follow these seven principles.

1. Move quickly

Energy infrastructure is a long game. The council needs to figure out its plan in the next two months, because four years is considered short-term in energy development. For example, it can take a decade or more from the time a discovery well is drilled to bring a new onshore oilfield online, and it can take seven to nine years to build a new natural gas pipeline. The Trump administration is operating in a new paradigm for energy policy, in which there are no guarantees from one administration to the next. With the stroke of a pen, permitting processes can be suspended, funding can be eliminated, and lease auctions can be canceled. The council doesn’t have a year to come up with a policy—it needs a well-articulated strategy in place before this summer.

2. Communicate with industry

The energy industry needs to know what to expect over the next four years, and, if possible, beyond that. The council should publish and publicize a timeline laying out the administration’s plans for energy regulation, permitting, funding, and leasing. This would allow businesses to make concrete plans and allocate capital effectively. The best way to encourage industry participation in domestic energy growth is to provide a clear map of the administration’s goals and intentions. Otherwise, lack of trust will either keep businesses and financial institutions from investing in US projects or force them to gamble on the accuracy of information they’ve obtained from inside sources. Oil company executives are already facing tremendous uncertainty due to the Trump administration’s tariff policies. The council could help alleviate this by establishing open, direct communication channels with industry.

3. Establish regulatory stability

Streamlining and stabilizing permitting processes doesn’t mean eliminating or scaling back environmental reviews. It means that when a company applies for a permit from the federal government, it should have reasonable certainty that, if the application meets the guidelines set by the agency, then it will be approved in a timely manner. This process was disrupted during the Biden administration, first when it halted all auctions to lease federal land for drilling just after taking office in 2021, and then when permits to drill on land already leased were held up in a bureaucratic backlog. The Biden administration further delayed the process by agreeing to reevaluate National Environmental Policy Act reviews that had already been completed for a large portion of the land leased during the first Trump administration in five western states. This prolonged an already lengthy process for oil and gas development, disincentivizing companies from exploring new land. Streamlining and simplifying the permit-review process would help reestablish industry confidence and encourage investment in US energy production.

Regulatory stability also means issuing new regulations in a timely manner and adhering to the deadlines those regulations establish. In recent years, the White House has not met this benchmark. The Biden administration, for example, delayed finalizing new methane emissions rules to oil and gas producers and new vehicle emissions standards to car manufacturers and dealerships well past its established deadlines. Today, the Environmental Protection Agency under Trump is reconsidering the Biden administration’s tailpipe regulation, which would have forced car dealerships to sell increasing numbers of electric vehicles regardless of consumer demand. No replacement regulations have been proposed, so the vehicle industry has no idea what to expect. New regulations need to be set so businesses can prepare, and federal agencies need to stop delaying the process beyond established deadlines. Regulatory uncertainty is extremely problematic for the auto and energy industries. Even when standards are stricter than industry would like, business leaders still prefer regulatory certainty to ambiguity.

4. Prioritize legislation over executive action

It is much more difficult, onerous, and time-consuming to pass legislation through Congress than it is to implement policy through executive orders or through regulatory agencies. But cementing policies through legislation ensures their implementation long after the sitting president leaves office. The council should push for legislation to secure future lease offerings for oil and gas drilling and for wind and solar farms so that no future administration can cancel or delay them for political purposes. The market should determine whether companies wish to bid for the rights to drill or build on this land, not politics. Likewise, land that should be protected from any energy development should be protected by law, not just the whim of the executive.

5. Develop strategic reserves of certain critical minerals

The United States has known for nearly a decade that China controls a startlingly high percentage of the world’s critical-mineral resources and that it is actively working to expand that control. Many of these resources, such as battery-grade lithium and cobalt, are critical to energy storage. There is bipartisan agreement that the United States needs to diversify its critical-mineral sources, but policies encouraging domestic production have been slow to emerge. Trump’s March executive order on critical minerals calls for fast-tracking the permitting process for new mining operations in the United States, but any new hard-rock mining operation will take many years to come online. To help secure supplies of the materials the United States needs to maintain its energy infrastructure and military readiness, the Trump administration should establish a strategic reserve for key critical minerals. Such government-controlled reserves would act as a cushion that could be used to temporarily alleviate supply shortages.

This would be especially valuable if Trump expects to continue to employ tariffs as a foreign-policy tool. For example, in February, China banned the export of certain critical minerals to US and allied defense companies in retaliation for tariffs. US weapons manufacturers, which rely on Chinese supplies of the metal tungsten, are now scrambling to find other sources. With 90 percent of the world’s tungsten supply controlled by China, Russia, and North Korea, a US strategic tungsten reserve would help keep the market from experiencing severe dislocation.

Likewise, copper is necessary for electrical wiring, semiconductors, and military hardware. The United States should establish a strategic reserve of copper to stabilize US copper supplies. This would be especially useful if, for example, Canada were to impose retaliatory tariffs on copper exports to the United States. The United States imports over one quarter of its copper from Canada, and the mere threat of tariffs is already upending the global copper market as companies increase imports to create their own stockpiles. A strategic reserve that could be released to combat the impact of potential future Canadian tariffs would likely help prevent panic buying and combat price spikes.

6. Incentivize investment in long-term oil and gas production

Production from conventional oil resources in the United States has been on a downward trajectory since 1986. The major increase in production since 2011 has come from unconventional resources, such as hydraulic fracturing, or fracking. Generally, production from fracking wells can be brought online more quickly than production from conventional wells. However, production from fracked wells declines more rapidly than production from conventional wells.

There isn’t much the federal government can do to incentivize companies to invest in oil and gas production in the United States outside of offering land, tax incentives, favorable regulation, government stability, rule of law, infrastructure, and predictability. The National Energy Dominance Council should examine each of these areas and find ways to improve their implementation. For example, it could recommend to Congress and the president that they amend the 1970 National Environmental Policy Act to include specific requirements for environmental assessments and environmental impact statements so that groups can no longer bring lawsuits demanding that permits and lease sales be invalidated because a government agency did not include a particular energy-market forecast. Lawsuits play an important role in checking corporate power in the United States, but the recent rise in frivolous lawsuits and lawsuits based on technicalities just to stall production disincentivizes companies from investing in long-term projects in the United States because they increase uncertainty. Changing the law could reduce the number of wasteful lawsuits and allow operations to move forward with reasonable environmental assessments.

7. Modernize infrastructure

While energy production is a major component of energy security, it is useless without the infrastructure to transport and transmit energy to consumers safely. The federal government should support the development of new pipelines to safely deliver natural gas to consumers. It should also support modernizing and improving electricity transmission infrastructure, including building long-distance transmission lines so that communities can access the cheapest and most efficient sources of electricity available, when they need them. Grants to study the state of the United States’ electricity infrastructure and government-backed loans to fund upgrades and modernizations that will improve safety and reliability should be made available to state and local governments.

The National Energy Dominance Council has the unique opportunity to recommend policies that could restore stability to the US energy sector and help ensure the United States’ energy security into the next century, but it needs to act soon. The council’s policy agenda should remove barriers to energy production without jeopardizing environmental protections, resolve regulatory uncertainties, streamline regulatory and permitting processes, build new strategic reserves for critical minerals, and modernize electricity transmission and pipeline infrastructure. Its most urgent task is to offer a sense of assurance and stability to energy producers that have been buffeted by regulatory, market, and geopolitical uncertainty.

Ellen Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the president of Transversal Consulting.

The post How the National Energy Dominance Council can set the US on the path to energy security appeared first on Atlantic Council.

Through the C5+1 Critical Minerals Dialogue, the Group of Seven’s (G7’s) Partnership for Global Infrastructure and Investment (PGII), and bilateral memoranda of understanding signed with the region, the United States has begun to explore Central Asia’s untapped critical mineral wealth. However, the political ambition has not necessarily reflected the logistical difficulties inherent in Central Asia-originated supply chains.

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Central Asia’s untapped potential

Much has been written on Central Asia’s position as a “new frontier” in the global contest for critical minerals. The region has a wealth of lithium, copper, aluminum and uranium, although some reserves require further exploration as existing data was collected during the Soviet era.

But just because the region has critical minerals, does not mean the United States can easily access them. Taking a closer look at the region, infrastructure, governance, topography, and geopolitical complexities presents numerous challenges for US companies to navigate.

Regional energy grids are not well equipped to handle expanded mineral production. Mining is highly energy intensive, accounting for 69 percent of Kazakhstan’s industrial energy use. Central Asia’s power system already struggles to balance generation and distribution, suffering high transmission losses and frequent blackouts. To improve the grid and ensure that reliable power is supplied to mines and enrichment facilities, modern power plants and upgraded high-voltage transmission lines are needed, which would cost an estimated $25–49 billion.

Subpar resource governance is also impeding Central Asia’s mineral potential. The region is home to inconsistent tax regimes, lacks government transparency, and has a history of nationalizing or renegotiating contracts with foreign companies. Stronger regulatory protections are needed to ensure investor confidence. 

Beyond these challenges, newcomers to this frontier market face deeply entrenched Chinese and Russian influence in regional supply chains. Soviet-era pipelines, highways, and railways initially pulled trade northward after the collapse of the Soviet Union. But, since 2013, China’s Belt and Road Initiative (BRI) has reoriented trade eastward through infrastructure projects like the China-Kyrgyzstan-Uzbekistan railway. Through partnerships with regional transit operators like Kazakhstan Railways (KTZ), and investments in locomotive production and Caspian ports, Beijing has bought out regional transit infrastructure and skewed the investment bidding process. US businesses may face challenges in securing contracts in a region where critical infrastructure is controlled by Chinese and Russian entities.

In the critical mineral sector, China holds the majority of mining permits in Kyrgyzstan and Tajikistan, Russia has monopolized regional uranium enrichment, and several Central Asian mining companies have been sanctioned  by the United States for their close relationships with Russia. These geopolitical and regulatory barriers not only limit Western access to critical mineral resources, but also reinforce China and Russia’s control over the region’s strategic industries.

Moreover, the primary bottleneck in the critical minerals supply chain is processing, not mining. While Kazakhstan can refine copper, zinc, and lead, the region lacks processing capacity for energy minerals like lithium, uranium, nickel, and cobalt. Most of these raw metals end up in China or Russia for further enrichment.

Promises and pitfalls of the Middle Corridor

For Central Asia’s critical minerals to reach Western markets at scale, new export routes must be established; energy infrastructure issues must be addressed; mineral survey maps must be modernized; and local enrichment facilities must be developed.

Raw minerals can be shipped to processors in the West, but westward routes are largely underdeveloped. Because the region is surrounded by sanctioned and adversarial states—Afghanistan, China, Iran, and Russia—the Middle Corridor, a multimodal transport route that links Central Asia to Europe via the Caspian Sea and South Caucasus, is the only way to ensure secure, sanction-free export. However, due to regional infrastructure inefficiencies, checkered contractual practices, and rapidly developing environmental issues, Western investors have been slow to develop the route’s capacity.

Infrastructure issues have kept the route’s container capacity low, the shipping times unpredictable, delays frequent, and prices volatile. Caspian ports are restrained by low vessel capacity; there are significant, time-consuming “break-of-gauge” issues across Central Asian railways; and unaligned tariff regimes, cargo regulations, and customs procedures impede the flow of goods across borders.

While climate-driven water loss could see the Caspian’s shoreline lower by 21 meters by 2100, port capacity is expected to shrink further, and ports could be pushed back at least one kilometer from the shoreline, necessitating major redevelopment and causing billions of dollars in economic losses. Rising temperatures and the construction of dams along Russia’s Volga River, the Caspian’s main source of water, have seen the average sea level drop to its lowest point in 400 years, reducing cargo ship capacity by 20 percent. In the northeast Caspian, where waters are shallowest, ships leave ports before they are fully loaded to reduce ship depth. If waters decline further, northeast Caspian ports will likely be unusable. Desalination projects have been implemented by Kazakhstan, Azerbaijan, and Turkmenistan to slow the declining water levels of the Caspian. However, the energy-intensive desalination process has unintended negative impacts on marine life and water quality, and its ability to slow declining water levels has been highly debated. Therefore, the region needs investment in new forms of water-saving technologies, like atmospheric water harvesting, in order to prevent shrinkage that will eliminate the feasibility of the Middle Corridor.

Can this frontier be tamed?

In its current state, the Middle Corridor is incapable of accommodating the United States’ critical mineral needs. Its limited capacity and higher-than-average transit costs would offer little strategic benefit to US businesses while exposing investors to significant financial and geopolitical risks.

For investors to see the benefits of Central Asian critical mineral mining, improved transit routes are necessary; some studies have estimated €18.5 billion is required to ensure commercial viability. Transport costs remain high, delays create logistical uncertainty, and limited domestic processing forces reliance on neighboring markets. Without addressing these bottlenecks, the region’s potential as a critical mineral hub will remain constrained.

Unified tariffs and cargo regulations and the digitalization of regional transit could help to reduce delays along the Middle Corridor, helping to set the groundwork for additional infrastructure investments. Kazakhstan, Azerbaijan, and Georgia have already begun working towards a unified customs system after signing a trilateral union in 2023 to establish a jointly owned logistics company. However, with China Railway Container Transport Corporation (CRTC) joining the joint venture at the end of 2024, the corridor is beginning to look like another BRI project.

China’s formal involvement in the Middle Corridor Multimodal Joint Venture, its agreement with Kazakhstan to construct the Tacheng-Ayagoz railway line, and China’s construction and management of Georgia’s Anaklia deep-sea port underscore the importance of this route for China. Any increase in the route’s capacity will help increase the capacity of China’s westward exports. Investing billions into the westward export of Central Asia’s critical minerals will benefit Chinese transit and open more opportunities for the dumping of Chinese goods into Western markets.

Although the United States strategically benefits from engaging with Central Asia and offering an alternative partner, investing billions of dollars into regional transit routes may lead to negative unintended consequences. Not only does the route require massive infrastructure investments and significant regulatory improvements to benefit Western markets, but from a US national security perspective, investments will undoubtedly encourage westward Chinese transit.

The reality of a US-Central Asia critical mineral partnership

Quickly securing critical mineral partnerships is vital to US efforts to reduce dependence on China. However, the United States should be wary of unrealistic expectations for what Central Asia can provide. Regional infrastructure development is incomparable to any other region in the world. Central Asia is uniquely burdened by its encirclement between US-sanctioned countries. In the short and medium term, low export capacity, high transit costs, geopolitical volatility, and a high-risk investment environment significantly reduce the region’s commercial viability.

The United States should choose its battles wisely. Political will is not enough to move billions of dollars’ worth of minerals across oceans. Infrastructural, logistical, environmental, and legal complexities should guide decision-making. With the time-sensitive nature of US critical mineral needs, efforts should start closer to home with US-allied countries with established mineral export industries, like Canada or Chile. US supply chain efforts need to be driven by capacity, reliability, and economic viability, rather than political pipe dreams.

Haley Nelson is assistant director at the Atlantic Council Global Energy Center.

Natalia Storz is program assistant at the Atlantic Council Global Energy Center.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Haley Nelson

Assistant Director, European Energy Security

Global Energy Center

Central Europe Energy & Environment

EnergySource Apr 3, 2025

Profitability and power: Fixing US critical minerals supply chains

By Ashley Zumwalt-Forbes

The global critical minerals race is well underway, and the American supply chain is behind. To regain momentum, the US must make this industry viable by creating a financial framework that attracts and retains capital.

Energy & Environment Energy Markets & Governance

New Atlanticist Mar 21, 2025

Four critical questions (and expert answers) about Trump’s new critical minerals executive order

By Alexis Harmon, Reed Blakemore

On March 20, US President Donald Trump signed an executive order intended to increase crucial mineral production in the United States. Atlantic Council experts dig into the details.

Economy & Business Energy & Environment

EnergySource Jan 22, 2025

China’s lithium-ion battery exports: Why are US prices so low?

By Joseph Webster

Export prices for Chinese batteries entering the US are lower than for any other market, suggesting that China may be engaging in anti-competitive behavior. As batteries grow in importance for commercial and military applications, the US should increase tariffs on Chinese battery imports to bolster US and allied manufacturing capabilities.

China Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Central Asia’s geography inhibits a US critical minerals partnership appeared first on Atlantic Council.

In this Atlantic Council issue brief, authors Sachin S. Desai, Michael Y. Hua, Amy C. Roma, Jessica A. Bufford, Jacqueline E. Siebens, and J. Andrew Proffitt explore pathways to address regulation, nonproliferation, and export considerations for fusion technologies. They argue that fusion power plants should be regulated in a pathway that is separate from the regulatory pathways established for fission reactors, especially since the materials and processes involved in fusion power plants are significantly different from fission reactors.

Report Feb 24, 2025

Atoms for Appalachia: The role of nuclear energy in economic development

By Lauren Hughes

Advanced nuclear technologies can drive economic security and energy security within Appalachian states.

Economy & Business Energy & Environment

EnergySource Jan 15, 2025

Tripling global nuclear energy capacity is in reach—if the world seizes the moment

By Amy Drake

At COP28, nations and corporations committed to tripling global nuclear energy capacity by 2050, underscoring its essential role in achieving net-zero emissions. Looking ahead to COP30, global leaders must strengthen multilateral collaboration, engage the financial sector, and provide support for new partnerships with the nuclear industry to meet this goal.

Energy & Environment Nuclear Energy

Global Energy Agenda Feb 20, 2025

The small reactor revolution can transform African energy systems 

By Lassina Zerbo

Africa faces a dual challenge of ensuring reliable access to energy while contributing to global net-zero goals. Nuclear energy—and in particular small modular and micro reactors—can revolutionize the African energy landscape and promote sustainable development.

Africa Energy & Environment

Nuclear Energy Policy Initiative

The Atlantic Council’s dedicated home for the exploration of nuclear energy’s future.

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The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Building a path toward global deployment of fusion: Nonproliferation and export considerations appeared first on Atlantic Council.

Without a clear pathway to sustainable profits, taxpayer and private sector investments risk becoming financial sinkholes. If the United States wants to secure a resilient supply chain, it must create a financial framework that attracts and retains capital.

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The economics of critical minerals

A functional critical minerals supply chain requires three key stages: mining, midstream processing, and downstream manufacturing. China dominates all three, not because it has better resources, but because it has a better economic strategy.

Through state-backed subsidies, China shields its companies from market forces, allowing them to endure losses in pursuit of long-term control. Meanwhile, the United States expects each player—miners, processors, and manufacturers—to be independently profitable, creating higher costs, greater risk, and systemic fragility. If one link in the chain collapses, the entire system fails.

This fractured approach discourages private investment. Unlike large, transparent markets such as oil or copper, critical minerals markets are relatively small, opaque, and highly volatile. Many key minerals trade on spot markets dominated by China, which can manipulate prices at will. If China wants to eliminate competition, it simply floods the market, driving prices down and making Western projects financially unviable.

To break free from this cycle, the United States must focus not just on developing mines, but on ensuring that the entire supply chain is profitable and attractive to investors.

A market-based strategy to compete with China

The United States has the strongest capital markets in the world. Rather than defaulting to top-down industrial planning, Washington should treat private capital as a strategic asset. With the right risk-adjusted incentives, US capital markets can outcompete China’s state-directed model. To do so, the United States should focus on four pillars: targeted supply chain construction, pricing power, investment risk reduction, and policy stability.

1. Stand up integrated supply chains through strategic funds

To accelerate development, the United States should launch government-backed, private-sector-managed funds focused on building single, vertically integrated supply chains (for example, a supply chain for antimony or gallium). These funds should be designed with strict performance conditions: they receive incentives only if they successfully stand up an end-to-end supply chain. This structure ensures quasi-vertical integration and forces offtake agreements to be part of the business model from the outset.

2. Build pricing power by raising domestic commodity prices for sensitive materials

To reduce vulnerability to China’s market manipulation, the United States must break away from artificially depressed price structures. This can be achieved through two levers: (a) targeted tariffs on mineral imports that benefit from unfair subsidies and (b) tighter domestic sourcing requirements across clean energy and defense sectors. By raising the floor on US commodity prices, these policies would insulate domestic producers and make long-term investments more financially viable.

3. Reduce investment risk via demand guarantees and price floors

Price volatility and uncertain offtake remain top deterrents to private investment. The United States should implement mechanisms to stabilize both. This could include government-backed trading houses or public-private stockpiles that establish price floors for particularly vulnerable minerals. Long-term offtake agreements, brokered through private-sector consortia, would provide stable revenue streams that investors need.

4. Ensure long-term policy certainty

The most important determinant of private investment is confidence in the rules of the game. Critical minerals development is a multi-decade endeavor. If the United States wants capital markets to play a leading role, it must offer long-term policy stability. That means preserving existing tax credits, grants, and loan programs—not just as temporary stimulus but as enduring pillars of the investment environment.

Building a market, not a monopoly

China has not just secured mineral resources—it has built a financial system that allows it to manipulate markets and suppress competition. The United States must construct an alternative, leveraging free enterprise and innovation as strengths. Identifying deposits and opening mines, though critical, is not enough. Without a financial strategy that ensures profitability, the United States will remain dependent on China for the materials that power its economy and national security.

It’s time to stop treating critical minerals as just a resource problem—and start treating them as the economic battle they truly are. The solution lies not in more short-term government intervention, but in structuring a market that incentivizes investment, ensures financial viability, and ultimately secures the United States’ position as a leader in the critical minerals race.

Ashley Zumwalt-Forbes is a former US Department of Energy deputy director for batteries and critical minerals, co-founder and former president of Black Mountain Metals and Black Mountain Exploration, and co-founder and former senior advisor of Metals Acquisition Corp.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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EnergySource Mar 31, 2025

The future of global energy policy is abundance 

By Charles Hendry

The United States and Europe are diverging on energy policy, with the United States prioritizing low costs and economic growth while the United Kingdom and the European Union focus on decarbonization. But reconciling these approaches is possible through the lens of energy abundance—each country must leverage its most plentiful resources to drive down costs, enhance security, and support sustainability without burdening consumers.

Energy & Environment Energy Markets & Governance

New Atlanticist Mar 21, 2025

Four critical questions (and expert answers) about Trump’s new critical minerals executive order

By Alexis Harmon, Reed Blakemore

On March 20, US President Donald Trump signed an executive order intended to increase crucial mineral production in the United States. Atlantic Council experts dig into the details.

Economy & Business Energy & Environment

EnergySource Jan 22, 2025

China’s lithium-ion battery exports: Why are US prices so low?

By Joseph Webster

Export prices for Chinese batteries entering the US are lower than for any other market, suggesting that China may be engaging in anti-competitive behavior. As batteries grow in importance for commercial and military applications, the US should increase tariffs on Chinese battery imports to bolster US and allied manufacturing capabilities.

China Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Profitability and power: Fixing US critical minerals supply chains appeared first on Atlantic Council.

Removing the natural gas waiver, however, would have a more significant impact as it accounts for more than forty percent of the total supply. By making Iranian energy more costly, the United States hopes to incentivize Iraq to diversify its energy sources and reduce its dependency on Iran, a goal that the Iraqi government has long delayed despite being aware of its necessity.

The view from Baghdad by Ahmed Tabaqchali

Iraq’s power conundrum is essentially a large gap between supply and demand.  

2023 estimates suggest that supply satisfies 82 per cent of demand, but almost forty per cent of generated electricity is lost during the transmission and distribution phases from an aging infrastructure, reducing supply to an estimated 53 percent of demand.  

Moreover, high population growth and infrastructure recovery after decades of war are exacerbating this gap as power demand growth outpaces supply growth.

Iran’s first electricity exports in 2004, followed by its natural gas exports in 2017, have been crucial in addressing Iraq’s chronic electricity shortages. Starting with a 1 percent share of electricity supply in 2004, it reached a peak of about 41 percent in 2020. That share declined to about 31 percent in 2023, and it is projected to decline further in 2024.

Iraq is facing a coming summer demand surge that threatens to significantly exacerbate this shortage, paired with the loss of Iranian electricity, and potentially gas. Tehran will blame this on US President Donald Trump’s administration, but a significant loss of gas exports would have happened anyway this summer as Iran itself is forecast to have its own electricity crisis. 

For Baghdad, diversifying its energy sources is critical to ensure a reliable supply. In other words, achieving energy security is not simply replacing current Iranian electricity and gas exports, but diversifying sources so Tehran’s exports become one of many sources, which in the process removes its, and any other supplier’s, leverage over Iraq.

This is a long-term process that demands significant investments across Iraq’s whole power infrastructure, including power plants that generate electricity, its transmission system that delivers electricity to population centres, and distribution networks that then ship this electricity to end users.  

This opens significant, multi-year collaboration and investment opportunities for Iraq, its neighbours and its international stakeholders, especially the United States. 

The first arena includes electricity imports from Baghdad’s neighbors, such as from Jordan  , the Gulf Cooperation Council Interconnection Authority (GCCIA) and close to home from Kurdistan Region of Iraq (KRI). The second is increasing gas supply sources like the expansion plans of Basra Gas Company and the Total Energies deal, developing untapped gas fields, and KRI gas potential through a resolution of the long-standing conflict over the development of the country’s oil and gas resources along the lines proposed by KRG and the Government of Iraq in 2023. Alos, the import of piped gas from Turkmenistan, and the import of Liquified Natural Gas (LNG) from either Qatar or the United States which in turns required significant infrastructure development. The third and fourth areas are to upgrade its transmission systems distribution grids, both responsible for the up forty percent of losses of the electricity generated.

Thus, embarking on joint long-term investments in the above areas is a win-win strategy for Iraq, its neighbors, and its international stakeholders. 

The view from Washington by Anthony Pfaff

Ending the waiver on Iranian electricity imports, but not natural gas, is a smart strategic move for Iraq. 

Removing these waivers is part of the Trump administration’s effort to impose “maximum pressure” on Iran. But the funds Iraq paid for Iranian electricity never directly reached Tehran—their use was proscribed but for limited categories of humanitarian trade overseen by the Treasury Department pursuant to the procedures in place since Trump’s first term in office. Still, these waivers enabled Iraq’s dependency on Iran for its energy needs, which may have made sense when ISIS was the primary threat to Iraq’s stability; however, it may not now, as that threat has receded and Iran’s threat to regional stability becomes more urgent.  

The first Trump administration reimposed sanctions on Iranian energy exports in 2018 after withdrawing from the Joint Comprehensive Plan of Action (JCPOA) that restricted Iran’s ability to enrich uranium to develop nuclear weapons. To prevent destabilizing the Iraqi economy, the U.S. has granted waivers to the Iraqi government, allowing them to import Iranian electricity and gas to meet their short-term energy needs. Former president Joe Biden’s administration extended these waivers, requiring funds paid to Iran to go to accounts that could be monitored and used only for humanitarian purposes. As a condition for the waivers, the United States pushed Iraq towards its own energy self-sufficiency, including through agreements with French and Qatari energy companies and ongoing work to connect Iraq’s energy grid to the GCC’s. 

Iraq may not need much incentive to diversify, especially considering the impending summer shortage. Even though the gas waiver remains intact, Iraq is already seeking to diversify its natural gas supply. That includes a deal with Turkmenistan, though the fact that its gas would travel through pipes going through Iran has limited its effectiveness. Baghdad has also sought agreements with Qatar and Oman to import natural gas, and recently signed an agreement allowing integration into the GCC electric grid, which will provide an additional 3.94 terawatt-hours of electricity. In fact, in a recent phone call with US National Security Advisor Mike Waltz, Iraqi Prime Minister Mohammed Shia al-Sudani reportedly underscored Iraq’s ambition to become energy independent and interest in greater involvement by Western and US energy companies.

By leaving the gas waiver intact, the United States ensures that Iraq can mitigate any resulting energy crisis, while giving Baghdad the flexibility it needs to pursue energy diversification without risking social instability or exacerbating the country’s energy shortages. Whether removing just one sanction will facilitate this transition will depend on Iraq’s Western and GCC partners increasing energy investment and cooperation while also enabling Iraq to endure any backlash from Iran or its proxies.  

Despite concerns that decreasing Iraq’s access to any energy sources, especially during the summer in an election year, could increase instability, the removal of the electricity waiver can be a prudent measure for Washington to encourage both Iraq’s self-sufficiency and its Arab partners to support Iraq’s ultimate independence from Iran.  It is in Washington’s interest, together with removing the waiver, to do whatever it can to help support those ongoing trends.

 Impacts, and a way forward 

 The immediate effect of the loss of waivers to import electricity and potentially natural gas is almost zero, as Iran effectively halted its exports in late 2024, diverting its gas exports to its own domestic market.  

Such diversions occurred a few times in the last few years, as a consequence of the negative cumulative effects of years of mismanagement, irrational consumption, and underinvestment in an aging infrastructure made worse by sanctions. However, this time, it’s much worse than any prior year, as Iran had rolling power blackouts across the country from November 2024, and natural gas was diverted from electricity generation to home heating to stave off social unrest. 

But ending the waiver on Iranian electricity imports, while preserving the natural gas waiver, allows Iraq to break free from Iranian energy dominance at a manageable pace, reducing risks to its energy security and fostering regional cooperation. Meanwhile, it signals to Iran and the world that the United States remains committed to countering Iranian influence but in a way that prioritizes stability and pragmatic solutions. This measured approach is a necessary step in Iraq’s path toward energy independence, national sovereignty, and long-term prosperity. 

Despite Iraq’s willingness, budgetary constraints can significantly hinder its efforts to diversify its energy sources. The government’s fiscal challenges are primarily due to its heavy reliance on oil revenues, which constitute approximately 90 percent of state income. A decline in global oil prices has exacerbated this issue, leading to reduced national income and fiscal pressures. In response, the Iraqi government has increased public spending, particularly on salaries and pensions, which account for over 40 percent of the budget, to maintain social stability.  

This allocation limits funds available for infrastructure projects, including those aimed at energy diversification. Given that limited funds increase the likelihood of Iraq not living up to its financial commitments, foreign investors will disincentivize investing in projects to diversify and stabilize Iraq’s energy sources. So, without a finalized budget, the allocation of funds for these critical projects remains uncertain, delaying progress and perpetuating Iraq’s dependence on limited energy sources. 

Another potential challenge is Iran-backed militias who smuggle Iraqi oil, diverting it from power generation. Given these interests, the political parties backing these militias may take action in parliament that impedes Iraq’s ability to diversify. Moreover, as Iran feels less secure due to the combination of regional setbacks, increasing Iraqi independence, and economic pressure due to sanctions, these militias may become more disruptive and further impede diversification by, if nothing else, making foreign investment too costly.  

Given the budgetary, political, and security challenges described above, it is less clear whether Iraq can achieve energy diversity on its own. To alleviate those challenges, Iraq’s Western partners can facilitate this transition by taking the following steps:  

•  Condition Cooperation. As the US nudges Iraq towards energy diversification, it should condition any concessions or other support on continued investment in domestic energy infrastructure, renewable energy sources, and alternative regional partners, such as leaving the gas waiver intact.  

• Encourage Regional Cooperation and Energy Alternatives. As described above, Iraq has been seeking new partnerships with the West as well as countries like Qatar, Oman, Turkey, and Saudi Arabia to provide alternative energy sources through electricity imports or investment in infrastructure projects. However, Iraq’s inconsistent payment record, coupled with expectations that there will be budget shortfalls in the near future, may limit interest, impeding Iraq’s transition to independence. Iraq’s partners may need to consider investment guarantees to sustain that investment.  

• Contain Backlash. US pressure and Iraqi cooperation will likely place Iran in a position where it must disrupt Iraqi energy diversity or lose influence. While Iran-backed militias may play a role, Iran will also utilize political and economic means that could have unexpected impacts that may be difficult for the Iraqi government to manage. Efforts to make Iraq resilient should also be part of a comprehensive policy to incentivize its energy diversification efforts. 

Despite these diversification efforts, Iraq’s way forward is clear: continue increasing effective investment in energy infrastructure while diversifying its energy suppliers so that it is not dependent on any one supplier. Improving energy efficiency can also help speed up Iraq’s transition to energy independence.  

Ahmed Tabaqchali is a nonresident senior fellow with the Atlantic Council’s Middle East Programs. He is an experienced capital markets professional with over 25 years of experience in the US and MENA markets and is the chief strategist at the AFC Iraq Fund.

C. Anthony Pfaff is a nonresident senior fellow with the Iraq Initiative in the Atlantic Council’s Middle East Programs and the research professor for the Military Profession and Ethic at the Strategic Studies Institute (SSI), US Army War College in Carlisle, PA. A retired Army colonel and Foreign Area Officer (FAO) for the Middle East and North Africa, Pfaff recently served as director for Iraq on the National Security Council staff. 

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But the round is set to occur against the backdrop of a decade-old stalemate between the Tripoli-based Government of National Unity (GNU) and Tobruk-based House of Representatives (HoR). Since 2014, the warring factions have failed to agree on a pathway for national elections and a political reconciliation process. 

The crisis is one that the US and Italy may be uniquely postured, and incentivized, to quell. 

Absent a thawing of that frozen stalemate, Tripoli is unlikely to attract an influx of energy investment. Even more, the stalemate risks plunging Libya into a deeper web of maligned foreign intervention. Both Washington and Rome could leverage their global positions to combat the country’s rabid kleptocracy and facilitate a Libyan-led technocratic political process. The carrot, of course, for this US-Italian stewardship is the opportunity for greater cooperation in countering Russia and China’s growing ambitions in Libya.  

Libya’s volatile energy output 

Libyan National Army (LNA) Commander Khalifa Haftar—who is also a US citizen—has held a monopoly over national energy resources for nearly a decade, bringing increased volatility to the country’s oil production. He has demonstrably leveraged his monopoly to negotiate arms deals and grow his access to a foreign support network. A recent Telegraph report uncovered a deal between Haftar and China where the latter reportedly shipped one billion dollars in Wing Loong military drones in exchange for crude oil. Haftar used the arms shipment to further project his power, by using United Nations-affiliated officials to facilitate it, in direct violation of the 2011 UN arms embargo. The move further signaled his rejection of any UN-facilitated process that could threaten his access to power.

As the stalemate stands, there is no guarantee for potential investors that Haftar or his affiliated militias will not force a shutdown of exploration or production. The bidding on the country’s largest petroleum reserves, the Sirte Basin, is largely under the control of Haftar’s LNA. It’s hard to imagine any company winning the exploration rights without buy-in from Haftar’s camp in exchange for security guarantees. Haftar could then leverage the exploration findings—if proven to be promising—to negotiate more favorable drilling approval and production plan contracts, growing his consolidation of the country’s shared institutions as defined by the 2020 ceasefire agreement. This could further open the door for increased foreign intervention in the country as both the GNU and Haftar have continued to leverage existing international partnerships to bolster their grip on the country’s wealthy energy resources.  

That includes an increasing closeness with Russia as Moscow pivots from Syria in the aftermath of the ousting of Bashar al-Assad. Such coziness portends that Haftar is likely to seek Russian and Chinese investment in the Libyan energy sector over Europe or the US. Already, in July 2024, Haftar signed a deal with Russian Railways Company to develop a railway connecting Sirte to Benghazi, a route critical to resupplying LNA weapons as well as shipping oil for export. Coupled with his smuggling of Russian oil into Europe, Haftar and Russian President Vladimir Putin demonstrate a keenness to collaborate and circumnavigate existing sanctions on Russian energy resources.  

Russia could ensure that its oil continues to be sold while Haftar would bank on Russia’s security backing to negotiate a more favorable role in the country’s future. By working with Russia and China, Haftar is more poised to use the contracts to retain his access to illegal arms shipments in exchange for oil. With little international oversight, he may seek to use the upcoming public tender as an opportunity to gain influence with maligned foreign actors and solidify his grip on power. 

Investment opportunities amid growing foreign ambitions 

At the end of 2024, the NOC defied global expectations and increased its production to an eleven-year high of 1.422 million barrels per day (BPD). By attracting investment, Libya hopes to repair existing refineries and work with international companies to re-establish its pre-war production output. Libya’s oil minister, Khalifa Abdulsadek, told Reuters in January that the country needs three to four billion dollars in foreign investment to reach a 1.6 million BPD output.

This has already raised some eyebrows among energy investors, and Libya is increasingly considered a hub of investment opportunity with promises of reforms and greater transparency. As Haftar continues to cozy up to China and Russia in search of weapon sales, the GNU has grown closer to Turkey. In 2019, they established an exclusive economic zone between the two countries. The GNU also signed a deal in January with Turkey to grow its cooperation in the renewable energy sector, and has attracted investment interest from Ankara’s state-owned Turkish Petroleum Corporation (TPAO). 

At the 2025 Libya Energy & Economic Summit held in Tripoli, General Manager of TPAO Ahmet Turkoglu indicated Turkey’s readiness to invest in the country’s energy sector, telling reporters “We are here because we see great potential. I am sure Libya will achieve much more,” specifically referring to offshore fields as part of a 2019 Memorandum of Understanding. 

Turkey’s ambitions in the eastern Mediterranean are neither secret nor uncontroversial. Similar to signing its fate with Syria’s Hayat Tahrir al-Sham, Turkey placed its bets on Tripoli’s GNU in hopes of solidifying its ambitions to become a regional hegemon. Paired with Ankara’s growing involvement in facilitating Israel-Hamas negotiations, Turkey’s President Recep Tayyip Erdogan is playing a regional chess game, one that has already proved successful in Syria and in its initial 2020 intervention in Libya. By growing investments in energy projects in Libya, Turkey seeks to gain influence in the country’s economic and political recovery. 

Renewing US-Italian engagement in Libya  

Any international reengagement on Libya short of a clear US role in facilitating an agreement risks plunging the country into a deeper web of maligned foreign intervention and spoiling development potential. 

US President Donald Trump, along with his transatlantic ally and personal friend Italian Prime Minister Georgia Meloni, are key international players in Libya. Only their absence and lack of diplomatic engagement allowed Russia and China to expand their operations there. By leading the facilitation of a renewed political process, the US and Italy could benefit from securing exploration contracts for the country’s energy resources, assist Europe in meeting its energy needs, while ensuring that Libyans get the democracy they have wanted since 2011. 

Italy is already developing a framework that Trump could assist in—positioning itself to become Europe’s energy hub, helping to facilitate the sale and transport of oil and gas from Africa to the rest of the continent as it pivots from Russian natural resources. Meloni’s “Mattei Plan”, named after Italian oil giant Ente Nazionale Idrocarburi’s (ENI) founder Enrico Mattei, could help Italy achieve its ambitions in becoming Europe’s main energy broker, and Libya could prove to be a helpful provider of the key to that opportunity. 

Tripoli’s energy potential remains untapped. It could offer Italy and wider Europe cheaper production rates and a higher quality of “sweet crude” oil compared to its neighbors.  

Italy’s investments in Libya have been relatively limited amid concerns about government instability. Rome has pursued energy contracts with other North African energy partners like Tunisia’s ELMED interconnector and Algeria’s Sonatrach. However, ENI has already resumed drilling in areas of the Ghadames basin late last year after a nearly ten-year hiatus, signaling its willingness to invest in  Libya’s energy potential. Furthermore, its proximity to Italy could also provide cheaper transport rates, making Libya a highly attractive energy investment partner for Italy. 

Meloni knows that without a clear political solution in sight for Libya, there is a significant risk in any investments in the country’s energy sector. Both the HoR and the GNU have failed to achieve their mandate of getting the country to elections, and have lost legitimacy for many Libyans after years of disengagement in determining their country’s future.  

The US and Italy could help a new political process by sanctioning Libya’s kleptocrats, who have stalled a solution at the cost of Libyan lives. Their participation and inclusion in any political process should be limited as they risk spoiling the process in exchange for a future role in the country. The US and Italy may instead focus on engaging the country’s civil society and array of economic and political experts in Libya and abroad, to head a transitional process with clearly defined mandates, deadlines, and limitations on power to help get the country towards elections. 

This renewed process would have to include negotiations over Haftar’s future role in the country, a subject for which no one has more leverage to bring the military leader to the table than the United States, considering his citizenship there and continued assets in the greater Washington area. Haftar also established a friendly working relationship with President Trump from his first term in office, which could allow the Trump administration an unprecedented opportunity to negotiate on Libya with Haftar’s camp.  

There is additional appeal in Libya for Trump, as the country is an important member of the Organization of the Petroleum Exporting Countries (OPEC). Earlier this year, the US president said he would demand that OPEC bring down the cost of oil, blaming high prices on the Russia-Ukraine war.  

Tripoli could assist in cutting oil costs by increasing and stabilizing production output. Libya’s acting oil and gas minister, Khalifa Abdulsadek, has already signaled his goal of increasing production from 1.5 million to 2 million BPD by December 2025. Oil production has already recovered and increased in recent months, and by attracting investments, the country’s energy sector could rebound to its pre-2011 output. By diversifying foreign investment in the country away from maligned foreign actors like China and Russia, who have spoiled the peace process in pursuit of their own interests, Libya could ensure investors greater transparency and compliance with international regulations, including the existing arms embargo. However, this cannot be achieved through the current status quo. It’s time for a renewed US-Italian engagement on Libya in search of innovative solutions to its prolonged stalemate. 

Trump has already proven he is not afraid to think “out of the box” on foreign affairs during his second term, a posture that could help clinch a deal to end the stalemate. From his attempts in facilitating a ceasefire in Ukraine, to imposing strict tariffs on Canada and Mexico, the US president is interjecting a new strong-armed approach to global issues that could reignite a post-Benghazi attack dormancy on US engagement. Nine years after he used the 2012 terrorist attack as a campaign issue against Hillary Clinton, Trump now has an opportunity to rewrite the fate of Washington’s mission in Libya and bring about a much-needed “win” in the region.  

Yaseen Rashed is the assistant director of media and communications at the Atlantic Council’s Rafik Hariri Center & Middle East Programs and a Libya researcher.  

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To paraphrase US Energy Secretary Chris Wright, energy policy should be about enriching people, not making them poorer. With some of the largest gas resources in the world, the United States has shifted fundamentally to an approach which prioritizes low costs and economic growth over decarbonization. 

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This pivot is having consequences around the world. European—and especially British—energy prices are now a multiple of those in the United States. The risk to Europe is that major energy users will move away from the continent if those price differentials cannot be narrowed. 

But while the US narrative is that cheap energy delivers security, in the United Kingdom (UK), the government insists that decarbonized energy delivers security. Britain is still seeing the consequences of the enormous price spikes following Russia’s full-scale invasion of Ukraine. The argument is that had the UK been less reliant on gas, the price increases would have been less dramatic. 

While it seems that these two approaches at loggerheads, they are in fact possible to reconcile. 

For years, many have spoken about the energy trilemma: the balance between security, affordability, and sustainability. It’s time to reframe that debate—and focus instead on energy abundance.   

A decade ago, when the American shale revolution was beginning, the sheer enormity of gas production, combined with an inability at that time to export significant quantities, brought prices crashing down for US businesses and consumers. 

Similarly, the global rollout of solar power has enabled the cost to be brought down to under 1 percent of what it was just a few years ago. 

Abundance enables costs to come down. Abundance offers energy security. And abundance helps make space to decarbonize without penalizing consumers. 

Different countries are abundant in different fuel stocks or technologies, so each country needs to play to its strengths. Consumers are best served by harnessing the resources which are most abundant and most affordable, rather than endlessly pursuing costlier resources just because they happen to be around. 

The United States would understandably focus on gas, but that does not mean that all countries should do so. If a country lacks significant gas resources of its own, it is foolhardy to build an energy policy that relies on imported gas, especially from a single source, as the Ukraine war has so clearly shown Europe. To paraphrase Winston Churchill, security comes from diversity, and diversity alone. 

Therefore, the UK and Europe need to look at where they have the most abundant resources and allow the genius of innovators and industry to work to drive those costs down. 

For the UK, that could be offshore wind, where prices have dropped by two thirds in a decade. It also makes sense to continue to use Britain’s North Sea gas resources for as long as possible, as the original investment costs have long since been recovered. While the North Sea basin is in long-term decline, the rate of decline can be reduced with sensible, pro-business policies. The UK should then be applying carbon capture technology when the gas plants are run as baseload rather than as peaking plants, which operate for only a small number of hours per year. 

In sunnier countries, solar is the answer. Nuclear, too, can provide energy abundance, especially if next-generation small and advanced modular reactors (SMRs and AMRs) are developed in sufficient quantities to deliver real economies of scale. Each country needs to chart it owns course, based on the resources and skills available to it. 

The first element of energy policy should be to develop abundant and affordable resources. Where that is not be sufficient to meet demand at all times (as abundance is not necessarily the same as self-sufficiency) then the policy should be to secure alternatives in the most affordable way. Interconnection can bring cheap electricity from many hundreds of miles away. Imported gas—from reliable partners and backed by sufficient levels of domestic storage—provides resilience when the wind is not blowing and the sun is not shining. And as the cost of batteries continues to fall, they can provide short-term reserves at grid scale. 

Policymakers’ rhetoric suggests a large gulf between the approaches in the United States and Europe. But just as there is no one-size-fits-all approach to every country’s needs, policy approaches must reflect the unique circumstances of individual countries. 

Faced with the imperative to keep costs down, governments need to be wary about open-ended commitments to provide subsidies. In the UK, the contract for difference model provides price guarantees to enable large energy infrastructure to be built. But unlike a subsidy, when the wholesale price of electricity rises, the support drops away and even becomes negative. If subsidies are used, then there must be a clear degression from the outset to make sure that they are a mechanism for driving costs down rather than keeping them artificially high. 

The cooperative optimism displayed at COP26 and COP28 is long gone. The response should be to rethink how to deliver the energy security the world needs in the most affordable way. The principle of abundance should be at the heart of it. Abundance enables countries with dramatically different supply and demand conditions to find common cause. There is security in diversity—and diversity alone. 

Charles Hendry is a distinguished fellow of the Atlantic Council Global Energy Center and a former UK minister of state for energy. 

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It’s an open question whether the United States, whose natural gas producers now rely on European liquefied natural gas (LNG) sales to boost profits and support investments, would ultimately cede that market—and the political influence that comes with it—to Russian pipeline exports. Perhaps Washington will concede its newfound dominance in Europe’s energy system as a cost of attaining peace in Ukraine—and extricating itself from the continent to focus on the Indo-Pacific theater.  

But for Europe, allowing Russia back into its gas market through Nord Stream would be a costly mistake. It would furnish the Russian war machine with an additional $5 billion, open the temptation for German manufacturers to extract a 1.5 percent competitive advantage over other Europeans, and leave 100 million Europeans in geopolitical limbo. 

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No reason for Nord Stream nostalgia 

There is an obvious temptation for Europe to try to return to the seemingly halcyon world before COVID-19 and war in Ukraine. Elevated gas prices have threatened the continent’s long-term industrial competitiveness. In 2023—after the price spikes of 2022 subsided—industrial gas prices remained a whopping four-and-a-half times higher than in the United States. The European average in 2019, by contrast, was a modest 70 percent higher than US prices. 

But Europeans should not view the pre-war status quo through rose-colored glasses. Europe was vulnerable to supply shutoffs, such as happened during Russo-Ukrainian disputes in 2006 and 2009. And supposedly cheap Russian gas proved to be very expensive in the end—mitigating the energy crisis cost Europe a historic price of nearly €700 billion just by mid 2023, on top of nearly €250 million in aid to Ukraine by 2025. All in all, the cost of dependence amounted to more than €1 trillion.   

Europe can neither forget the lessons learned from Russia’s weaponization of gas supply in the lead up to and during the war; nor can it ignore the new geopolitical realities that define its relationship with Russia.  

Paying off the arsonist

First, if Europe were to restore Russian pipeline imports, that would greatly increase cash flow to Gazprom. Currently, Russia is selling gas mostly to China, supplying the country with 30 billion cubic meters (bcm) of gas in 2024 and aiming to hit 38 bcm in 2025 with the opening of a new eastern pipeline. But those volumes pale in comparison to the record 179 bcm shipped by pipeline to Europe in 2019. Even the amount of gas exported via the now-destroyed Nord Stream 1 alone—which had the same nameplate capacity as its successor—totaled 58.5 bcm in 2019, far more than total Russian pipeline and LNG shipments to China in 2024.  

Chinese buyers can’t make up for the loss of European markets. There exists no infrastructure to bring the gas from Russia’s massive European fields to Asian consumers. China has slow walked completion of the 50 bcm Power of Siberia 2 pipeline and appears to be hesitant about becoming too reliant on Russian gas. Losing the European market has severely hurt Gazprom, which posted a net loss of $12.9 billion in 2024—after seeing record profits of $29 billion in 2021. 

This has profound implications for Russia’s ability to wage war in Ukraine—and elsewhere. If Gazprom were to attain an additional $15 billion from Nord Stream 2 sales—based on a pre-war estimate of the pipeline’s potential revenue generation—and another $15 billion from restarting the damaged Nord Stream 1 pipeline, one might assume that half would go to Russia’s state budget. Of that $15 billion, one third would go to the military, based on the proportion of Russia’s 2025 budget dedicated to defense. This would mean $5 billion more to Russia’s military, a 4 percent increase in the Russian war chest. 

Distorting European competition 

Moreover, making Germany the primary entry point for Russian gas into Europe would provide German industry with a temptation to take advantage over its neighbors, as was the case in the early 2000s, constantly threatening European unity at a trying time. A primary reason why other Western European countries had opposed Nord Stream 2 even before the war was fear that Germany monopolizing Russian gas flows would give it a competitive advantage over manufacturers in Italy and France. 

Indeed, a 2012 investigation by the European Commission into Gazprom found that Russian gas was cheaper for Germany than it was for the average European country by at least 15 percent. Data released by Russian news agency Interfax in 2010 revealed that Gazprom was charging France 10 percent and Italy 25 percent more than Germany for gas. Further, the Commission found in 2018 that Gazprom had violated European Union (EU)  antitrust rules to divide national markets, potentially allowing it to overcharge five Central European member states—countries which paid even more than France and Italy.  

For the most energy-intensive sectors in Europe, energy can account for over 10 percent of manufacturing costs—so if German industry gets a 15 percent discount, the country gains up to 1.5 percent advantage in profitability over the European average.  

A dagger at the heart of European unity 

Last but not least, Nord Stream 2 would deliver Russian gas in a route that bypasses most of the Central European transit states, allowing Russia to leverage energy supplies to these countries separately from Western Europe and leaving 100 million Europeans in geopolitical limbo.  

Whereas Moscow’s disputes with Kyiv in the 2000s over gas supply meant that cutting off Ukraine would cut off the rest of Europe, Nord Stream 2’s reopening would allow Russia to more effectively divide and conquer the continent. In a new era of full-scale war to readjudicate the political borders of Europe, this would leave substantial portions of the EUand NATO at the mercy of the Kremlin’s imperial whims. 

Three numbers that should frighten Europe 

Ultimately, regardless of how Washington decides to proceed on Nord Stream 2, Europe must take responsibility for its own decisions on whether to buy gas from the pipeline or not. In weighing that choice, it must remember three key numbers: $5 billion in additional money for the Russian military; 1.5 percent of additional profitability for German industry over its EU neighbors; and 100 million Europeans left vulnerable to renewed Russian aggression. 

Michał Kurtyka is a distinguished fellow with the Atlantic Council Global Energy Center and was formerly Poland’s minister of energy, climate, and environment. 

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The agreement that was under discussion with the Biden administration would have guaranteed that the United States would open the valve on arms sales to Saudi Arabia and maintain a troop and equipment presence to deter Iran-backed action against the kingdom. It would also have started a US-Saudi partnership to develop Saudi Arabia’s civil nuclear energy program (enrichment was still a point of debate) and to cooperate on artificial intelligence and emerging technology.  

These discussions seemed oddly devoid of benefits to the United States. One benefit touted was locking Saudi Arabia into a commitment to buy weapons platforms from the United States instead of from China. However, achieving this does not require a commitment of US troops in the region nor a joint nuclear program. It only requires that the United States approve its own arms sales and speed up its own epically slow foreign military sales process.

The reason for this lopsidedness was that the United States saw the biggest prize as Saudi normalization with Israel, which would unlock economic and social integration projects across the Middle East, South Asia, and parts of Southeast Asia and Africa. However, Israel’s opposition to a path toward a Palestinian state is as intransigent now as Saudi Arabia’s insistence on it as part of any normalization.

With Trump now in office, charging aggressively into foreign policy dealmaking on a number of fronts, the narrative has shifted on whether a Trump presidency could deliver a stronger security agreement with Saudi Arabia that includes the hefty asks from the kingdom but does not include normalization with Israel. Yes, it is possible that Trump can secure such a deal. But should he? 

A stronger US-Saudi relationship would be beneficial for both countries across a host of issues and sectors, but alliances imply mutual responsibility. Saudi Arabia is not asking for the equivalent of a NATO Article 5 security guarantee, because the responsibility to defend the United States would then apply to Riyadh. Saudi Arabia would ideally like the United States to guarantee its security but does not want to commit to supporting US security or to making hard choices about China. The latter would have to change.

Without normalization with Israel, the previously proposed agreement with Saudi Arabia requires too much and offers too little. The deal will need to be sweetened. Here are some ways to do so.

Gain greater Saudi support for US policy on Iran

Short of normalization, Saudi Arabia should be asked to stop using rhetoric about Iran or Israel that creates any confusion about the kingdom’s allegiances. For instance, at a November Arab League summit, Saudi Crown Prince Mohammed bin Salman spoke about the need for international actors (read: Israel and the United States) to respect Iran’s territorial integrity. Such statements are a message to Washington that the lack of an upgraded US-Saudi defense agreement is pushing Riyadh further toward Tehran as a hedge. A US security guarantee should require unequivocally picking a side. 

Saudi Arabia’s détente with Iran should be encouraged in the interest of regional stability, but the relationship should not deepen in any way that puts the US military or economy at risk. A cold peace is fine unless and until the Trump administration signs a deal with Iran. Any suggestion that Saudi Arabia’s détente with Iran creates the opportunity for the kingdom to serve as a mediator in potential US-Iran talks is a fallacy; Iran will not trust Saudi Arabia to play this role. 

Because the future of US-Iran relations is unknown, the ask of Saudi Arabia on its Iran policy should be twofold: First, in the event that US military action against Iran is necessary, a US-Saudi agreement should stipulate that the kingdom will permit the use of its airspace, bases, ports, and other logistics mechanisms for US military operations.

To discourage Saudi leadership from engaging in risky behavior vis-à-vis Iran, a US security guarantee for Saudi Arabia should also require a degree of Saudi skin in the military game. The agreement should stipulate that the kingdom will support any US military operations in the defense of Saudi Arabia with some level of troops, equipment, and funding.

Second, if Trump secures a new deal with Iran, the United States should request that Saudi Arabia pledge to support the US plan to roll back Iran’s nuclear program and its network of proxies. Such a deal might ask Saudi Arabia to invest in Iran, which would likely be welcomed in Riyadh. Iran presents a large potential market for products including aluminum, phosphate-based fertilizers, refined petrochemical derivatives that Iran does not have the technology to produce, and even high-end dates.

If the Trump administration strikes a deal with Iran, the possibility of bringing Iran’s oil onto the legitimate market would drop the per-barrel price, barring other global disturbances in the supply chain. While this would go against Saudi Arabia’s economic goals, this could be offset by the prospect of Saudi-Iran joint ventures to upgrade Iran’s extraction and refining industries for a number of products.

Help stabilize the Middle East

Saudi Arabia has worked with the United States on stabilizing the Middle East throughout the years on a host of issues involving Lebanon, Syria, the Palestinians, Iraq, Iran, and Sudan. Saudi Arabia has been at the political table in good faith in Yemen for over two years now, per the United States’ request. One notable divergence from this record was Riyadh’s rift with Qatar, which benefited Iran, as the first Trump administration repeatedly reminded Saudi Arabia. As part of a US-Saudi agreement, the kingdom could be asked to commit to participation in future regional stabilization efforts and, as importantly, to refrain from those that contradict US objectives.

Strengthen the US-Saudi diplomatic partnership

The United States and Saudi Arabia have successfully cooperated in pursuing mutual foreign policy goals for years. This diplomatic cooperation could be enshrined as part of a new US-Saudi agreement.

The first US-Saudi joint global diplomacy was to rally international support for kicking the Soviets out of Afghanistan in the early 1980s. This joint work was expanded to counter Soviet influence in Africa. In recent years, the United States and Saudi Arabia have divided and conquered, engaging the countries with which they hold sway, to build coalitions like the Global Coalition to Defeat ISIS and the Saudi-led Islamic Military Counter Terrorism Coalition. For a while, Saudi Arabia helped the United States keep Bashar al-Assad’s Syria out of the Arab League. Saudi Arabia has to tried to convince Russia not to sell weapons to Iran and tried to get a cease-fire in Sudan when the United States effectively lacked a Sudan policy. For several years now, the United States and Saudi Arabia have worked together to try to convince Israel to agree to a plan for a Palestinian state. 

In other instances, like the 1973 oil crisis and on topics like military intervention in Iraq, backing of parties in the Syrian Civil War, Saudi Arabia’s war in Yemen, and Saudi military acquisition projects with Russia and China, Saudi Arabia has pursued foreign policy goals that counter US interests. A US security guarantee for Saudi Arabia should come with a Saudi guarantee that Riyadh will not contradict US efforts on the ground in places where the United States has stated and clear foreign policy goals. This acknowledges the valid Saudi complaint that US policy has lacked clarity in recent years on files including Syria and East Africa. This lack of clarity is for the United States to fix.

Encourage Saudi Arabia to expand defense cooperation with the US—not China or Russia

While the predominant obstacle to US arms sales to Saudi Arabia has been executive and congressional holds and the cumbersome US foreign military sales process, there are important asks the Trump administration can make of the kingdom in this arena. 

First and foremost, Saudi Arabia’s cooperation with China in the defense space should be curtailed. China and Saudi Arabia have joint manufacturing facilities for drone and missile component production and collaborate on counter-drone technology and cybersecurity. If the United States is to provide a security guarantee of any sort to Saudi Arabia, there can be no space for China in these sensitive areas. The premise, oft-cited by Saudi interlocutors, is that the United States is the kingdom’s security partner while China is the economic partner. This feeds the faulty assumption among isolationists in Washington that Riyadh’s economic partnership with China does not bleed into the defense space. This hasn’t been the case for years now, and Saudi-Chinese cooperation in the defense sector should not be allowed to continue as part of any US-Saudi security partnership.

Likewise, any potential deal for Riyadh to collaborate with Russia to domestically produce advanced air or land defense systems in Saudi Arabia should be prohibited. In the past, Saudi Arabia flirted with purchasing the S-400 air-defense system from Russia and used this possibility as a lever in conversations with Washington about other policy issues. The potential for such purchases should be prevented as part of a US-Saudi agreement.

The United States competes for arms sales in the Gulf even with longtime allies, and this sector dominance is important because this purchased military equipment serves as plug-and-play capability augmentation for the US military in the region when necessary. The United States should certainly not cede this market to Russia, even as its relations with Moscow shift. The good news is that Saudi Arabia does not want to go the Russia route. But the United States has stood in its own way. I’m told that the National Security Council Policy Coordinating Committee has recently started conversations about reforming the US foreign military sales process. That will hopefully make it easier for US Central Command to increase interoperability with partners that have been asking for this, including Saudi Arabia.  

Saudi Arabia seeks to develop a domestic defense industry. This goal should complement but not compete with US arms sales to the kingdom. US companies are active in joint ventures with Saudi Arabia’s state-owned defense contractor SAMI to build and maintain aircraft, drones, and missiles, as well as to integrate systems, in line with Riyadh’s National Industrialization and Military Logistics Program. Yet, Saudi Arabia has made offset requirements more difficult for US companies to meet, demanding technology transfer in areas where US companies have invested heavily in research and development. The United States should ask that these offset requirements for US firms be relaxed.

To ensure that Saudi Arabia’s development of its own defense industry does not run afoul of US interests, the United States could request as part of a security agreement deal that Riyadh vet future defense partnership and purchase arrangements with third countries through a joint US-Saudi steering committee.

Make Integrated Air and Missile Defense a reality

Integrated Air and Missile Defense (IAMD) is a specific long-time objective of the United States that should be cemented in any US security guarantee granted to Saudi Arabia. The goal of creating a common operating picture for missile defense capabilities across the Gulf, and creating a central command-and-control mechanism for responding to threatening missile arsenals in the region, first emerged in the early 2000s and was codified in the 2019 National Defense Strategy. The kingdom is not alone in dragging its feet on this project; mistrust among Gulf Cooperation Council (GCC) states has made them all wary of exposing vulnerabilities in their air defenses and sharing intelligence with their neighbors. Saudi Arabia has had additional concerns about being expected to foot the majority of the bill for establishing this defense umbrella across the Gulf. But as the largest landmass of the GCC, this is inevitable; Saudi Arabia has more airspace that needs protecting.

Saudi Arabia previously invested in Chinese and Russian radar and counter-drone systems such as the Silent Hunter and Pantsir that cannot be integrated into a US-led IAMD network. Saudi Arabia can be asked not only to participate fully in IAMD advancement but to act alongside the United States in encouraging progress on it. In December 2024, the Department of Defense awarded the Johns Hopkins University Applied Physics Lab a contract for research and engineering support to the IAMD project, showing that the Pentagon is putting its own money where its mouth has long been. Saudi Arabia could be asked to do the same, particularly since the overarching objective is making the Gulf, not the United States, safer. Without IAMD, the job of providing security to Saudi Arabia is a much larger lift. More robust participation in IAMD implementation should be a requirement in any upgraded US security assurances for the kingdom. 

Beyond IAMD, the Gulf states (except for Bahrain) have also dragged their feet on participation in maritime joint task forces to protect the waters of the Middle East. A US-Saudi security agreement should mandate full Saudi participation in existing and future US-led joint task forces and mechanisms like, for example, the Comprehensive Security Integration and Prosperity Agreement, focused on securing the land, air, seas and networks of the region.  

US firms should be the first choice in all contracts let in Saudi Arabia’s defense sector if Washington grants the kingdom a security guarantee. As part of the agreement, the two partners should agree on the conditions in which a non-US partner would be selected.

Cooperate on counterterrorism

It is unfortunate that indicators point toward an uptick in terrorist recruitment and planning in 2025. The United States will likely soon seek to reinvigorate coalitions to counter a resurgent terrorist threat. 

As part of a US-Saudi agreement, the United States could ask for a commitment from the kingdom to continue or upgrade intelligence sharing, financial cooperation, collaboration between law enforcement agencies, and joint counterterrorism task forces to conduct operations against terrorist organizations. In May 2023, the United States signed the latest iteration of the 2008 Agreement for Technical Cooperation to help the kingdom build skills to protect its critical infrastructure from terrorists. This could be reviewed for any desired edits or additions.

The United States should also ask Saudi Arabia to commit to a serious effort, both diplomatic and incentive-based, to bring other countries on board with future coalitions and task force efforts as necessary.   

Collaborate on a civilian nuclear program

Saudi action toward a civilian nuclear program has ebbed and flowed in the past decade, as has US openness to supporting it. A US refusal to work with Riyadh on its post-oil plans for nuclear energy production will not result in Saudi Arabia abandoning these plans. It will simply choose another partner, and several countries have offered to help, including China, South Korea, and France. It is in the United States’ interest to have a hand on the controls of a Saudi nuclear program rather than zero visibility into it. US involvement in building a Saudi civilian nuclear program would allow the United States to build in safeguards to the program that would not be possible if Saudi Arabia partners elsewhere. Chief among the benefits for the United States would be oversight of Saudi Arabia’s safety, security, and nonproliferation standards, as well as gatekeeping access to this program.

If the Trump administration agrees to the kingdom’s request to pursue a civilian nuclear energy partnership as part of a larger deal involving a security pact, the United States should have extensive oversight of the program.

The Saudi Aramco model, in which US technology and expertise (and US control over both) formed the basis of a company gradually turned over to Saudi management, can be a theoretical blueprint for maintaining US oversight of the program for a period and eventually handing the program over to host country control as US and Saudi comfort dictates.

A “123 agreement,” named after Section 123 of the US Atomic Energy Act of 1954, should be a requirement. A 123 agreement requires congressional approval as well as the partner country’s commitment to nonproliferation, adherence to International Atomic Energy Agency safeguards, and limits on enrichment before the United States can sell nuclear energy technologies to another country. The reason Saudi Arabia gave the United States for not agreeing to the additional “gold standard” protocol foregoing enrichment is that the limitations in the Iran nuclear deal were fewer than this protocol, and it made no sense for the United States to impose more restrictions on a partner than it imposed on Iran. This is fair. But the answer is not to downgrade the ask of Saudi Arabia but to aim in any negotiations with Iran for Tehran’s compliance with the same level of terms and commitments outlined in section 123 of the Atomic Energy Act. The United Arab Emirates (UAE) and Morocco, both members of the Abraham Accords, are US partners in 123 agreements. And the UAE and Taiwan, both with strong security agreements with the United States, are signatories to the US gold standard.

As a US security guarantee for Saudi Arabia would also be expected to protect civilian nuclear facilities that would present an enticing target for enemies, the United States should ask for a deciding vote on the activities that are conducted at the facility. A facility that does not conduct enrichment is a less attractive target for Iranian aggression than one that does. Saudi Arabia could perhaps become the breaker of ground and a model for small modular reactors, in partnership with the United States.

Lower energy prices

In Riyadh, a senior official with an energy portfolio told me, referring to oil prices, “Get ready. One hundred [dollars] is the new forty,” indicating that the kingdom would not make moves to lower oil prices for the foreseeable future. Trump has already challenged that stance.

Washington and Riyadh should start a renewed conversation about stabilizing oil markets, a goal Saudi Arabia says is its priority as the leader of the OPEC cartel. Saudi Arabia’s domestic development budget is tied to a price per barrel. Similarly, the Trump administration’s goals for boosting the US economy will require cheap oil to drive growth. As part of the security agreement, a sweet spot on oil prices should be agreed upon.

It is important to note here that if a US ask for increased Saudi oil production is tied to plans to remove Iranian oil from the market, Saudi Arabia will expect a US guarantee of the kingdom’s security to be in place before it boosts output. In October, Iran reiterated threats to retaliate for Israeli or US strikes on its homeland by striking Saudi Arabia, a threat the Saudis take seriously. If they are asked along with other Gulf neighbors to dip into spare capacity to replace Iran’s supply, they may only agree if the United States has signed on to robust levels of defense support to the expansive nation that exceed any previously provided. In this scenario, however, the United States would have less ability to make additional asks to Saudi Arabia, such as those outlined above and below.

Increase Saudi foreign direct investment

Saudi foreign direct investment (FDI) stock in the United States decreased by roughly five billion dollars between 2019 and 2023. Then in 2024, Saudi Arabia’s sovereign wealth fund lowered its US stock holdings by approximately fifteen billion dollars, a 41 percent reduction in its US stock portfolio, according to the Wall Street Journal. Saudi Arabia has been offloading US debt and looking to Africa and Latin America for investment opportunities. If the United States provides a security guarantee to the kingdom, Riyadh should be asked to reverse this trend. In January, Saudi Arabia announced plans to invest $600 billion into the United States. Saudi Arabia projects a nearly thirty billion dollar fiscal deficit in 2025 and has a shrinking balance of trade surplus. This, combined with pressure to keep oil prices low, may mean the $600 billion figure will be difficult to meet. But the United States can ask the kingdom for significantly increased FDI commitments in specific sectors and industries identified as key to US economic, national security, and supply chain resilience goals. Currently, the United States has a trade deficit with Saudi Arabia. The United States should ask the kingdom to purchase domestically manufactured US goods, which will bolster the US manufacturing base, a core aspect of Trump’s agenda.

Negotiations on an upgraded US-Saudi bilateral security agreement should stay within the parameters of actions that each side can realize on their own. A US-Saudi deal should not be contingent on the approval of plans for a Palestinian state or a regional security framework for the Middle East. This approach would toss the negotiations into a bureaucratic purgatory, where they will likely languish and die. Worse, it would make the achievement of US objectives subject to the whims of other nations and organizations. The United States should not put itself in that position.  

A new bilateral strategic alliance with the United States without having to normalize with Israel would be a big win for Saudi Arabia. And it could be for the United States, as well. But a bilateral deal raises one final question for US policymakers: If the United States grants all the kingdom’s asks that were originally intended to incentivize normalization with Israel, what will Washington have left to offer at the normalization table going forward? 

Kirsten Fontenrose is a nonresident senior fellow at the Scowcroft Middle East Security Initiative in the Atlantic Council’s Middle East Programs. Previously, she was the senior director for the Gulf at the National Security Council during the first Trump administration, leading the development of US policy toward nations of the Gulf Cooperation Council, Yemen, Egypt, and Jordan. 

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The post A US-Saudi deal without Israel? Here’s what the US should ask for. appeared first on Atlantic Council.

As with any recent tariff announcement by Trump, the devil is in the details. Venezuela currently exports oil and gas to a variety of countries, ranging from US rivals such as China and Russia to US allies such as India, Spain, France, and a number of small Caribbean nations. Is Trump interested in slapping an additional 25 percent tariff on Chinese goods sold in the United States, on top of the current 20 percent tariffs? Is he willing to impose tariffs on US allies? And are any of these countries willing to risk those tariffs in order to continue receiving Venezuelan crude oil and gas? All of this remains unclear.

What is clear is that, at the same time that Trump is seeking to box out foreign companies, he is preserving space for US companies to operate in Venezuela’s oil sector. Just hours after the president announced the tariff plan, the US Treasury Department announced that it had extended the “wind down” period it had previously given Chevron to pull out of Venezuela. Instead of the original deadline of April 3, the US oil major now has until May 27 to end its operations. But the fact that the Treasury’s Office of Foreign Assets Control (OFAC) extended this license, coupled with the reality that previous OFAC licenses that have been framed as “wind down” notices (like the limited General License 8) have been renewed consistently since 2019, suggests this wind down could evolve into a more permanent arrangement. This license has so far only permitted restricted activities, but other licenses allowing European and other companies to operate have so far remained in place. It is too early to be certain, but there is a chance that Chevron may be allowed to continue to operate in Venezuela, but on a tighter leash.

Such an approach would fit with Trump’s “America first” agenda. So far, US sanctions on Venezuela’s oil sector have done nothing to dislodge Venezuelan strongman Nicolás Maduro from the presidential palace in Caracas and may have actually pushed Venezuela further into the orbit of US global rivals. Until Chevron was given a green light to deepen its operations in Venezuela in 2022, oil sanctions created an opening for China and Iran to emerge as Venezuela’s primary trading partners. Iranian traders received Venezuelan oil in exchange for condensate, which Venezuela’s state-owned oil company then mixed with its extra-heavy crude in order to sell it on the global market at steep discounts, largely to Chinese firms. Russian firms, meanwhile, have maintained limited but important investments in the country’s oil sector even in the face of secondary sanctions. Essentially, US sanctions were subsidizing cheap oil for China and preserving undue influence to Russian investors—all to the detriment of US interests.

As for US allies and partners such as Spain, France, Italy, and India, there is likely no need for the administration to escalate matters by imposing tariffs. Instead, OFAC could simply end specific licenses and comfort letters, which provide specific guidance allowing certain companies to operate. Of course, doing so might compound the problem further by creating an opportunity for US rivals to step back in and exert their influence, especially if US energy firms are also instructed to pull out of Venezuela. If that happens, expect an increase in Chinese, Russian, and Iranian influence over Caracas. China has made clear that Venezuela is an “all-weather strategic partner” of Beijing and is unfazed by the threat of tariffs. Instead of signaling its compliance with the new executive order, the Chinese Foreign Ministry has issued a statement rejecting US influence in Venezuela and asserting that the tariffs would only hurt US consumers. Venezuelan oil is expected to continue to flow to China’s market, even in spite of a current slowdown caused by the uncertain climate.

Trump and his cabinet are almost certainly aware of this risk. They understand that it is not in the US interest to simply sit back and watch Venezuela, the country with the largest oil reserves on the planet, drift further into the arms of Russian President Vladimir Putin and Chinese President Xi Jinping. This is likely why, in spite of the recent rhetoric, the White House sent Presidential Envoy for Special Missions Richard Grenell to Caracas in February to begin conversations with the Maduro government. Grenell’s work has so far secured the release of six American hostages and convinced Maduro to accept repatriation flights of Venezuelan deportees.

Ultimately, the White House seems to be advancing an approach that Trump knows well: making a deal. With conversations ongoing and the door left open to Chevron and other US companies to continue operating in Venezuela, even if foreign companies are forced out, the administration seems to be preserving space for an agreement. An attractive deal might include concessions on migration, such as an acceleration in repatriation flights to match the administration’s interest in increasing deportations. It could also see some concessions on oil, such as the passage of legal reforms allowing US companies to assume majority ownership of joint ventures with the state oil company. But it should also include concessions that could move Venezuela toward a gradual democratic opening. After all, offering sanctions relief to shape internal incentives in Maduro’s inner circle is precisely what drove the government to organize, and to ultimately lose, last July’s presidential election.

There is a slim, but counterintuitive, opportunity in the fact that Maduro has said he will promote reforms to Venezuela’s 1999 constitution. Of course, Maduro is unlikely to agree to anything that will threaten his control in the immediate term, and he probably sees constitutional reform as a way to further entrench his power. But if Washington is open to expanding a US footprint in Venezuela’s energy sector, that gives US policymakers significant leverage as the ruling party debates any reforms. The United States should use this leverage to advance its oil and migration interests. But Washington should also seek verifiable progress on benchmarks such as the release of political prisoners, an end to the persecution of opposition activists, competitive electoral conditions, and perhaps a roadmap toward power-sharing and restoring the country’s democratic institutions.

Geoff Ramsey is a senior fellow at the Adrienne Arsht Latin America Center.

The post An ‘America first’ approach to Venezuela is taking shape appeared first on Atlantic Council.

Rubio will find a region undergoing profound changes both negative and positive. Crime and violence are on the rise, which is hurting the private sector, especially tourism, a main lifeline for many economies in the region. At the same time, the Caribbean is poised to become an energy powerhouse by the end of the decade thanks to recent discoveries and energy development.

This week, Caribbean leaders will welcome Rubio’s visit, as they are eager to influence US policy toward the region over the next four years. On the US side, Rubio has an opportunity to come away from the trip with a new strategy for the region that can yield tangible benefits and protect US and Caribbean interests alike. This new strategy should have two priorities:

• lowering barriers to US investment in Caribbean energy, which can bolster energy security for the wider region, including the United States, and
• helping countries in the region reduce crime and violence, which can protect US citizens traveling abroad.

Untapped potential

The Caribbean’s proximity to US shores has earned it the nickname “the United States’ third border.” As with the countries on its land borders, the United States shares strong trade, commercial, and people-to-people ties with Caribbean nations. More than twenty million US citizens travel to the Caribbean each year for overnight stays, and the United States remains the Caribbean’s top trading partner. Five of Taiwan’s twelve remaining diplomatic allies are in the Caribbean. And Guyana, Suriname, and Trinidad and Tobago collectively house enough hydrocarbon resources to make them active players in global oil and gas markets.

Yet despite the importance of the Caribbean for US interests, the region has long suffered from inattention and inconsistent US foreign policy. The result is a relationship that relies on ad-hoc engagement and has forced countries to look elsewhere for assistance, from China to India to African nations. While in office, former US Vice President Kamala Harris sought to rectify this by launching the US-Caribbean Partnership to Address the Climate Crisis 2030, but it did not have enough time to take root and it failed to deliver long-lasting benefits. Now, early in the second Trump administration, Rubio can use this week’s trip as a starting point to design, build, and implement a Caribbean strategy that serves US and regional interests alike over the next four years and beyond.

What a US Caribbean strategy needs

Two points are critical to any successful US strategy in the Caribbean. First, it must be a whole-of-government effort that uses and amplifies existing diplomatic, economic, and security partnerships with the Caribbean. Fortunately, there are various forms of active US cooperation with Caribbean nations in all three of these areas. For example, US embassy officials across the region have built trust among locals and the private sector, making the United States a first-choice partner. US Southern Command’s defense partnerships with Caribbean militaries (except The Bahamas) has significantly enhanced capacity building and training for pre- and post-natural disaster events as part of its annual Tradewinds exercise.

The challenge will be to coordinate these various activities into one coherent strategy. In practice, this first means creating a new framework that can house current US policy initiatives in the Caribbean across different US agencies, identifying opportunities to scale engagement. Next, Washington will need to allocate the resources needed to in-region US embassies and other US policy instruments, such as US Southern Command and the State Department’s Caribbean office, to implement these measures.

Second, while Rubio’s trip is an important sign from administration that it takes the Caribbean seriously, US policy must go beyond high-level government-to-government engagement to succeed. There are five national elections set to take place in the Caribbean by the end of this year. Relying solely on interactions with the region’s national governments, some of which could change soon, limits the local private sector and regional institutions’ ability to help implement US-Caribbean policy decisions. Institutionalized partnerships with local business chambers and more engagement with development institutions, such as the Caribbean Development Bank, can offset any political uncertainty associated with upcoming general elections.

With these two principles in mind, where should the United States focus its attention? Reducing crime and violence should take precedence. In 2024, nine of the top ten countries in Latin America and the Caribbean with the highest homicide rates were in the Caribbean, primarily due to increasing gang proliferation and the illegal trafficking of small arms originating from the United States. The recent reintroduction of the Caribbean Basin Security Initiative Authorization Act by the US Congress—which allocates $88 million annually through 2029—is expected to help address the region’s security challenges, but the appropriated resources alone are insufficient given the scale of the problem. Caribbean countries also need increased technical assistance from the Pentagon and US Southern Command to increase police and military capacity to address the transit of illicit arms and drugs. Doing so would ensure greater stability for Caribbean countries and help protect the millions of US citizens traveling abroad to the region.

Next, Caribbean countries are uniquely positioned to welcome increased US investment in the region’s energy market. Trinidad and Tobago, Guyana, and Suriname’s natural gas potential provide a hub for future investment. Each of those countries already has US and Western operators, but the derivatives from natural gas usage—such as ammonia, urea, plastics, and aluminum—also provide opportunities for US companies. For example, building and operating new ammonia and urea plants—which will have a ready-made market for export in the Caribbean—would enable US companies to invest at scale in a region where project size is on the smaller end. There are also energy investment opportunities in the eastern Caribbean, which houses significant geothermal reserves. New technological advances in geothermal exploration and financial backing from Wall Street could reduce costs and risks enough to entice US companies to consider making investments.

Since the power generation projects in the Caribbean are small relative to those in Latin America, Rubio should consider working with the US International Development Finance Corporation to subsidize pre-project costs for US companies willing to take the time to determine the viability of energy projects in the Caribbean. Moreover, given that potential geothermal projects reside in some of the countries with diplomatic ties to Taiwan, and the region’s future natural gas producers already have large-scale Chinese investments in the energy sector, increasing US competitiveness in this industry could go a long way toward counterbalancing potential Chinese engagement.

If the Caribbean truly is the United States’ “third border,” then it is important to US national security and economic interests to invest the resources and time in strengthening relations with the region. Rubio’s trip is the second Trump administration’s first real opportunity to do this. Resources, assistance, and institutionalized engagement will be needed—all of which can yield tangible benefits for the United States over the next four years and beyond.

Wazim Mowla is the fellow and lead of the Caribbean Initiative at the Atlantic Council’s Adrienne Arsht Latin America Center.

The post The US needs to build a new Caribbean policy. Rubio’s trip to the region can be the first step. appeared first on Atlantic Council.

To ensure US AI leadership, the United States must harness all forms of energy–while also promoting energy efficiency—allow a level playing field, and remove red tape constraining the buildout of critical enablers, especially transmission lines and grid enhancing technologies. A “some of the above” energy approach could force the United States to compromise on not only AI leadership, but also affordable electricity and other economic priorities.

The competition with China in artificial intelligence may be the defining national security challenge of our time. While AI’s exact electricity needs remain uncertain, substantial power infrastructure expansion and efficiency improvements are needed. By building new generation capacity, including advanced energy technologies, enhancing transmission, and optimizing power consumption, the United States can maintain its competitive edge in AI development. If the United States adopts a “some of the above” approach to energy, however, it will be waging the century’s most important technological fight with China with one hand tied behind its back.

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Nonetheless, grassroots momentum could accelerate decarbonization throughout the Mediterranean basin. Increased renewable energy cooperation across the Mediterranean would not only help mitigate climate change, but it would also promise new economic opportunities, improved energy security, and enhanced regional ties.

To achieve the ambitious global goal of tripling renewable capacity, the Mediterranean region must overcome several challenges, including geopolitical tension and limited finance. But the target is eminently within reach if countries implement their existing renewable energy plans and increase their ambition while embracing the benefits of cross-border collaboration.

Common targets, divergent trajectories

Over the past decade, the region has significantly expanded its renewable energy portfolio, particularly in the east. As of 2022, installed renewable power capacity in Mediterranean countries was estimated at nearly 300,000 megawatts (MW), representing 43 percent of total generation capacity.

According to Climate Analytics, in order to align with the 1.5 degrees Celsius target set in the Paris Agreement, global renewable capacity needs to grow to 11.5 terawatts (TW) by 2030, 3.4 times higher than 2022 levels. For the Mediterranean to play its part, it would need to bring its capacity above 1 TW, 3.6 times 2022 levels. This would require annual growth of 97 gigawatts (GW)—adding the total generation capacity of Spain every year until 2030.

These goals are within reach if countries implement their current plans—and then some. The existing pipeline of solar, wind, and hydropower projects in the region, would nearly triple generation capacity to 780,000 MW. But this only brings the region 73 percent of the way toward the 1 TW goal.

Within the region, plans and aspirations vary widely. Last year, most Mediterranean countries signed the Global Renewables and Energy Efficiency Pledge, which aims to triple renewable energy capacity globally by 2030. Under existing plans, Greece, Egypt, Libya, Tunisia, Algeria, and Morocco would exceed three times their current renewables capacity, while others—including big consumers like France, Italy, Turkey, and Israel—would fall short.

Seizing the economic opportunity

The renewable energy transition presents distinct economic opportunities for both the northern and southern shores of the Mediterranean, reflecting their unique geographical, economic, and industrial contexts.

Solar photovoltaics (PV) and wind power are becoming increasingly competitive with fossil fuels.  In Egypt for example, the cost of solar energy dropped to 2 cents per kilowatt hour, while wind power stands at 2.4 cents. Mediterranean countries can meet their domestic energy needs with clean, locally sourced energy, and potentially become net exporters using interconnectors such as the one between Tunisia and Italy. Investing in renewable projects creates real economic benefits—clean energy accounted for 10 percent of global economic growth in 2023. Scaling up renewable deployment has the potential to create 30 million new jobs globally by 2030, although 13 million jobs in fossil fuel-related industries could be lost.

The Mediterranean’s extensive coastlines offer significant potential for offshore wind development. This emerging sector could create thousands of jobs in manufacturing, installation, and maintenance, especially in the north. Northern Mediterranean countries can also invest in smart-grid technologies and energy management systems that would improve domestic energy efficiency and create exportable expertise for grid integration of renewables.

Additionally, the southern Mediterranean can capitalize on its high solar irradiance and vast deserts to develop large-scale solar and wind projects. Countries like Morocco, Egypt, and Algeria can serve domestic needs and potentially export clean energy to Europe through interconnectors, such as that connecting Morocco and Spain, and one being planned between Tunisia and Italy. Abundant solar and wind resources across North Africa are ideal for green hydrogen production, creating new export opportunities serving energy-hungry European markets.

Financing the energy transition

Countries across the Mediterranean can position themselves as green finance hubs, facilitating investments in renewable projects throughout the region rather than chase dwindling investments in fossil fuels. Countries with developed financial markets, like France and Italy in the north, can leverage their existing expertise and infrastructure to accelerate renewable energy deployment. In the south which has often struggled with attracting investments on favorable terms, emerging markets such as Egypt and Morocco can capitalize on their growing financial sectors and strategic positions to attract renewable energy investments.

Southern Mediterranean countries can use instruments like Sharia-aligned sukuk, also known as Islamic bonds, that emphasize environmental stewardship. The success of green sukuk issuances by entities like the Islamic Development Bank has already demonstrated the potential of this approach. Governments can also offer tax incentives and develop national sustainable finance strategies.

Despite not explicitly referring to the Mediterranean region, the EU’s Clean Industrial Deal could also provide some support and resources, particularly in financing through the Clean Trade and Investment Partnerships, and its plans to mobilize €100 billion for clean manufacturing, simplifying state aid for renewables, and addressing energy prices and financing.

Overcoming geopolitical faultlines

Ultimately, the region needs to come together to push toward a collective goal. But doing so requires overcoming complex geopolitical relationships, recent history shows that energy cooperation can persist even amid political tensions.

Despite the economic opportunities presented by renewable energy collaboration, the Mediterranean region faces significant geopolitical challenges. Historical tensions and ongoing disputes create a complex landscape for cooperation, including between Morocco and Algeria over Western Sahara, strained relations between Algeria and France rooted in colonial history, periodic tensions between Morocco and Spain over migration and border disputes, and between Turkey-Greece-Cyprus over territorial and maritime issues.

However, these challenges haven’t completely hindered collaboration. Algeria and Italy have maintained strong energy partnerships despite Libya’s instability. Similarly, Morocco and Spain have successfully operated the Morocco-Spain power interconnector since 1997, and have recently agreed to study collaboration on green hydrogen transport.

Tripling renewables is an unmatched opportunity

By embracing the goal of tripling renewable energy capacity by 2030, countries across the Mediterranean have the opportunity to unlock a host of economic benefits. Achieving this ambitious target will require concerted efforts and collaboration among all stakeholders. Governments must take the lead in creating enabling policy frameworks, investing in infrastructure, and fostering regional cooperation. The private sector must also step up to drive innovation, mobilize capital, and build robust supply chains.

The time to act is now, and the Mediterranean must embrace this transformative journey with a spirit of regional cooperation. By seizing the economic potential of renewable energy, the region can address the pressing challenges of energy and climate change while laying the foundation for a more sustainable and inclusive future.

Karim Elgendy is an Associate Fellow at Chatham House and at the Middle East Institute in Washington.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

Read more

EnergySource Mar 7, 2025

The US can reduce Russia’s nuclear energy—and geopolitical—influence

By Marina Lorenzini

As the Trump administration outlines its energy priorities, strengthening the US nuclear industry remains a point of bipartisan agreement. Revitalizing this sector will lead not only to domestic economic growth, but also a reduction in Russia’s dominance in global nuclear markets and its geopolitical leverage.

Energy & Environment Energy Markets & Governance

EnergySource Feb 27, 2025

Can the EU’s Clean Industrial Deal cut carbon and restore competitiveness? 

By Andrea Clabough, Andrei Covatariu, Elena Benaim, Carol Schaeffer

Atlantic Council experts share their analysis on the EU’s new industrial policy, its implications for European energy security, and how key partners may respond to the bloc’s evolving regulatory landscape.

Eastern Europe Energy & Environment

EnergySource Jan 15, 2025

Tripling global nuclear energy capacity is in reach—if the world seizes the moment

By Amy Drake

At COP28, nations and corporations committed to tripling global nuclear energy capacity by 2050, underscoring its essential role in achieving net-zero emissions. Looking ahead to COP30, global leaders must strengthen multilateral collaboration, engage the financial sector, and provide support for new partnerships with the nuclear industry to meet this goal.

Energy & Environment Nuclear Energy

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post The Mediterranean must work collectively to harness the power of renewables appeared first on Atlantic Council.

How previous presidents approached power

Mexico has long suffered from underinvestment in electricity generation, transmission, and distribution. Power outages are a persistent and growing challenge, electricity prices are higher than those of the neighboring United States, and much of the country is underserved in power access and reliability. CFE is undercapitalized and saddled with expensive and carbon-intensive infrastructure. Indeed, it reportedly lost close to six billion dollars in 2024.

This undercapitalization is a core political challenge for every Mexican government. If the most profitable customers are served by private competitors or supply themselves, then CFE has little hope of growing a credit-worthy market—especially when it is already saddled with providing guaranteed subsidized power to the residential market. Lacking capital, the country needs private-sector investment to grow generation capacity. 

This problem has been apparent for a while, and several ways of addressing it have been tried before. President Carlos Salinas de Gortari, who served from 1988 to 1994, introduced IPPs and self-supply schemes to allow CFE to lease modern gas-fired power plants and let industry generate its own electricity. More recently, President Enrique Peña Nieto passed a comprehensive constitutional and legal reform to Mexico’s energy policy in 2013 and 2014. These reforms made CFE a special productive enterprise that competed with the private sector on an equal footing, created multiple independent regulators for industry supervision, and held highly successful auctions for renewable power. 

Then López Obrador, who governed from 2018 to 2024, disrupted the reforms with executive and legislative attempts to overturn them. While these attempts were not successful during his term, in practice, the winners of renewable auctions saw the economics of their projects destroyed when they were denied the interconnection, green certificate, and priority-of-dispatch benefits they were entitled to under the reform. When the ruling Morena party won both the presidency and legislative supermajorities in the July 2024 elections, López Obrador ultimately passed constitutional changes that reversed many of the Peña Nieto reforms and restored CFE’s primacy in the power sector. 

How Sheinbaum’s plan could work

The new law, which is expected to be approved by the Chamber of Deputies before the end of April, creates a hybrid framework where CFE has “prevalence” in the power system, with a requirement that it retain 54 percent of the nation’s power generation. The private sector can provide the balance, and every year the national planning authorities will review whether the correct balance has been maintained. The law requires that new renewable energy also provide storage to maintain grid stability.

The Plan Mexico and CFE’s 2025-2030 Expansion Plan promise major government investments on transmission and distribution and adequate funds for the government to build up to 6 gigawatts in gas generation over the next six years to fulfill its share. The Plan Mexico also pledged, and the new law incorporates, “one stop shopping” for expedited permitting. This allows for some small-scale self-supply without a permit: less than 0.7 megawatts (MW) distributed generation and up to 20 MW self-supply with a permit but with very tight rules that require the consumer to apply for the permit.

Importantly, the law also introduces two new schemes for CFE projects financed by the private sector: the Long Term Producer, which is a new type of IPP that will sell electricity exclusively to CFE, and the so-called Mixed Investment. The Mixed Investment is an electricity company controlled by CFE in which private investors can participate as minority shareholders, and that could sell electricity to CFE or to private customers. This follows a precedent set by Energia Quantum, a government-controlled private company that owns thirteen plants bought from Iberdrola Mexico. CFE has already announced that it will tender the first new projects (to add 2,376 MW generation capacity) in the first four months this year. The framework is essentially buying time for CFE to grow enough to provide grid-based solutions to all major consumers and right-size its finances. 

There is much that is positive in this new plan and proposed law. Project developers would, in theory, be guaranteed that the power they generate would be dispatched on an economic basis once they have a permit and their project is incorporated in the national plan. Previously, CFE’s own generators took priority even though the law was supposed to create a level playing field. The plan’s commitment to increasing renewable energy’s share of the mix is welcome and important for Mexico’s energy security, given the country’s deep reliance on US natural gas. The self-supply and IPP projects, which were built under prior legal regimes, are preserved—a welcome sign of stability for investment. While the new framework is likely too restrictive to attract new investors to the power sector, the major private-sector players that have prospered over the past six years, who have worked with CFE, and who already operate at scale are well-positioned to participate in this new phase. It is also helpful that the law would allow for some smaller scale new self-supply, even if the rules are restrictive, so that some businesses can provide their own power without waiting for a new permit. There is also some welcome financial flexibility allowed for CFE itself. Under the plan, CFE would have the authority to develop its own generation capacity and access private financing and capital.

Eight ways the plan could fall short

There are also major risks and drawbacks to the new approach. 

First, with the Secretariat of Energy exercising complete discretion over which private sector projects are permitted, the lack of merit-based selection and transparency is a major integrity risk.  

Second, the regulations will need to make clear which projects are scored in the government’s 54 percent share and which are not. If CFE contracts with a private company to supply it with power, for example, which basket is that contract in? 

Third, the costs of private-sector generation may be uncompetitively high. The new rules restrict the right to build transmission to the government alone. If a generator needs a new substation or transmission line, it can build it with permission—but the infrastructure needs are discretionally determined by the National Center for Energy Control (CENACE) and must be donated to the government. And if, for example, CFE contracts with a Long Term Producer for a 500 MW facility and the power plant has the capacity for 700 MW, the company cannot sell the excess power. The owner must transfer property of the plant to CFE without compensation at the end of the contract (e.g., a typical IPP contract lasts twenty-five years, and a combined cycle plant has a life cycle of forty years). These ancillary expenses will raise the cost of every project. 

Fourth, the economic viability of private projects depends on regulated rates and charges (e.g., transmission) set by the new regulatory authority (the National Energy Commission) and by the system and market operator (CENACE). These two are formally independent but ultimately controlled by the minister of energy. Will they set reasonable charges and rates that allow private companies to recover costs and compensate for some ancillary costs that result from the new law (e.g., the cost of connecting self-supply to the grid, or the cost of storage for renewables)? 

Fifth, will CFE have the technical and financial capacity to procure its 54 percent share (including getting access to gas turbines, which seem to be backlogged for years)? CFE’s track record over the past several years has been less than stellar, with many projects that were to be completed in 2024 now scheduled to start in 2025-2027. If not, will the private sector be held back while it waits for CFE to deliver its share? Down the road, how can the total generation “pie” grow, if it will be dependent on new money for CFE? 

Sixth, will the new regulations assure that “prevalence” for CFE does not mean primacy in dispatch or allow for other types of unjustified discrimination? The government seems to be saying that dispatch will be on economic terms if a power provider has a permit, but if transmission is constrained, will this still be the case? The rules need to provide clarity and legal protection with recourse. 

Seventh, the government has not yet promulgated a national plan for natural gas supply. There is some excess capacity which can be utilized for the first wave of projects, but more gas will be needed for the government to meet its planning goals. The challenge to new infrastructure lies on the Mexican side of the border. The government will need to support the procurement and permitting of new infrastructure and help expedite the completion of projects already permitted to ensure that its new plants are well supplied. 

Finally, the rules for distributed generation and the new self-supply (0.7 MW and up to 20 MW) could be unhelpfully tight. For many areas of Mexico, such as the southeast, grid connections may take some time to arrive. A permissive structure could deliver power and development on a faster timeline. Likewise, the demand for power for near-shoring and additional data centers, coming from industrial parks in the north of the country, is imminent in the next four years or so. Distributed generation and self-supply could provide competitively priced power faster there as well. Perhaps a time-limited program, with projects required to be under development within four years, could balance CFE’s long-term goals with industry’s short-term needs.  

Some of these questions will be answered when the final regulations are promulgated, which is expected to happen in the next few months. In the interim, the Sheinbaum government deserves praise for its active engagement with the private sector over how these rules are to be drafted. Time will tell how quickly permits will be granted and whether the new framework encourages or restricts growth. But given the government’s ideological commitment to the dominance of state enterprise, this new framework has the potential to grow generation and support the president’s commitment to her energy transition goals. 

Mexico’s economic competitiveness hangs in the balance. But this government has a practical, technocratic approach that may allow for adjustment down the road if needed. 

David L. Goldwyn is president of Goldwyn Global Strategies, LLC, chairman of the Atlantic Council’s Global Energy Center Advisory Group and a former special envoy for international energy affairs at the US Department of State. 

César Emiliano Hernández Ochoa is a managing partner at Publius, a Mexico City law firm, and served as deputy secretary of energy for electricity for SENER, Mexico’s energy Ministry, from 2014-2017.

The post Mexico’s new electricity law could boost the country’s energy sector. But big questions remain. appeared first on Atlantic Council.

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For the past two decades, Russia has wielded its nuclear energy technologies—through its state-owned conglomerate Rosatom—as a strategic export to exert geopolitical leverage. Rosatom has been a dependable, cost-effective, and technically competent partner for stakeholders around the world, enabling its dominant market position.

Substantial up-front project finance and loans have contributed to Rosatom’s international success. Bangladesh, Belarus, Egypt, Hungary, and Turkey have benefitted from multibillion-dollar loans from Russia’s State Bank for Development and Foreign Economic Affairs (Vnesheconombank). State sponsorship allows Rosatom to offer favorable loan terms—such as a 3 percent interest rate—that competitors cannot match. Meanwhile, any analogous form of concessional loans for infrastructure projects has not been a part of the development strategy among Rosatom’s competitors.

However, some countries that previously embraced the vision of energy integration with Russia continue to shift investments away from Russian partners. Countries tied to Rosatom for their nuclear supplies are keen to diversify—if not extract themselves entirely—from energy dependence on Russia. Additionally, Vnesheconombank‘s SWIFT ban and US sanctions designation increases risks for loan recipients.

The United States—and allies with nuclear industries such as France and South Korea—could further convert the commercial interest for non-Russian products into strategic wins by focusing on countries with Soviet-era reactors. Countries and utilities often cite project finance as the primary barrier for building, but the new political momentum in the United States could galvanize both sufficient funds and new models across the public and private sectors.

Bulgaria seeks two new reactors at Soviet-era site

Bulgaria’s Kozloduy nuclear power plant operates two Soviet-era VVER-1000 reactors which supply one third of the country’s electricity. But in February 2024, Bulgaria signed an intergovernmental agreement with the United States to contribute to Bulgaria’s civil nuclear program, including the design, construction, and commissioning of two Westinghouse AP-1000 reactors at Kozloduy at a cost of $14 billion. Bulgaria’s energy minister said that the two reactors will be built entirely with public funds: either the Bulgarian treasury or the state plant owner will finance up to 30 percent of the project costs, and a loan will cover the remaining costs.

In early February, the Bulgarian energy minister met with officials from the US Export-Import Bank (EXIM) to advance a $8.6 billion (more than 60 percent of the estimated cost) letter of interest for the two new reactors. For the remaining amount, the Bulgarian treasury or Kozloduy’s owner has several options. Bulgaria may also have access to debt or equity financing from the world’s largest multilateral development lender, the European Investment Bank. Additionally, as the World Bank considers how to incorporate nuclear power into their offerings, any steps toward engagement would encourage other lenders to do the same. If further capital is required, Bulgaria—with its relatively healthy domestic economy—could issue dollar-denominated bonds to raise funds, or the Kozloduy owner could issue green bonds similar to Canada’s Bruce Power.

Bulgaria’s ability—and that of any potential lenders—to overcome financing hurdles will determine the success of such agreements. But if the agreement leads to new nuclear power generation, it bodes well for similar economies to undertake new reactor builds.

Soviet reactor reaches end of life in Armenia

Russia dominates Armenia’s energy system, but Armenian foreign policy has shifted dramatically away from Moscow in the past year, in part due to the lack of Russian military assistance to Armenia when Azerbaijan seized Nagorno-Karabakh.

The policy change will not immediately impact Armenia’s Soviet-era VVER-440 nuclear reactor at Metsamor, which has received several upgrades and lifetime extensions—the latest, with Rosatom’s support, will sustain the remaining operational reactor until 2036. However, preparations must be made in the coming years to: extend the operational lifetime (a highly unlikely outcome due to the reactor’s age); build new light-water reactors (whether from China, Russia, South Korea, or the United States); or invest in small modular reactors (SMRs). Armenia may seek to build an SMR rather than a traditional reactor due to limited financing options and low power consumption.

To build a new reactor, Armenia might want to follow Romania’s blended model for financing its SMR deal with NuScale. The EXIM and US International Development Finance Corporation offered Romania tentative financial support totaling $4 billion. Public and private partners then formed a coalition of stakeholders from Japan, South Korea, the United Arab Emirates, and the United States to finance the SMR project up to $275 million. If further capital is needed, private financial institutions have also recently announced their plans to support the nuclear industry. Whether and when construction begins for the reactor in Romania will demonstrate feasibility, but so far, the financial structure has shown promise.

A great nuclear power balance

In partnership with allies, the United States should advance financial and commercial solutions to help countries dependent on Russian nuclear energy diversify their domestic power programs. The United States is well positioned to do so. Trump, and Biden before him, have supported nuclear energy domestically, which, in turn, can result in the export of US technologies and expertise. Strong bipartisan appropriations from multiple administrations will reinforce Trump’s vision and the domestic nuclear energy industry. In 2019, during Trump’s first administration, the Nuclear Energy Innovation and Modernization Act became law, paving the way for a streamlined advanced reactor licensing process. Under the Biden administration, the multibillion-dollar appropriations from the Infrastructure Investment and Jobs Act and the Inflation Reduction Act bolstered the US nuclear energy industry. Further, the 2023 Nuclear Fuel Security Act and the 2024 ADVANCE Act enjoyed bipartisan support on Capitol Hill.

Building on these domestic advances, Trump’s embrace of financial vehicles, such as the EXIM Bank or DFC, that bridge public and private sectors, will facilitate investments in multi-billion dollar infrastructure projects outside of the United States and bolster US energy-related exports, including from its domestic nuclear energy industry. These factors bode well for the United States to substantially weaken Russia’s share of global nuclear markets and its geopolitical influence.

Marina Lorenzini is the research program coordinator at the Middle East Initiative at the Belfer Center for Science and International Affairs at Harvard University’s John F. Kennedy School of Government.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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EnergySource Feb 24, 2025

US energy dominance is Putin’s worst nightmare as Russia enters its fourth year of war crimes

By Olga Khakova, Haley Nelson

Three years of Russia’s senseless aggression in Ukraine have caused monumental, unnecessary human suffering but also an irreversible impact on Russia’s energy sector. Sanctioning Russian LNG at the source is the most effective way to prevent future supply blackmail from Moscow.

Central Europe Eastern Europe

EnergySource Jan 29, 2025

Bigger than the Berlin Airlift: How NATO’s natural gas shut down a key Russian pipeline 

By Simon Lomax, Morgan Bazilian, and Greg Clough

NATO’s formidable defense of Europe against Russian energy aggression has shut down one of the last natural gas connections between the EU and Russia. These efforts are reminiscent of the 1948 Berlin Airlift, and mark a moment in geopolitics, energy security, and climate progress that merits celebration.

Energy & Environment Europe & Eurasia

EnergySource Jan 15, 2025

Tripling global nuclear energy capacity is in reach—if the world seizes the moment

By Amy Drake

At COP28, nations and corporations committed to tripling global nuclear energy capacity by 2050, underscoring its essential role in achieving net-zero emissions. Looking ahead to COP30, global leaders must strengthen multilateral collaboration, engage the financial sector, and provide support for new partnerships with the nuclear industry to meet this goal.

Energy & Environment Nuclear Energy

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post The US can reduce Russia’s nuclear energy—and geopolitical—influence appeared first on Atlantic Council.

Read the full report here.  

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On balancing competing pressures 

In recognition of the complexity of the energy system, rising energy demand, and that every energy source has tradeoffs, Rick Muncrief, who just retired as CEO of Devon Energy, sums up the realities facing the sector this way: “We cannot prioritize clean energy over reliability and affordability, we cannot pursue reliability and affordability at the expense of the environment, and we cannot develop energy policies and systems that do not account for geopolitical risks domestically and abroad.”  

These geopolitical risks feature strongly in our survey results, with respondents citing conflict in the Middle East and Russia’s unjust war in Ukraine as the biggest concerns. These risks raised the alarm over the use of energy for geopolitical leverage and renewed determination among US business leaders and policymakers to ramp up innovation and manufacturing domestically.   

What will be the biggest risk in energy geopolitics in the coming year?

On seeking common ground 

But amid this competitive spirit, policymakers know that they cannot secure their respective energy systems alone. Dan Jørgensen, European Commissioner of energy and housing, identifies key areas, including supply chains, cybersecurity, liquefied natural gas, and nuclear energy, where US-EU partnership is critical for both to achieve energy security, writing: “In the face of challenges to come, it will be essential to find and reinforce our common connections, wherever they exist.”   

On advancing the energy transition 

Energy leaders also make clear in our Agenda that the momentum of the energy transition has taken on a life of its own. Andrés Rebolledo Smitmans, executive secretary of the Latin America Energy Organization (OLADE), notes that in Latin America and the Caribbean “the share of renewable energy in electricity generation increased from 53 percent to 68 percent in the past ten years, while greenhouse gas emissions were reduced by 26 percent.” Ramping up progress will “require investments in unprecedented volumes of materials, which must flow and materialize in relatively short periods.” 

This unprecedented amount of investment is perhaps why, out of all sectors we surveyed, those who work in finance predict the longest runway for reaching net-zero emissions. 

Median year estimated for achieving net zero (by sector and region/country)

However, progress toward advanced nuclear energy and greater regional cooperation will continue to move the world toward both decarbonization and development. 

As Lassina Zerbo, chair of the Rwanda Atomic Energy Board, writes, “Nuclear energy—and in particular small modular and micro reactors (SMRs)—can revolutionize the African energy landscape and promote sustainable development.” In Southeast Asia, Kok Keong Puah, chief executive of Singapore’s Energy Market Authority, emphasizes that interconnections are key to regional decarbonization, but also that a “stable, prosperous, and decarbonized Southeast Asia will not only benefit the region but also strengthen global supply chains, promote economic growth, and contribute to climate stability.” 

And one of the most intriguing advancements to watch in 2025 will be the promise of generative AI, which could lead to a game-changing acceleration toward net-zero targets.   

While acknowledging that energy demand for AI is currently growing, Josh Parker, senior director of corporate sustainability at Nvidia, writes, “AI is also proving to be a powerful tool for finding ways to save energy and may very well become the best tool we have for advancing sustainability worldwide.”  

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Landon Derentz

Senior Director

Global Energy Center

Energy & Environment Middle East

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Christine Suh

Managing Editor, Global Energy Center

Global Energy Center

Energy & Environment French

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Bailee Mathews

Program Assistant

Global Energy Center

Energy & Environment Energy Transitions

Global Energy Agenda Feb 20, 2025

Energy realities require pragmatic solutions

By Rick Muncrief

Meeting the world’s growing energy demand requires balancing reliability, affordability, and sustainability while addressing geopolitical and economic security. Pragmatic policies that expand energy access, invest in diverse energy sources, and build resilient infrastructure are needed for a more secure and prosperous future.

Americas Energy & Environment

Global Energy Agenda Feb 20, 2025

The small reactor revolution can transform African energy systems 

By Lassina Zerbo

Africa faces a dual challenge of ensuring reliable access to energy while contributing to global net-zero goals. Nuclear energy—and in particular small modular and micro reactors—can revolutionize the African energy landscape and promote sustainable development.

Africa Energy & Environment

Global Energy Agenda Feb 20, 2025

Busting the top myths about AI and energy efficiency 

By Josh Parker

The rapid growth in AI and data centers in recent years has fueled concern that these systems will push the world toward an energy crisis. Advancements in this sector, however, should put this concern to rest.

Energy & Environment Energy Transitions

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post How shifting political leadership, war, and generative AI are shaping the energy outlook: Insights from the 2025 Global Energy Agenda appeared first on Atlantic Council.

However, as geopolitical pressures mount and Europe faces growing competition in global markets, questions remain over whether these measures will be implemented swiftly enough to prevent further industrial decline. Below, Atlantic Council experts share their analysis on the EU’s new industrial policy, its implications for European energy security, and how key partners may respond to the bloc’s evolving regulatory landscape. 

Click to jump to an expert analysis:

Andrei Covatariu: The EU’s decarbonization goals are technically achievable—but are Europeans able to pay for them? 

Andrea Clabough: Europe goes all in on industrial policy—with or without the US

Elena Benaim: The Clean Industrial Deal Needs a Clear Strategy on Clean Energy Supply Chains 

Carol Schaeffer: The CID is more industrial than it is clean. But Europe needs to be both.

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The EU’s decarbonization goals are technically achievable—but are Europeans able to pay for them?

Listed first among the critical elements for a “thriving new European industrial ecosystem of growth and prosperity” is affordable energy, as Europe’s energy prices are significantly higher than those of its main trading competitors. For this reason, the Clean Industrial Deal strategy issued by the European Commission is accompanied by an additional, even lengthier document—the Action Plan for Affordable Energy—aimed at finding energy policy solutions to restore economic competitiveness while keeping the EU on track to meet its decarbonization goals. 

To achieve this, the Clean Industrial Deal sets a target of a 32 percent electrification rate by 2030, representing a more than 50 percent increase compared to today (21.3 percent). While flexibility is seen as a major contributor to both increasing electrification and reducing system costs, achieving such a rapid electrification rate would require massive investments in power grids—otherwise a critical foundation for the energy transition process—within less than five years. Given that Europe has some of the highest lead times globally for deploying new distribution and transmission lines, fast-tracking permitting is cited as a necessary solution. Although these ambitious targets are technically achievable, ensuring affordability at the same time—as repeatedly emphasized in the Commission’s proposal—is simply aspirational. 

While acknowledging that Europe has the most integrated grid globally, the Action Plan for Affordable Energy also recognizes the need for further progress. It proposes making electricity bills more affordable, including by reducing network charges. However, while these costs may be removed from final energy bills, they will still be indirectly paid by end users through domestic or EU budgets, exacerbating existing budget deficits or inflation-related issues, especially in the short run. 

Although ambitious targets may foster short-term social and political cohesion, failing to meet them will have political repercussions in the next EU elections in 2029—just months before the 2030 milestone. 

Still, the goal of reducing net greenhouse gas emissions by 90 percent by 2040 is still attainable through other energy policy measures listed in the document, most of which have already been talked about in previous years. These include more long-term contracts, faster permitting for clean power projects, creating a Gas Market Task Force to ensure fair competition, fully integrating energy markets, and providing more funding for energy efficiency solutions. 

In summary, the EU requires more than €570 billion per year between 2021 and 2030, as well as €690 billion per year between 2031 and 2040, to stay on track to meet its climate neutrality mission, according to the Action Plan for Affordable Energy. These figures include solar, wind and biomass, energy efficiency and grid capacity, but do not cover investments in nuclear energy (including fusion), enhanced geothermal, solid-state batteries, or capacity refurbishment, which the Commission will assess and foster. It is a bold—if old—plan, with the same unresolved question of how the EU will pay for it.  

Andrei Covatatiu is a nonresident fellow with the Atlantic Council Global Energy Center 

Europe goes all in on industrial policy—with or without the US

The Clean Industrial Deal hardly emerged in a vacuum, and it is perhaps impossible to analyze apart from the sea change the last month has brought to US-EU relations. The CID reveals determination in Europe to build its own future and (re)emerge as a global industrial competitor—looking not just at China, but also the United States. Some of the announcements will be appreciated in Washington, such as delayed implementation of the EU’s Carbon Border Adjustment Mechanism (CBAM), narrowing its application to a smaller group of importers, and more tailored environment, sustainability, and governance requirements in corporate sustainability and due diligence reporting. 

But other components point to a “Made in Europe” industrial policy that retains characteristic focus on decarbonization. New Clean Trade and Investment Partnerships and additional free trade agreements are intended to “better manage strategic dependencies” but are almost certainly a response to the protectionist mindset and tariff threats coming from Washington. Likewise, a critical raw materials demand aggregation and matchmaking mechanism will facilitate joint purchases within hotly competitive markets for minerals and other commodities—a focus of the Trump administration’s recent diplomacy to secure such access for the United States. A revision in the Public Procurement Framework next year will “make European preference criteria a structural feature of EU public procurement in strategic sectors.” The Affordable Energy Action Plan, meanwhile, emphasizes further diversification of liquefied natural gas (LNG) suppliers from existing and future LNG projects, likely to include but perhaps look beyond reliance on US LNG. 

Through the CID, the EU Commission is arguing that the costs of energy transition can be mitigated while the social and economic opportunities are fully maximized—a marked contrast to the attitude in Washington. These and other elements suggest the EU wants its own rules of the road to be proactive (rather than continually react) to whatever pathways the United States and China pursue. With serious questions surrounding the transatlantic alliance and the reliability of the United States as an economic and geostrategic partner, this gear shift in the European approach comes not a moment too soon. 

Andrea Clabough is a nonresident fellow with the Atlantic Council Global Energy Center. 

The Clean Industrial Deal Needs a Clear Strategy on Clean Energy Supply Chains 

The European Commission’s Clean Industrial Deal outlines a welcome and necessary framework, as it positions climate action as the driver for creating a compelling business case for industrial decarbonization. 

While the framework includes a series of forthcoming initiatives that could—at least in principle—strengthen the competitiveness and decarbonization nexus, there is a lack of clarity when it comes to the role of international trade. 

Under the “Global Markets and International Partnership” pillar, the Commission rightly points out that “the EU cannot realise its clean industrialisation objectives without partnerships on the global stage.” Clean Trade and Investment Partnerships (CTIPs) are introduced as a tool that will complement free trade agreements to offer a “more targeted approach, tailored to the concrete business interests of the EU.” 

For the EU to successfully achieve its clean industrial objectives, a well-defined strategy for clean technology supply chains is essential. This requires, on one hand, a comprehensive analysis of the EU’s current manufacturing capacity in clean technology supply chain segments necessary to reach net zero, and on the other, a thorough assessment of existing trade agreements with global partners to identify where external supply chains can complement gaps in the EU ‘s capacity. 

Without such an analysis, there is a risk that CTIPs may fall short of delivering, ultimately undermining the EU’s goals. At a time of geopolitical turmoil and a reassessment of strategic partnerships, fully integrating this evaluation into a joint roadmap for decarbonization and competitiveness is of fundamental importance. 

Elena Benaim is a nonresident fellow with the Atlantic Council Global Energy Center. 

The CID is more industrial than it is clean. But Europe needs to be both.

With the introduction of the Clean Industrial Deal, the European Commission correctly acknowledges that competitiveness and climate policy are intertwined. But as Carbon Market Watch put it, although the deal is “certainly industrial, it is far from clean.” While the CID is an important step to solidify the green transition as part of a strategy for economic competitiveness, it falls short in bringing Europe closer to meeting the goals of the Paris Agreement. 

One example is the CID’s heavy reliance on carbon capture, utilization and storage (CCUS), which is its main strategy to address emissions from key sectors of European economy, such as steel, cement, and chemicals. But CCUS can only count as carbon removal if that removal is permanent. While a revision of the Emissions Trading System (ETS) aims to incentivize permanent storage—which has enormous long-term logistical challenges—relying on carbon capture to manage emissions after they are produced is a more precarious way to decarbonize than reducing the emissions in the first place. 

It is important to remember that cutting emissions is itself a competitiveness measure—the long-term damage to supply chains and infrastructure from increasingly severe climate impacts is as great a threat to Europe’s economy as any tariff. But despite the shortcomings of the CID, the good news is that it clearly signals Europe’s commitment to doubling down on the green transition amid profound economic challenges. 

The CID may be more industrial than it is clean—but that may be in service of the climate fight in the long run. Europe cannot be a leader in the green transition if it collapses under competitive pressures from the United States, Russia, and China. But if the CID is about Europe fighting for its survival in a rapidly shifting geopolitical landscape, then it should not forget that the climate crisis remains the continent’s greatest long-term threat. 

Carol Schaeffer is a nonresident senior fellow with the Atlantic Council Europe Center. 

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Kok Keong Puah is the chief executive of Singapore’s Energy Market Authority. 

Southeast Asia’s energy transition stands at an inflection point. As the region’s energy demand accelerates—spurred by both rapid economic growth and a growing population—the stakes are higher than ever. The ASEAN Centre for Energy (ACE) estimates that Southeast Asia’s energy demand will more than double from 2022 levels by 2050. By that year, the International Energy Agency predicts that the region’s energy demand will surpass the European Union’s.  

This growth presents an enormous challenge: How can we ensure energy security, meet climate ambitions, and address the needs of a growing population at the same time? Yet there is a silver lining: Southeast Asia has the potential to lead the way in the global energy transition. 

ACE estimates suggest that renewable energy could meet more than two-thirds of the region’s energy needs by 2050. However, unlocking this potential is far from straightforward. Large upfront capital investments, profitability concerns, and a lack of adequate grid infrastructure all stand in the way.  

The solution? A more connected Southeast Asia.  

Regional interconnectivity is key to unlocking Southeast Asia’s decarbonized future. The ASEAN Power Grid (APG) vision aims to connect power grids, creating a borderless network throughout Southeast Asia that links regions rich in renewable energy to demand centers. A connected system would lay the foundation for a robust and integrated regional energy market. It would allow countries to diversify their energy sources and strengthen resilience by drawing upon mutual support from neighboring nations. 

Through the APG, countries could establish long-term power purchase agreements for renewable energy projects that improve project bankability and attract high-quality investments. For example, The Business Times in Singapore reported that planned electricity export projects from Indonesia to Singapore could bring as much as $20 billion in investments to Indonesia. The APG would also increase access to electricity in exporting countries as domestic grid infrastructure is strengthened to support cross-border trade. Domestic manufacturing and related economic activities would likely see an uptick as developers source parts and services locally.   

Southeast Asia is already taking strides toward realizing the APG vision. Pathfinding projects, such as the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project, have proven the feasibility of multilateral cross-border power trade among multiple Southeast Asian countries. Its success has paved the way for further initiatives such as the Brunei-Indonesia-Malaysia-Philippines Power Integration Project.  

These efforts are laying the groundwork for an interconnected regional grid. But significant investment and infrastructure development are still needed. 

Singapore is supporting projects from Australia, Cambodia, Indonesia, and Vietnam to provide a total of 7.35 gigawatts of low-carbon electricity imports to Singapore. Doing so has allowed us to kick-start discussions within the region on how we can collaborate to realize the APG vision.  

Collaboration beyond the Association of Southeast Asian Nations (ASEAN) is essential. No one country can realize the APG alone. ASEAN has collaborated with dialogue partners such as Australia, Japan, and the United States on renewable energy technologies and regional power integration. These partnerships not only bring financial support, but also a wealth of expertise to accelerate the sustainable energy transition.  

An example of such collaboration is the joint feasibility study between Singapore and the United States on regional energy connectivity. The first phase demonstrated the technical feasibility and socioeconomic benefits of regional connectivity, while the second phase will focus on studying the necessary legal and financial frameworks to support it.  

Southeast Asia’s renewable energy resources make the region an ideal testing ground for emerging low-carbon technologies. Hydrogen, geothermal energy, and carbon capture and storage (CCS) hold immense potential. Singapore, in collaboration with ExxonMobil and Shell through the S Hub consortium, is studying cross-border CCS projects to enhance the region’s climate resilience.  

The inaugural Singapore-US Forum, co-hosted with the US Department of Commerce at the 2024 Singapore International Energy Week (SIEW), brought together government and industry leaders to discuss strategies to accelerate the development of hydrogen in Asia. These partnerships are critical for driving innovation and ensuring that Southeast Asia remains at the forefront of the global energy transition. 

Similarly, organizations like the Atlantic Council play a key role in driving the region’s decarbonization by facilitating important discussions that shape energy transition narratives. As our strategic insights partner for SIEW, the Atlantic Council’s advocacy efforts on energy security have helped to build mindshare among participants on the benefits of regional interconnectivity, renewables, and low-carbon energy technologies.  

The energy transition in Southeast Asia has global implications. A stable, prosperous, and decarbonized Southeast Asia will not only benefit the region but also strengthen global supply chains, promote economic growth, and contribute to climate stability. Through our continued partnerships with the United States and other global partners, we will build a connected and sustainable world for all. 

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Unlike in 2022, when Russia manufactured an abrupt gas supply shortage, today’s energy threats are more gradual in nature. For example, undersea electricity and energy cables are being cut, and the suspected vessels are often part of Russia’s shadow fleet. Such attacks should still be taken seriously by the European Union (EU) and its partners both for the real damage they cause and because Russia could ramp up such attacks on short notice. In addition, kinetic and cyberattacks on the electricity grid, remaining gas supply issues and chokepoints, and high energy prices compound the danger.  

However, it is possible for Europeans to address these threats to their energy security and mitigate potential damage to their societies and economies. It is reassuring, too, that the message that came out of Munich was one of unity and a desire to act. But now that leaders and policymakers have decamped from the Bavarian capital and returned home, what will happen next? Will Europeans sleep through these issues or take action? What should Europe do, and should member states or the EU take the reins?  

Brussels and beyond 

Over the past several decades, EU funding has enabled a massive build-out of grid and pipeline infrastructure on the continent. Considering the cross-border nature, risk, and scale of these projects, EU engagement was vital. It was also vital during the 2022 energy crisis, during which the EU increased its work on energy security. Today, too, current threats would be partially curtailed by the EU building additional infrastructure. However, as the European energy system goes through unprecedented transformation—electrification, digitalization, market interconnection, artificial intelligence integration, and further supply diversification—Brussels should not act alone. A multi-pronged approach is required to create and secure the energy system of tomorrow. 

One reason a multi-pronged approach is needed is because of because of budget constraints. The COVID-19 pandemic and Russia’s intentional energy blackmail scheme, which cost Europe one trillion dollars, has left the EU coffers and many national budgets in a tight spot. There is still no vision around a shared borrowing scheme. European countries and other allies are rightfully prioritizing borrowing money to provide Ukraine with a significant influx of military support. This is especially the case following recent remarks from US President Donald Trump and Vice President JD Vance that suggest the United States will decrease its support for Ukraine and, potentially, for Europe as a whole.  

However, the lack of funding is not the only barrier. Another frequently mentioned concern at the MSC was the challenging regulatory environment in Europe, as some member states take a more stringent approach to interpreting EU regulations at the national level. This difficulty is further compounded by geopolitical uncertainty. Thousands of companies operating in Europe are impacted by the sweeping environmental and societal disclosure mandates from the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive, and methane regulations.  

All aboard the omnibus  

The new EU leadership should be commended for responding to these calls by focusing on the promising omnibus legislation and sending a strong message with its competitiveness compass—a roadmap for boosting European competitiveness. The European Commission is expected to unveil the omnibus, intended to streamline the EU’s sustainability reporting, in late February or March.  

There is plenty of irony in reducing regulations by rolling out another regulation, but the omnibus a tangible, timely, and thoughtful solution. If done right, it could provide needed certainty for investors and developers. The EU could accomplish this by outlining the scope of the existing and incoming regulations and by reducing costs for non-value-added certification, measurements, and verifications. Most important, the EU should make it easier for the private sector to reach common-sense objectives in a reasonable timeline, with eyes on the end goals rather than on processes and paperwork. This could also help create a more coordinated regulatory environment across the EU member states.  

By simplifying its rules, the EU could encourage member states to harmonize their implementation of the regulations. Differences in implementation can create confusion and additional expenses for companies looking to deploy projects across multiple EU countries.  

Reducing regulatory burdens by getting rid of non-value-added bureaucratic steps could also invite more US private sector partnerships, while transatlantic geopolitical and trade tensions settle. The European Commission’s new leadership does not need to sacrifice its carbon emissions reduction and environmental integrity efforts to address incoming energy sector threats. The omnibus could be the first step—and an impactful one.   

Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center. 

The post Make Europe more energy secure by reforming EU regulations   appeared first on Atlantic Council.

On February 15, Andrew Michta, senior fellow in the GeoStrategy Initiative, was published in 19FortyFive on the effect of the European Union’s climate policies on Europe’s economy. He argues that the European Union’s “overly-ambitious emissions reduction targets” and “rigid climate policy” have stagnated European economic growth and overly burdened its corporations.  

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One critical challenge for the United States in the energy security space is the sourcing of enriched uranium that fuels nuclear reactors across the country, vital for the energy transition away from fossil fuels. The United States has consistently depended on Russia for enrichment services. At the same time, the US enrichment capacity, once thriving, has dwindled, giving way to foreign imports. Nearly seventy-three percent of enriched uranium in 2023 originated abroad. Such reliance on a handful of foreign sources, and especially adversarial countries, introduces severe supply vulnerabilities. With the global demand for enriched uranium expected to rise, the United States should regain its status as a large uranium enricher capable of satisfying its domestic demand.

Russia has a consistent track record of weaponizing energy dependence to coerce other countries. Approximately twenty-seven percent of the enriched uranium used in the United States comes from Russia, which is responsible for around forty-four percent of global enrichment capacity. Although the Biden administration banned Russian uranium imports by signing the H.R.1042, Prohibiting Russian Uranium Imports Act into law, effective August 2024, the Act permits US firms to procure nuclear fuel from Russia’s state-run nuclear energy firm, Rosatom, under a waiver program until alternative suppliers are secured. These waivers, however, can only be granted until 2028 and are designed to give US energy providers sufficient time to adjust to the new conditions.

In response, in November 2024, Moscow announced “tit-for-tat” restrictions on uranium exports to the United States. According to the new rules, exemptions might be made under one-off licenses issued by the Russian Federal Service for Technical and Export Control. While it is unclear whether such licenses will be granted, this move yet again showcases the risks of relying on external fuel sources.

The pursuit of indigenous enrichment capacity is not motivated by market dynamics or elevated prices. The current price of enrichment services (measured in separative work units) is significantly lower than at any point between 2006 and 2019. Instead, the drive stems from vulnerabilities associated with overreliance on a handful of suppliers. Such concentration of supply may become vulnerable to disruptions caused by malign actors or market shocks.

Building resilient enriched uranium supply chains is a critical policy to prevent future weaponization and disruptions by malign actors. It requires more than simply halting imports from Russia. The United States should pursue a strategic policy to meet its own nuclear fuel needs while helping establish resilient and transparent supply chains to other nations. The Sapporo 5—a coalition of like-minded countries comprising Canada, Japan, France, the United Kingdom, and the United States—has pledged to collaborate on securing a reliable nuclear fuel supply chain. Achieving this objective will require a sustained increase in allied financing across all stages of the fuel cycle, including uranium enrichment.

A growing bipartisan consensus in the United States supports strengthening domestic uranium enrichment programs, even if allies and partners temporarily fill the gaps. Until recently, the United States lacked domestically owned uranium enrichment facilities. To address this, around $3.4 billion has been mobilized to jumpstart domestic enrichment efforts. These funds will benefit domestic enrichers and support firms at other fuel cycle stages, including mining.

The goal of building domestic uranium enrichment capacity to safeguard from disruptions should remain a priority. Despite the optimistic outlook, the jury is still out on whether these efforts are sustained in the long run. Such investments cannot have immediate results and require a strategic vision. Additionally, the nuclear fuel cycle, by design, is hard to sustain competitively without close public-private collaboration. Public-private partnerships and long-term demand signals to service providers are essential to building a resilient enriched uranium supply chain.

Mikael Pir-Budagyan was a Young Global Professional with the Economic Statecraft Initiative of the Atlantic Council’s GeoEconomics Center.

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Lithuania, Latvia, and Estonia have faced a wide array of Russian coercive energy policy measures arising from their historical dependence on Russian energy supplies and Soviet-era energy infrastructure. These measures included a total economic and energy blockade of Lithuania in 1990 in response to its independence movement, a prompt shutdown of an oil pipeline after Lithuania declined to sell its crude oil refinery to a Russian company in 2006, and long-term politically motivated gas pricing for the Baltics, to name just a few well-known cases. 

Having faced the destructive impacts of Russia’s weaponization of energy, the Baltic states have become leaders among European nations in severing ties with Russia’s energy supplies over the past decade. The installation of the liquefied natural gas (LNG) terminal in Klaipėda, Lithuania’s seaport, in late 2014 marked a significant step in this direction. It opened the Baltic gas markets to global LNG suppliers, including those from the United States. This alternative gas supply route enabled the Baltic states to ban all Russian gas imports, both piped and LNG, just two months into Russia’s full-scale war against Ukraine. The Baltic states became the first European countries to take such a principled stance, and they are among those advocating for the rest of the EU members to follow suit by implementing a blanket ban on Russian LNG.  

Flipping the switch

The timely diversification of oil and electricity supply routes also allowed the Baltics to stop importing these energy sources from Russia. In terms of electricity, the Baltic states use the interconnectors Estlink 1 and Estlink 2 between Estonia and Finland, Nordbalt between Lithuania and Sweden, and LitPol Link between Lithuania and Poland for power exchanges with Europe. However, the Baltic states’ early market-level integration with their EU neighbors did not mean the immediate end of Russia’s involvement in the their electricity sectors on the system control level.

These are the last days that the Baltic states’ power grids remain a part of the Russian-controlled Integrated Power System/United Power System (IPS/UPS) grid. This effectively means that a dispatch in Moscow is still responsible for maintaining electric frequency stability in the Baltic states—bringing all the risks that such a dependency on Moscow entails. Ukraine and Moldova performed a test desynchronization from the IPS/UPS grid concurrently with the onset of Russia’s invasion of Ukraine in 2022, immediately asking for an emergency synchronization with the European grid, which was granted. Lithuania was aware of the potential need to perform an emergency synchronization, too, and thus had prepared its power grid to function in an isolated mode if needed. On February 8, Lithuania, Latvia, and Estonia will decouple from the Russian-controlled grid and conduct a joint isolated operation test before joining the European grid on February 9.

The planning for the Baltic synchronization with the European grid began as early as 2007, but—due to multiple project phases involving political, regulatory, and infrastructural components in Lithuania, Latvia, Estonia, and Poland—it has only now been finalized. The project was co-financed by the EU, which has allocated more than €1.2 billion from its Connecting Europe Facility. For the EU, the project is as important as it is for the Baltic states: only with Lithuania, Latvia, and Estonia connected to the European grid can the EU achieve its goal of a fully integrated European energy market, in which all uncontrolled third-party impacts on its member states are eliminated.

Securing critical infrastructure

Although Russia will no longer exert direct influence over the energy supply and system control of the Baltic states, Moscow may now focus on targeting their critical energy, communications, and data infrastructure. Since October 2023, at least eleven cables running under the Baltic Sea have been damaged. This includes the underwater Balticconnector gas pipeline between Estonia and Finland; communications cables linking Finland, Germany, Sweden, and Lithuania; and the Estlink 2 power cable between Estonia and Finland. A data cable between Latvia and Sweden has been damaged as recently as January 26. The Lithuanian government is responding with increased military involvement in protecting critical seaborne energy infrastructure under the Baltic Sea amid an attempted sabotage of the NordBalt power cable that connects it to Sweden.

The damage was caused by vessels dragging their anchors on the Baltic Sea’s seabed. Investigations into the circumstances of the damage are still ongoing, but the rapid increase in such incidents and the vessels involved—mostly Russia’s “shadow fleet” oil tankers—raise concerns that the damage was intentional. As a response, NATO has stepped up its presence in the Baltic Sea by launching a new military patrol mission called Baltic Sentry. This mission involves deploying frigates, maritime patrol aircraft, and naval drones to enhance the ability of littoral states to respond to destabilizing acts on their critical infrastructure. The Alliance has also established a Critical Undersea Infrastructure Network to enhance information-sharing and situational awareness and a dedicated Maritime Centre for the Security of Critical Undersea Infrastructure within NATO’s Maritime Command in Northwood, United Kingdom. 

Crucial first steps have also been made to increase the protection level of the onshore LitPol Link interconnector between Lithuania and Poland, through which the Baltics are synchronizing with the European grid. Lithuania’s Public Security Service has taken over the protection of several LitPol Link sites from a private security company that had previously been assigned this role. The Baltic states and Poland, fully aware of Russia’s hybrid activities in the region, have also urged the EU to provide financial support for enhancing current security measures for the LitPol Link and other critical energy infrastructure in the region. 

It’s a start, but more needs to be done, particularly in the case of Lithuania. With vital interconnectors—LitPol Link in energy and Rail Baltica in transport and military logistics—passing through the country, Lithuania is emerging as a crucial gateway connecting continental Europe to the Baltics, the Nordic region, and even the Arctic.

All these interconnections traverse the narrow land corridor between Lithuania and Poland, known as the Suwałki Gap. This notorious area borders Belarus to the east and Russia’s Kaliningrad exclave to the west.

Russia could attempt to isolate the Baltics from the rest of Europe by obstructing the Suwałki Gap from these territories. Thus, beyond the punctual tactics of strengthening the security of the LitPol Link and, later, the planned additional onshore electricity interconnector between Lithuania and Poland that is reportedly set to run along the Rail Baltica tracks, an approach of a comprehensive protection regime for this vulnerable border area is needed. An increased NATO military presence in Lithuania and regional measures, such as installing the Baltic Defense Line along the Baltic states’ borders with mainland Russia, its Kaliningrad region, and Belarus, are important steps toward a solution.

With the Baltic power systems soon operating in harmony with those in continental Europe, the regional security agenda shifts from concerns over the security of energy supply to the protection of critical energy infrastructure. The Baltic nations and their allies should further enhance their proactive efforts to deter sabotage and secure this strategically vital region.

Justina Budginaite-Froehly, PhD, is a nonresident senior fellow with the Atlantic Council’s Europe Center and Transatlantic Security Initiative in the Scowcroft Center for Strategy and Security.

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US President Donald Trump should recognize that Azerbaijan has not only maintained thirty years of good relations with Israel but has also proven itself as a reliable security and economic partner of the Jewish State. If the United States were to build on Israel’s close relations with Azerbaijan to deepen its own ties to Baku, Washington could gain significant economic, diplomatic, and security benefits, including an enhanced partnership with a bulwark against Iranian influence. 

A troublesome neighbor

Since gaining independence in 1991, the small Caspian Sea nation of Azerbaijan has struggled with Iran, which has threatened it with war, sponsored a terrorist group on its territory, and, according to Azerbaijani officials, supported hardline Islamist groups that tried to overthrow its government.

Azerbaijan, which neighbors Iran and has a population nine times smaller than the Islamic Republic’s, has largely maintained its autonomy and stability by relying on Israel and Turkey to keep Tehran at bay.

Iranian and Azerbaijani relations have long followed a repeating pattern of crises and détentes. Currently, their relations are in a détente phase. But as recently as August, Iranian President Masoud Pezeshkian proposed targeting Azerbaijan instead of directly striking Israel in retaliation for the assassination of Hamas political leader Ismail Haniyeh in Tehran.

In 2022 and 2023, Iran threatened war against Azerbaijan multiple times, moving forces onto the border and holding massive military exercises, including a simulated invasion across the Aras River into Azerbaijan. Recently, Iran’s primary concern with Azerbaijan centered around the establishment of the Zangezur corridor, a proposed route between Armenia’s Syunik Province and Azerbaijan’s Nakhichevan enclave. Such a corridor would put all of Iran’s northwest border under Turkish and Azerbaijani control, a scenario Iranian Foreign Minister Abbas Araghchi has called a “red line.”

Much like with Israel, the Islamic Republic has irreconcilable differences with Azerbaijan.

Today, although Iran does not allow ethnic censuses, an estimated thirty million ethnic Azerbaijanis live in northwest Iran—three times the population of Azerbaijan and a third of the Iranian population. Like other minorities in Iran, Azerbaijanis face political oppression as well as cultural, linguistic, economic, and even ecological discrimination.

Many of Iran’s policies toward its minorities stem from paranoia over ethnic separatism. As the national homeland of its largest minority, Iran sees Azerbaijan as posing a particular threat. As such, Tehran worries that Baku may inspire Azerbaijanis to revolt.

But Azerbaijanis in Iran don’t need inspiration from Baku to voice their dissent against their government’s foreign policy. During the 2020 Second Nagorno-Karabakh War between Azerbaijan and Armenia, Iranian Azerbaijanis rushed to the borders to cheer on the Azerbaijani military. Some even openly protested the Islamic Republic’s support for Armenia in the conflict.

Iran has used two main tools against Azerbaijan—support for Armenia and proxy warfare.

Traditionally, Iran used relations with Armenia as a tool against Azerbaijan. Over thirty years of conflict with its western neighbor took up most of Azerbaijan’s foreign policy bandwidth. Iran supported Armenia since the beginning of the First Nagorno-Karabakh War in 1992, albeit discreetly, to keep Azerbaijan in check. Since the 2020 war, that support has come out in the open with large weapons deals, intelligence cooperation, high-profile meetings with the Ayatollah Ali Khamenei, and vows from Iranian leaders to defend Armenia. 

As both then Iranian Foreign Minister Hossein Amir-Abdollahyan and Iranian Ambassador to Armenia Mehdi Sobhani declared in 2022, “Armenia’s security is Iran’s security.” 

Iran has also waged a steady irregular warfare campaign against Baku using an ethnic Azerbaijani proxy known as the Husseiniyyun, or followers of the third Shia Imam Hussein. The late Islamic Revolutionary Guard Corps Quds Force Commander Qasem Soleimani created the group in 2015. Since then, the Azerbaijani government has accused the Husseiniyyun of having been behind multiple assassination attempts against Azerbaijani officials, including the mayor of Ganja, Elmar Valiyev, and outspoken anti-Iranian parliamentarian Fazil Mustafa. The group also actively propagates extremist Khomeinist ideology, pushing for an Islamic revolution and attempting to incite public demonstrations and attacks on Azerbaijani, Jewish, and Israeli targets. According to Azerbaijani security officials, Baku has thwarted multiple terrorist attacks by the group, including an attempt on the Israeli embassy in 2023. Additionally, it has busted up affiliated Iranian spy rings allegedly tasked with overthrowing the government.

Azerbaijani-Israeli ties

In the face of this threat, Azerbaijan has turned to support from Israel.

Israel was one of the first nations to formally recognize Azerbaijan after the latter declared its independence in 1991. Their real bilateral cooperation started in October 1995, after a meeting between then Israeli Prime Minister Yitzhak Rabin and then Azerbaijani President Heydar Aliyev. As the Israeli outlet Maariv reported, during their conversation, Aliyev spoke of Azerbaijan’s “long and troublesome border with Iran” and asked for security assistance, which Rabin promised to consider. 

Since then, Baku and Jerusalem have become close partners, especially in the critical spheres of military and energy cooperation. Azerbaijan is the top energy exporter to Israel, supplying it with 55 percent of its oil imports. For its part, Jerusalem sells Baku billions of dollars’ worth of weapons and military technology. Israeli weapons made up 69 percent of Azerbaijan’s weapon imports from 2016 to 2021. These shipments included missile interceptor systems and Harop drones, which played a major role in Azerbaijan’s victory over Armenia, which received backing from Iran, in the Second Nagorno-Karabakh War. Although Turkey was Azerbaijan’s largest backer during the conflict, Israeli weapons greatly enabled Azerbaijan’s successful offensive. Unfortunately, the military assistance from Turkey and Israel have permitted Baku to pursue a truculent policy which has made it more difficult to achieve peace between Armenia and Azerbaijan.

Historically good relations with Jews in Azerbaijan and internationally also helped usher in close ties. Jews have lived in Azerbaijan since at least the seventh century and, like in many other Turkic countries, faced little to no antisemitism. According to Azerbaijani-Jewish diaspora organizations, no country has been “as friendly and loyal” to their Jews as Azerbaijan. This has led to stellar ties with Jewish diaspora organizations, which have helped improve Azerbaijani-US relations. As then Azerbaijani Foreign Minister Hassan Hassanov said, “we don’t conceal that we rely on the Israel lobby in the US.” Indeed, relations with the Jewish State have helped improve Azerbaijan’s ties with Washington. In 2002, Jewish organizations helped waive a ban on aid to Baku. In December 2024, the largest US pro-Israel lobbying group, AIPAC, sent its outgoing president and president-elect to meet with Azerbaijani President Ilham Aliyev, telling him, “your support for Israel will be recognized.” 

But the most significant benefit from Baku’s relations with Israel has been deterring Iran. As early as the 1990s, Israel helped Azerbaijan set up electronic intelligence-gathering stations. According to Forbes, the Mossad enjoys a “large and significant presence” in the country. When Iran threatened an Azerbaijani oil tanker in the Caspian Sea in 2001, both Turkey and Israel vowed defense support. In 2011, Jerusalem began supplying Baku with Orbiter 2M surveillance drones to monitor the Iranian border. From 2016 to 2023, Haaretz reported ninety-two flights carrying weapons exports from a military base in Israel to Azerbaijan. These flights increased right before Azerbaijan’s September 2023 military offensive against Nagorno-Karabakh and continued between November 2023 and April 2024, when its relations with Iran were at a nadir. The ongoing war in Gaza has not derailed this collaboration.

Additionally, Haaretz reported that Azerbaijan provided the Mossad with a forward base to monitor Iran and even prepared an airfield for Israel to use if it planned to target Iranian nuclear weapon sites. Although Azerbaijan denied the latter assertion, Obama administration officials assessed in 2012 that Israel could use Azerbaijan as a staging ground to strike Iran. Such access would remove the need for Israeli fighter jets to refuel midflight.

Considering the sensitivity of such cooperation, it is likely that leaks of this kind are part of a much greater picture. As a WikiLeaks memo later showed, Aliyev himself said that relations with Israel are “like an iceberg” with “nine-tenths below the surface.” In the same memo, Aliyev said that, like Israel, Azerbaijan views Iran as an “existential threat.”

Such ties with Israel act as a strong deterrent and have instilled confidence in Azerbaijan. In response to Iranian threats over relations with the Jewish State in 2021, Aliyev posted a photo of himself caressing a Harop drone near the Iranian border.

Recently, Azerbaijan has taken advantage of Iranian weakness to begin a renewed push to establish the Zangezur Corridor. On January 7, Aliyev said the corridor “must and will be opened.” Much like the fall of Syrian dictator Bashar al-Assad, this wouldn’t have been possible without Israel decimating Iran’s power projection over the past year and a half.

How Israel benefits—and the US could, too

To be sure, Israel also gains from its ties with Azerbaijan.

Besides key energy imports and a bulwark against Iran, Israel has gained a partner that can help expand its influence and trade to Central Asia and help mediate its relations with Turkey. Turkish-Israeli relations have suffered since the October 7, 2023, massacre by Hamas and the ensuing war in Gaza. As a result, Azerbaijan’s role as an arbitrator is increasingly vital, especially since Turkey and Israel share some regional goals, such as keeping Iran out of Syria. Hikmet Hajiyev, a top advisor to Aliyev, appears to have taken on this role. Following the fall of Assad, Hajiyev flew to Jerusalem and Ankara to relay messages between the two countries. 

Azerbaijan has long acted as a mediator. Baku officials sought reconciliation following the crisis in Israeli-Turkish relations following the Marmara incident in 2010, in which Israeli commandos killed nine Turkish activists trying to breach a naval blockade in Gaza. Aliyev began mediating between the two countries himself in 2018, including in personal conversations with Turkish President Recep Tayyip Erdoğan. According to the Institute for National Security Studies, an Israeli research institution, Azerbaijan played an important role in negotiations over normalization between Turkey and Israel between 2021 and 2023.

Baku has also served as an interlocutor with the Arab world. According to Chen Baram of Hebrew University, Azerbaijan acted behind the scenes to bring Israel closer to the Persian Gulf countries. Baram said he “personally witnessed meetings between Israelis and high-ranking officials from the Arab world in Baku, years before they became official in Israel.”

So far, it has paid off. While Iranian influence has had devastating effects on Lebanon, Iraq, and Yemen, Azerbaijan is safe from its grip. And as Tehran surrounds Israel with its proxies, Jerusalem has a key ally on Iran’s border.

Washington should learn from Israel’s diplomatic and security collaboration with Azerbaijan to bolster its own ties with Baku. Besides being a bulwark against Iran, close relations with Azerbaijan could help the United States gain a stronger foothold among Central Asian countries, with whom Azerbaijan has been developing stronger relations. This would be especially important for the United States, as Central Asia is rich in minerals and energy and is home to the Middle Corridor, a trade route from Asia to Europe that bypasses both Russia and Iran. After the Second Nagorno-Karabakh War, Azerbaijan has prioritized deepening its ties with the Turkic world. 

Washington could start by expanding the Abraham Accords to Azerbaijan, as well as Central Asian countries. Doing so would include both the Caucasus and Central Asia in a high-profile forum with access to top-level diplomats. To date, no US president has visited Central Asia, while Russian President Vladimir Putin and Chinese leader Xi Jinping have made regular stops there. Hosting an Abraham Accords conference in Baku would be fitting, considering all the secret meetings between Israel and Gulf governments that have allegedly already occurred there over the years.

Should the United States take the same approach as Israel and deepen its diplomatic, economic, and security ties with Azerbaijan, it may reap similar geopolitical rewards.

Joseph Epstein is the director of research at the Endowment for Middle East Truth, a senior fellow at the Yorktown Institute and a research fellow at the Post-Soviet Conflicts Research Program at Bar Ilan University’s Begin Sadat Center for Strategic Studies. He also sits on the advisory board of the Alekain Foundation, a nonprofit dedicated to providing education to women and girls in Taliban-controlled Afghanistan.

The post How the US can benefit from deepening Azerbaijani-Israeli ties appeared first on Atlantic Council.

Watch the full event

Public Event Tue, February 4, 2025 • 5:00 pm ET

Canadian Energy Minister Jonathan Wilkinson on US-Canada energy cooperation

Jonathan Wilkinson, the Canadian minister of energy and natural resources, discusses ways to enhance cooperation on North American energy security with a new administration at the helm in Washington.

Energy & Environment Geopolitics & Energy Security Trade and tariffs United States and Canada

Speaker

Jonathan Wilkinson
Minister of Energy and Natural Resources, Canada

Moderator

David L. Goldwyn
Nonresident Senior Fellow and Chairman, Energy Advisory Group, Global Energy Center, Atlantic Council

Event transcript

Uncorrected transcript: Check against delivery

DAVID L. GOLDWYN: Good afternoon, everyone, and welcome. I’m David Goldwyn. I’m chairman of the Atlantic Council’s Energy Advisory Group and a nonresident senior fellow here at the Atlantic Council. Thanks for joining us in person and also virtually. We’re honored today to be joined by Jonathan Wilkinson, minister of energy and natural resources of Canada, NRCan in the Canadian parlance, to talk about tariffs and energy.

You all may have seen the extreme market reaction to President Trump’s threat to impose 25 percent tariffs on Canada and Mexico and 10 percent on energy trade. And that’s because the US and Canada have probably one of the most integrated energy systems in the world. In 2023 I think we did about 198 billion [dollars] in trade. It’s two-way trade. We get 60 percent of our imported oil from Canada, heavy oil which refineries the Midwest and the Gulf Coast use and which the United States doesn’t make. We have two-way trade in electricity. Almost thirty states, I think, get electricity from Canada. We send gas and oil and products to Canada. They send it back to us. We get a quarter of our uranium from Canada for our nuclear reactors. I think we’ve got seventy pipelines across the border and maybe thirty electricity interconnections.

So that’s why it got a pretty big reaction. We are really closely, closely integrated. And the electricity grid is also really important. We get most of our major components, such as transformers and switch gear, from Canada, as well as critical minerals. So that’s why we had a big reaction. And we’re really, really fortunate to have Minister Wilkinson here to talk to us about what happens next. As you saw in the news, there’s a thirty-day pause, at least thirty days, until tariffs are reimposed, when conversations will take place between our countries. So the timing couldn’t be better. And we’re going to hear from the minister, we’re going to have a little conversation about some of the issues, and go from there.

We couldn’t have a better or more qualified person. Minister Wilkinson knows of what he speaks when it comes to energy. In addition to being the minister, and formerly a minister for climate change and environment and also for oceans, he comes from the tech world. He was chief executive officer of QuestAir Technologies and also the former BioteQ. So he knows—he knows waste to heat. He was a senior vice president with Nexterra—not Next Era, but Nexterra—the waste to heat company. And he’s a pretty smart guy too. He’s a Rhodes Scholar. So he knows this field well and he’s going to be one of the point people for talking to the US government about energy. So, Minister Wilkinson, please join us here on the stage and let’s go from here.

JONATHAN WILKINSON: Thank you. Thank you very much. And, certainly, thanks to the folks here for the invitation to be with you today, and for the flexibility. I was coming from Canada’s west coast, and that’s always a dangerous thing in the winter. It took a little longer to get here than I had anticipated. So I certainly appreciate the flexibility around the timing.

It is, as I say, a pleasure to be with you today, and certainly after what have been some tumultuous and challenging days. But I would like to focus today on the enormous economic opportunities that exist for cooperation between our respective countries. I firmly believe that collaboration is what makes this continent great. And it is what will enable our conversation to move from one about tariffs, which in my mind is a lose-lose conversation, to one about prosperity and security, which offers a win-win.

We have all, I’m sure, heard many times the adage that Canada and the United States are each other’s best friend, closest ally, and most important economic partner. And beyond friendship and our economic partnership, we have long been steadfast partners on the world stage. That is ever more important right now, given the increasingly aggressive behavior of international actors like China.

Though it may feel a little bit cliché to say those words, these statements are undeniably true, despite the difficult moment we have found ourselves in over the past few days. The administration has made clear the concerns regarding border issues, particularly illegal migration and fentanyl. I think it needs to be recognized that the scale of these issues at the Canada-US border are not particularly significant. Fentanyl from Canada represents 0.2 percent of US seizures of fentanyl at the border. And, in fact, last year American border enforcement seized just forty-three pounds of fentanyl from the Canada-US border; not a lot more than the seizures that go the other way. And while illegal migration is very low, we agree that one illegal migrant is too many. That is why we have already been cracking down with 600 percent more investigations in 2024.

I want to be very clear about this. Just like the US, Canada has no interest in illegal crossings, either of people or of substances. One illegal crossing and one pound of fentanyl crossing the border is too much. In this regard, we agree very much with President Trump. That is why, further to conversations we have been having with the administration, Canada recently announced an enhanced border plan, which included an additional investment of over a billion dollars, which will be made in areas like the deployment of additional helicopters, drones, mobile surveillance towers and officers with new K-9 teams to strengthen the border.

And yesterday, after conversations with the president, we announced additional measures. Canada will be appointing a fentanyl czar and will list cartels as terrorists. Together we will launch a Canada-US joint strike force to combat organized crime, fentanyl, and money laundering, ensuring 7/24 eyes will remain on the border. And Prime Minister Trudeau also signed a new intelligence directive on organized crime and fentanyl, which was backed with an additional $200 million.

Canada has acted on these issues, and Canada remains very open to conversations about how we can jointly do more. Productive, collaborative discussions like these are a much better route than destructive economic action that drives up prices for Americans and for Canadians.

With respect to our economic partnership, the Canada-US relationship has long been the envy of the world, keeping our supply chains secure, creating good jobs, and ensuring good prices. Our respective economies are so integrated that I would say the partnership is effectively hardwired. Nearly $2.7 billion worth of goods and services crossed the border each day in 2023. Thirty-six US states rely on Canada as their number one export market. Canadian consumers and businesses purchase more goods from the United States than China, Japan and Germany combined.

This is true in the case of many sectors; for example, the auto sector, where parts will often go back and forth across the border six, seven, eight times before a product is completed. But there is no area where the integrated nature of our economies is clearer than in energy and key resources, such as critical minerals.

For example, Canada supplies significant quantities of low-cost hydroelectricity to several US states via fixed transmission lines. Canadian electricity powers the equivalent of six million American homes. That’s more than every home in the state of Ohio. Canada and the US have an integrated oil pipeline system that supplies Americans approximately four million barrels per day, creating jobs and fostering energy security.

This oil is largely heavy crude, and US firms have invested in complex refineries to process this specific type of low-cost Canadian oil. This is by far the most affordable option for American companies and consumers, and it enables the export of US light crude to countries around the world, creating additional profit for American companies but also creating additional tools to be used in the context of geopolitics.

Canada is the US’s largest supplier of potash, meeting the demand for farmers for use as fertilizer, which means affordable food. It also allows the US to avoid purchasing potash and fertilizer from unreliable countries like Russia and Belarus.

Uranium for nuclear power is also supplied in significant quantities by Canada. In fact, Canadian uranium presently powers the equivalent of almost twenty million homes in the United States. Once again, this enables the US to reduce reliance on producers such as Russia.

And Canada supplies significant quantities of critical minerals including germanium, zinc, nickel, copper, and graphite. These are the building blocks of a range of American economic sectors including defense. In the area of critical minerals typically the alternative source of supply to Canada is China.

Let me also address concerns about a trade deficit between our two countries. If you break it down and look at nonenergy-related trade, the US in fact has a surplus of over fifty billion dollars. The United States is a net exporter to Canada of manufacturing goods, particularly motor vehicles and parts.

Hampering industries with an American trade surplus with tariffs would chiefly disrupt industries where the United States already exports more to Canada. Where I noted, as I noted, parts go back and forth often seven or eight times before a car is complete and for which there are no easy alternatives. It would make these things more expensive while simply not supporting a rebalancing of the trading relationship.

And in the case of energy, the current trade balance also already provides the US advantage by leveraging Canada’s resource abundance to obtain low-cost and secure energy and minerals that the American economy requires, especially if one wants to achieve energy affordability and energy dominance, and the US obtains these products from Canada at a low cost, allowing thousands of American workers to refine and transform them and sell at a higher price to the rest of the world.

Moving past border issues and the reality of the trade balance, it is important to recognize what tariffs would actually do and why we should continue to avoid them after this thirty-day period. They would cause financial pain for Canadian families, no doubt, but they would also significantly increase the price of energy and food for American consumers.

With a tariff on Canadian oil and gas Americans would see higher prices when filling up their gas tanks and heating their homes. Groceries would become more expensive because Canadian potash that supplies American farmers would cost farmers more, and for those who might be planning to buy a new car Wells Fargo has estimated that a 25 percent tariff on Canada would add more than two thousand dollars to the price tag of a car.

Overall, tariffs on Canada, a country that shares your goals and values more than any other country in the world, could cost an average family—American family about $1,300 per year.

As a sovereign democratic nation that must protect its own national interest, the unwarranted imposition of tariffs on Canada would necessarily necessitate a response. But this kind of damage being caused to both of our economies is truly unnecessary and it is ultimately the people of our respective countries who will pay the costs.

That is why our focus is to move beyond this conversation to one about collaboration on the border, on the scourge of illegal drugs, on our economy, and certainly on energy and critical minerals.

Which brings me to my pitch to you today. Rather than going down a path that will inevitably be lose-lose I am suggesting something entirely different. I am suggesting that we should instead build upon current success by developing a US-Canada alliance in energy and minerals.

Such an alliance would enable the United States and Canada to achieve our shared vision for affordable energy bills for families, strong and secure economies, and North America as the world’s dominant energy supplier.

Just a few examples of how we can move in the near term to create mutual benefit. In the areas of critical minerals needed for energy, defense, and aerospace applications there is, for example, an opportunity to jointly invest in a project that would enable greater germanium supply which can displace germanium the United States has been purchasing from China, which China has recently cut off.

We can collaborate on rare earth processing and the augmentation of rare earth supply, once again reducing exposure to and dependence on China. Many will not know that the one large rare earths mine that exists in the United States sends a hundred percent of its product to China presently for processing because the processing technology does not exist here.

With regard to uranium there is an opportunity to work together to build a complete North American nuclear fuel cycle, which would mean relying less on Russia and enhancing continental security. That is something that will be critically important for the ultimate deployment of small modular reactors.

On energy we can enhance the flow of Canadian crude from Alberta to assist the administration’s goal of energy dominance by working together on projects such as enhancing the capacity of the existing Enbridge mainline, enabling the export of additional energy from the US to the world.

There is much opportunity here that can benefit both countries. However, none of this will be possible if we get into this destructive tit-for-tat.

Both countries have a strong interest in the same goals and outcomes, and there is indeed enormous potential if we work together to collectively onshore production and manufacturing and ensure that access to critical energy and materials exists within our collective borders, so we cannot be held hostage by unreliable countries and actors that do not share our values—in particular, China. Rather than looking to erect barriers that will impede trade flows, increase costs for citizens on both sides of the border, and make both countries less secure, let us engage a more positive conversation, a conversation that is focused on seizing enormous economic opportunities and creating additional shared value while enhancing our security—or in other words, form a true energy and minerals alliance.

I and my government are keen to engage these positive and productive conversations to ensure that we can build together a continent that will be more prosperous, more secure moving forward.

So thank you for the invitation to speak to you today, and I look forward to the discussion to come.

DAVID L. GOLDWYN: Great, thank you. Thank you for that positive, positive vision.

I should say that this conversation today is public and on the record, and it’s streaming over YouTube, X, Facebook, and the Atlantic Council website.

So, Minister Wilkinson, you—you know, you posited a very positive potential pathway, but the imposition of the tariffs or the threat must have been a bit of a shock for Canadians. And we see in Mexico now increased talk of producing their own natural gas because they’re worried about continued dependence on the US. Most of Canada’s crude flows through US pipelines out to the gulf to markets. Strategically, do Canadians need to think about alternative routes to the east coast or the west coast as sort of a hedge on the US?

JONATHAN WILKINSON: Well, I would say it was a shock. You know, the original free trade agreement that was signed between Canada and the United States was signed way back in 1988, and the Auto Pact that ensured the free flow of products in the auto sector goes back to the 1960s. So we have looked deep in the integration over the course of the past number of decades because it was so obvious that we were both extracting mutual benefit from the trade that existed. That’s not just in energy and minerals.

And so when all of a sudden Canada is treated more like an adversary than a partner, it did shake every Canadian. And I think you saw that in some of the patriotic expressions that came out in the aftermath of the decision to impose tariffs. Canadians don’t tend to wear their patriotism on their sleeve. We are probably less patriotic overtly than Americans, but you saw it very strongly in Canada.

I think, you know, we need to hopefully walk back from the brink and find pathways through which we can actually work together. But I do think in Canada this has caused some reflection on whether perhaps in some areas we are too dependent on infrastructure in particular that flows only through the United States. We have some things that have been developed over the last number of years, including liquid natural gas facilities on the west coast, that will give us the ability to take some of the gas to Asia. But certainly in the areas like oil, we flow almost all of it this way.

DAVID L. GOLDWYN: Let’s talk about the—unpack the positive agenda a little bit. For President Trump, critical minerals seem to be important. There’s talk about Ukraine exploring critical minerals there as a condition for security support, and this Greenland talk seems to be a little bit about access to Greenland’s critical minerals. So what’s the—what’s the way that the US and Canada can cooperate in this area, either in production—you mentioned two projects earlier, but is there more there? And are you going to use the next thirty days to have this conversation with US officials?

JONATHAN WILKINSON: Yeah, I mean, I think there’s a lot of things that we can do together. Some of them relate to specific projects and some of them are a big more general. One of the challenges with some of the critical minerals has been because of the concentration that exists in Chinese hands, whether it’s in China or it’s in a number of countries like Congo and elsewhere, China has been able to at times manipulate the market. So whenever you are looking to start a project that requires hundreds of millions of dollars, all of a sudden the price goes, you know, goes down significantly and the business case actually falls away. We’ve seen that with lithium. We’ve seen it more recently with nickel, where China has used its dominance to flood the market. And so there is work that can be done between Canada and the US, and probably with Australia and a few others, to actually create some kind of a mechanism around a price floor that will give the business certainty such that you can actually attract private capital for some of these kinds of projects.

There are also some very specific projects that if we made the decision to jointly invest we can pull forward. And the germanium one is one example of that. We have done some coinvesting over the last couple years with the US Department of Defense, but there is a lot more that we could do. And that would help to alleviate the strategic vulnerability, which is a huge strategic vulnerability for the United States in critical minerals, because virtually all of them right now are coming from China.

DAVID L. GOLDWYN: And there’s been talk of a strategic minerals reserve, either on the US or the Canadian side, which could probably help support that price floor. One of the reasons we don’t have as many of those critical minerals produced or processed in the US is—you know, is the challenge of regulation and permitting, and also stakeholder considerations. So deregulation is a big agenda for President Trump. Is there something that can be done on the harmonization of permitting and regulatory decisions that would expedite either critical minerals or pipelines?

JONATHAN WILKINSON: I think there is. Certainly, we’ve done a lot of work to try to figure out how to optimize existing regulatory and permitting processes. As you folks—we’re both federal states—have, the complexity is also some of those reside at the federal level and some of them reside at the state level. And part of it is trying to better align the federal standards with state standards. And to the extent that you can get states to try to harmonize some of their requirements, it certainly would make that conversation easier. We have been working individually with every province to try to actually better align the federal and the provincial.

But certainly, I think there are things that we can both learn from each other. And ideally we can actually find ways to jointly streamline in similar ways, such that you can actually expedite these things. But I mean, clearly, it’s a challenge on both sides of the border. It takes a long time to get mines permitted in Canada. It needs to be much shorter than it is. And we are focused on that. In the United States—and I say this with great respect—but it’s even harder to get a mine permitted in the United States than it is in Canada. But we have been talking a lot, not just to you folks but also to the Australians, and the Chileans, and others who are also thinking exactly about these issues, so.

DAVID L. GOLDWYN: North American energy cooperation used to be a staple. We sort of invented this. You all were going to host the North American Leaders Summit last year, and that got postponed. And I think these tariffs have thrown the viability that concept into a—you know, a little bit into question. Mexico, I think, is concerned as well. But there would seem to be a lot of areas that we could cooperate on, if we were to revive that process. Nuclear is an area of commonality, electricity, regional planning, because we trade so much across the border. Do you think, you know, North America, as a concept, exists? And can you talk a little bit about what you think a positive agenda for a trilateral discussion might be?

JONATHAN WILKINSON: Well, I do—I mean, I think a lot of the elements of it already exist. But there certainly are areas where I think we could push the collaboration for outcomes that would actually be beneficial for both of us and, in some cases, with Mexico as well. Nuclear is a great example. The first small modular reactor—it’s a large one, it’s three hundred megawatts—will be running at an Ontario site adjacent to a very large-scale nuclear reactor in 2027/2028. It’s a GE-Hitachi design. It’s an American-Japanese collaboration that actually produced the technology.

Eventually, as we build out more of these small modular reactors—and everybody’s seen, you know, a lot of the tech firms now getting into this game of this is how they’re going to generate their own—their own electricity—you’re going to need enriched fuel. You need uranium from Canada. You need the conversion of that, but you actually need the enrichment. And United States has enrichment. Canada doesn’t have enrichment. And doesn’t really want to do enrichment because of nonproliferation kinds of issues. But there’s a perfect marriage that we could actually work on together to ensure that we actually can enable the development and the deployment of these technologies as expeditiously as possible.

And Mexico. We saw the handshake, you know, sort of, you know, between the Mexican president and Prime Minister Trudeau. So is there—how do we bring Mexico into that—into that discussion?

JONATHAN WILKINSON: Well, I mean, look, Mexico is blessed with the same—similar resources to what the United States and Canada have, right? Lots of oil. They do have an ability to go after the gas. They have deployed renewables on a relatively large-scale basis. There have been some issues there in terms of Canadian companies and American companies investing, and how that was treated. But I think, you know, there’s lots of learnings. And even on the regulatory and permitting side there’s lots of learnings about what it is that different groups are doing that can actually enable you to go faster.

So I do think, you know, between the three of us we have more than what we need to both build and to power the economy. And we have the ability to actually produce much of what the world needs. And that has value in a world that is going to need more energy—energy of all kinds. You know, and I think, you know, whether you call it energy dominance, or you call it something else, there is an opportunity to use that in a constructive way in a world where, you know, some actors, like Russia, have been using it in a less-than-constructive way.

DAVID L. GOLDWYN: Very helpful. I know you’re not the trade minister, but we’ve got the conversations on USMCA, or whichever national acronym people want to use, coming up. So there will be a conversation. Just in terms of the energy piece, of which the tariffs would be a violation, I guess, of this agreement. But putting that aside, what’s your perspective on Canada’s position on energy and USMCA? Is it sort of, it’s not broke, don’t fix it? Or is there more to be done that would deepen the energy cooperation between the three countries?

JONATHAN WILKINSON: Yeah. I mean, I do think that there’s more that can be done. It needs to be part of an overall agreement around—that the tariffs aren’t coming back, right? You know, at the end of the day we need to actually have a pathway that allows us to deepen the collaboration, if we agree that that’s a good thing, without thinking six months from now we’re back into the same conversation that we were in the last few days. But I do. Some of the projects that I talked about there are things that would actually help to deepen the collaboration.

Like, why does the United States purchase so much uranium and potash from Russia? You don’t need to. If we actually work together, you can be completely secure. Why are so many critical minerals being purchased from China? You don’t need to. If we work together and we actually pull forward some of these projects—you know, the same thing is true, as I said, with oil and gas. So I do think that there’s lots that we can do. Starting with some very specific projects but looking more generally down the road, creating joint tools that can allow us to actually make joint investments. I do think that there is a real scope for those kinds of conversations. But it starts with—it starts with, you know, us agreeing that collaboration and deepening that relationship is the right way to go.

DAVID L. GOLDWYN: Let me ask you a question about Liberal Party politics, if I can. You all are facing an interesting political season in Canada.

JONATHAN WILKINSON: Yeah.

DAVID L. GOLDWYN: You’ve got two candidates now up for consideration, Chrystia Freeland and Mark Carney, who are well known around the world, and they’ve talked—both talked about pulling back the carbon tax on consumers, leaving the carbon tax on the industrial sector in place. Can you just paint us—what’s the future of sort of energy and climate policy for the Liberal Party going forward?

JONATHAN WILKINSON: Well, you’re asking somebody who got into politics because of climate change. And I had the great privilege of serving as Canada’s environment and climate change minister for three of four years and brought into place the first climate plan Canada’s ever had that showed how we would not only beat a target, but we would raise the target because we would exceed that. So I am committed to the fight against climate change. It’s a science issue. It shouldn’t be a partisan issue. It is a science issue.

But we need to do that in a manner that is thoughtful, that addresses concerns—legitimate concerns people have about affordability, and does so in a manner that actually ideally enhances our own energy security. This government, whether it’s Mr. Carney or Ms. Freeland who ultimately lead the Liberal Party and become the next prime minister of Canada, are committed to the fight against climate change, but they want to do so in a manner that actually also is going to help us to build a strong and prosperous economy. I don’t think you are going to see a lot of fundamental changes.

The consumer carbon price, I mean, 80 percent of the value of carbon pricing comes from the industrial price, where you’re actually going after the large emitters. Twenty percent comes from the consumer carbon price. I’m still a believer in the consumer carbon price in the sense that it is the most economically efficient way to actually reduce emissions, that incents innovation. And 99.9 percent of economists will tell you the same thing. It’s a market mechanism. But it became very divisive in Canada, especially regionally, and both of the candidates have made the decision that they will remove the consumer part of the carbon price, not the industrial price.

And the other thing that they have been very clear on is that they will find the megatons that would have been found through the consumer price in a different way. They are not abandoning the fight on climate change.

DAVID L. GOLDWYN: That’s great. Thank you.

Well, unfortunately, our time today has come to a close. Thank you, Minister Wilkinson, for your candor and for painting this positive vision of US-Canadian energy—of the energy relationship.

As a reminder, the recording of the event will be available on the Atlantic Council website and on our YouTube page, and we hope you’ll join us for future events. Thank you.

Watch the full event

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Click to jump to an expert analysis:

Josh Lipsky: Beijing is breathing a sigh of relief

Jason Marczak: Can there be a short-term end game for Mexico?

María Fernanda Bozmoski: The tariffs on Mexico are counterproductive to Trump’s goal of curbing immigration

Joseph Webster: These tariffs could upend energy sector business models

Barbara C. Matthews: This historic move means US trade treaties now come with a caveat

Maite Gonzalez Latorre: Canada’s next prime minister must articulate how the country will navigate the Trump presidency

L. Daniel Mullaney: The tariffs genie is out of the bottle

Beijing is breathing a sigh of relief

Two things are true at the same time. These tariffs are more sweeping than any trade action we saw in the first Trump term and will impact over one trillion dollars in goods. The president has invoked the International Emergency Economic Powers Act (IEEPA) in an unprecedented way, levying major trade barriers all at once against the United States’ three largest trading partners. But it’s also true that China is likely breathing a sigh of relief.

Policymakers in Beijing have to be wondering how it happened that the United States tariffed its allies at 25 percent and its greatest economic challenger at 10 percent. Of course, the 10 percent comes on top of the already existing tariffs in several sectors, but it still means that most goods from Mexico and Canada will face a steeper fine than those from China. It’s much tamer than Trump’s campaign threat of 60 percent. (In fact, despite that threat, we predicted a China scale-down right after the election.) 

Why the softening toward China? Inflation is one reason. Trump knows his moves on Canada and Mexico will have an impact, and there’s only so much price pressure US consumers are going to put up with. But leverage is another. Mexico and Canada depend far more on the United States than the United States depends on them. (Though there’s no doubt every economy in North America is going to bear some cost in these new trade wars.) China is a different story. China’s economy is less dependent on trade than Canada and Mexico—and only 15 percent of its exports go to the United States, compared to nearly 80 percent for Washington’s neighbors.

Now faced with 10 percent tariffs, Beijing has a trick up its sleeve: currency devaluation. Watch to see how the yuan moves this week. It’s likely that most of this increase can be absorbed through exchange rates—and that’s one reason why Beijing’s rhetoric will be sharp but its economic retaliation will potentially be more muted.

—Josh Lipsky is the senior director of the Atlantic Council’s GeoEconomics Center and a former adviser to the International Monetary Fund.

Can there be a short-term end game for Mexico?

Mexican President Claudia Sheinbaum quickly responded to Trump’s announcement of 25 percent tariffs with an instruction for Economy Secretary Marcelo Ebrard to implement what she termed “Plan B” to include retaliatory tariff and non-tariff measures. If Mexico uses a similar playbook as to when Trump threatened tariffs in 2019, retaliatory tariffs will follow a red-state strategy. This could include pork from Iowa, dairy from Wisconsin, and industrial goods, including vehicles and electronics, particularly from Michigan and Ohio—all states that voted for Trump in 2024. 

Sheinbaum has until Tuesday to see how to de-escalate and what carve-outs may be possible. Back in 2019, Trump threatened escalating tariffs that didn’t end up going into effect since Mexico committed to specific measures to curb immigration. What can Mexico agree to do this time around that would satisfy Trump? The fact sheet announcing the tariffs stated that the purpose is to “hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.” The Mexican authorities will be seeking to find some type of common understanding on new measures—like in 2019—that could be undertaken so the US president can claim a quick win.

Trump may be looking at the success of last Sunday’s tariff threats against Colombia—25 percent immediately with an escalation to 50 percent after one week—as proof that tariffs can deliver quick wins. Last week, Colombia acquiesced by the end of the day to Trump’s demands around acceptance of deportees. The Colombia tariff threats were the first test of this new administration as to whether governments would quickly capitulate. But Colombia is not Mexico or Canada.  

—Jason Marczak is vice president and senior director at the Atlantic Council’s Adrienne Arsht Latin America Center.

The tariffs on Mexico are counterproductive to Trump’s goal of curbing immigration

This evening’s announcement of 25 percent tariffs on Mexican imports—it is still unclear when they will take effect—is counterproductive to Trump’s goals of curbing immigration to the United States. The Trump administration has, oddly, made it cheaper for US manufacturers to source supplies from China than from Mexico. The tariffs will quickly erode the economic growth and improvements in supply-chain security that were direct results of the United States-Mexico-Canada Agreement (USMCA). China is stronger, and Mexico and the United States are weaker, because of this move. 

The implementation of these tariffs will weaken the Mexican peso and the country’s economy. Depending on how long the tariffs remain in place, Mexican exports could fall by over 10 percent, and its gross domestic product (GDP) contraction could reach up to 4 percent. However, it is clear from the White House statement that the logic behind these tariffs on Mexico is not economic; they are being used as a tool to force flashy results on the security front. The Trump administration has gone as far as accusing Mexico of colluding with drug trafficking organizations. This marks the first time in decades that US-Mexico economic collaboration has been so explicitly dependent on security concerns. Most importantly, the signals it sends to the United States’ top trading partner ahead of the revision of Trump’s signature trade agreement—the USMCA—are far from positive. Finally, the timing of this announcement could not be worse, as Secretary of State Marco Rubio embarks on a trip to Central America to build goodwill among allies in the same neighborhood. 

—María Fernanda Bozmoski is the director of impact and operations and lead for Central America at the Adrienne Arsht Latin America Center.

These tariffs could upend energy sector business models

Trump has issued an order imposing 25 percent additional tariffs on imports from Canada and Mexico and a 10 percent additional tariff on imports from China. According to the White House, “energy resources from Canada” will face a lower 10 percent tariff. If these tariffs are indeed implemented, the impact on energy markets will depend on the tariffs’ duration and the definition of “energy resource.”

Many US energy producers will never have imagined that supply chains in Mexico and especially Canada would ever face 25 percent tariffs. Consequently, some energy sector business models will break down if these tariffs are sustained.

It’s unclear which Canadian energy resources will qualify for the 10 percent tariff, though crude oil likely will. If the lower rate excludes imports of electricity, batteries, and minerals, this could significantly impact US electricity, battery, and defense technology markets. US capabilities in artificial intelligence and drones will be impacted, as well.

As David Goldwyn and I noted in our examination of USMCA energy trade, US refineries will now pay higher prices for Mexican and Canadian crude in the wake of tariffs. Texas refineries have historically taken in Mexican crude oil but will now be forced to pay higher input costs, harming their export competitiveness to other markets, especially Latin America. Midwestern refineries will also face higher prices, as they have few if any alternatives to Canadian crude oil and will pass along many costs to consumers. Finally, the US automotive sector could be severely impacted by these tariffs, due to deep supply chain interconnectedness with its North American neighbors. US development of autonomous vehicles will likely slow, perhaps considerably. The Midwest—especially Michigan—may be particularly squeezed by auto-related tariffs, as the mobility industry accounts for an estimated 27 percent of the Wolverine State’s gross state product.

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and Indo-Pacific Security Initiative; he also edits the independent China-Russia Report.

This historic move means US trade treaties now come with a caveat

Trump’s decision to impose tariffs on US trade treaty partners accelerates centrifugal forces that have been pulling at the global economy for over a decade.

The White House announced that the tariffs are being imposed under the president’s authority from IEEPA rather than through established trade treaties. This move is historic.

IEEPA provides the president with broad powers to address any “unusual or extraordinary threat, which has its source in whole or substantial part outside the United States.” Centering the tariff action on national security should make the move World Trade Organization-legal under the General Agreement on Tariffs and Trade’s Article XXI national security exception. If the Trump administration invokes the Article XXI national security exception, the United States and Ukraine will be the only nations ever to do so.

Trump has now asserted that the United States faces a dire national emergency as China exploits the free trade area created by the USMCA. The tariff policy implies that the United States’ closest trading partners are turning a blind eye to the fentanyl trade.

This is not, however, the first time that the United States has imposed tariffs to address non-trade vulnerabilities. President Richard Nixon invoked the Trading with the Enemy Act to impose across-the-board 10 percent tariffs after the United States left the gold standard in the early 1970s. His goal at the time was to avoid a balance of payments crisis. Nor would the United States be the only nation to use tariff policy to promote domestic policy priorities. The European Union is creating import levies based on their estimated embedded carbon emissions under the Carbon Border Adjustment Mechanism.

The harsh truth is that international economic interdependencies also create real vulnerabilities. The world has been adjusting to those vulnerabilities since the COVID-19 pandemic. Today’s tariff decision being premised on a national emergency shifts US trade policy past the trade paradigm. It signals that Washington no longer considers international trade to be either benign or always beneficial.

The United States’ trading partners have had time to prepare for this action. Geoeconomic alliances are already shifting. Canada’s prime minister has turned inward, encouraging domestic provinces and territories to decrease their own internal trading barriers to offset the disruption in trade flows with the United States. The European Union this month concluded a new trade agreement with Mexico. 

Today’s tariff decision tells the world that the United States’ trade treaty commitments come with a caveat: trading partners must support US policy priorities. The United States already exerts considerable economic influence through economic statecraft associated with US dollar sanctions policy. Tariff policy has now been enlisted into action as well.

—Barbara C. Matthews is a nonresident senior fellow with the Atlantic Council. She is also CEO and founder of BCMstrategy, Inc.

Canada’s next prime minister must articulate how the country will navigate the Trump presidency

As Canada navigates a race to determine who will lead the Liberal Party and become the next prime minister, the 25 percent Trump tariffs could potentially devastate Canada’s economy, shrinking its GDP by 2.6 percent (approximately 78 billion Canadian dollars), according to the Canadian Chamber of Commerce. While these tariffs would also harm the US economy, reducing its GDP by 1.6 percent (roughly $467 billion), Canada is more vulnerable due to its greater reliance on trade with the United States.

As the Liberal Party chooses its next leader, it is crucial for the party to present a strong, unified front to the public, despite internal challenges. More importantly, the candidates must articulate how Canada will navigate a Trump presidency, and fighting against these tariffs could provide an opportunity to achieve unity on this issue. Prime Minister Justin Trudeau said the country is readying a “forceful and immediate response,” which signals a strong, unified Canadian front.

Canada and the United States have long maintained a strong and vital economic and diplomatic relationship. The next Canadian government has the opportunity to assert itself and push back against unfavorable policies like the 25 percent tariff. This week, Rubio met with Canadian Foreign Affairs Minister Mélanie Joly in Washington to discuss collaboration on shared global challenges, including securing borders and ensuring energy security. With the United States emphasizing energy policy, Canada’s role as a key ally in this sector will become increasingly significant and could be a way to fight back against the tariffs.

—Maite Gonzalez Latorre is a program assistant at the Atlantic Council’s Adrienne Arsht Latin America Center.

The tariffs genie is out of the bottle

With this action, the United States has crossed a Rubicon. Previous tariffs have generally been in response to the injurious impact of some set of unfair trade practices, import surges, or balance of payments issues. Using the emergency power to impose tariffs in response to unrelated issues like drugs and immigration sets the stage for further tariffs in response to any number of other non-trade priorities. The genie is out of the bottle.  

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He previously served as assistant US trade representative for Europe and the Middle East.

The post Experts react: Trump just slapped tariffs on Mexico, Canada, and China. What’s next? appeared first on Atlantic Council.

The Canadian energy partnership is a case in point. Canada is the United States’ largest crude oil partner, by far, and many landlocked US markets lack alternative suppliers. Through the first ten months of 2024, the True North comprised about 62 percent of all US crude oil imports. Mexico is also a significant player, accounting for about 7 percent of all crude oil imports over the same period (and more in markets along the southern border). It is also the largest purchaser of US natural gas and petroleum products, as well as a supplier of crude oil to US refineries.

Tariffs on Canada and Mexico, the two largest crude oil exporters to the United States, would have profound implications for US energy markets. That’s because crude oil imports, including from these two countries, are transformed by US refineries into crude products for domestic consumption or export.

Take heavy oil imports (HTS Code: 2709001000). Notice that Canada is by far the largest exporter of heavy crude oil to the United States. In some US markets, such as the Midwest, there is no alternative import supplier of heavy oil.

Nor can domestic US crude production completely replace imported crude. US crude oil production is typically of light, sweet grades, while the United States’ “complex” refineries are optimized to run on heavier grades—such as Canadian and Mexican crude. Indeed, imports account for about 39 percent of the crude used by domestic refineries.

Accordingly, if the United States imposes 25 percent tariffs on imports of Canadian crude oil, domestic energy prices would likely spike, especially in states in the US Midwest. Most of the economic literature suggests that costs would be passed on immediately to consumers in the form of higher retail gasoline and diesel prices.

Tariffs on crude oil imports will also impair US exports of crude products, like fuel oil, diesel, and gasoline. Additionally, over time there could be negative impacts on the US natural gas trade, as countries in Latin America, Europe, and Asia potentially see reliance on US supply as a political vulnerability. Mexico, the largest recipient of US oil and gas exports, could also look to liquefied natural gas (LNG) to hedge against the reliability of the US supply.

To see how tariffs could harm US exports, consider the recent US-Colombia trade spat. Due to a dispute over migration, Trump threatened a 25 percent tariff on Colombian imports, with a potential increase to 50 percent, while Colombia threatened its own retaliatory tariffs. While imports of Colombian crude only comprise about 3 percent of total US crude oil imports, this isn’t true across all markets and products. Colombia provides a significant amount of heavy crude oil imports (HTS Code: 2709001000) to the United States—and especially to Houston, where it shipped more than 137,000 barrels per day through the first eleven months of 2024, according to the US Census Bureau.

Since Houston exports more refined products than any other US district, tariffs on Colombian oil would, all things being equal, raise the prices of heavy US crude products, such as marine fuel, diesel, and gasoline. Accordingly, tariffs on Colombian (or Canadian, or Mexican) imports would likely make US exports relatively more expensive and therefore less competitive in international markets—even before considering second-order consequences, such as reciprocal tariffs.

Disruptions to US crude product exports could also have geopolitical ramifications across Latin America, including for the US-China competition. Several Latin American countries lack domestic refining capacity and rely on the United States for their energy security needs. To hedge against US unpredictability, Latin American countries may seek out other arrangements, including by finding alternative suppliers.

If US crude products become less attractive for importers across Latin America and beyond, China might attempt to exploit the opportunity. China is the world’s largest refinery market, by capacity, and its domestic gasoline and diesel demand may have already peaked due to a combination of electric vehicles and LNG for trucking. Accordingly, Chinese refineries may increasingly seek to export crude products abroad, including to Latin America, although it’s worth noting that Chinese global fuel exports are currently subject to export quotas.

US policymakers should think deeply before placing tariffs on energy imports to Canada or Mexico. Domestic markets will be impacted by higher taxes on crude oil imports because they will raise refiner acquisition costs. In many US markets, such as states in the US Midwest, there is no alternative to Canadian oil imports, so the inflationary impact will be immediate and likely proportional to the size of the tariff.

The United States should also not discount the potential impacts of retaliatory tariffs. While Mexico is most likely to retaliate against US tariffs by imposing duties on agricultural products, any serious reduction of US exports of natural gas or petroleum products to Mexico would sharply lower prices in the United States, potentially impacting domestic crude oil production. Refinery economics would be punished to the extent that importers substitute crude oil from other countries. If Mexico and Canada are targeted, there’s no question that Brazil, Argentina, and other major markets in Latin America will be watching as well. Rather than establishing US energy dominance, tariffs on energy products could accelerate the desire of major US hydrocarbon partners to diversify trade with other countries, including China.

Energy tariffs could impact the competition with China in other ways. Tariffs on Canadian electricity and advanced energy exports might hamstring the US artificial intelligence (AI) development complex and military capabilities. In 2023, the United States imported 33 terawatt hours of electricity from Canada, helping power US data centers needed for AI. If domestic electricity prices rise, then US AI capabilities would suffer. Additionally, Canada is a significant exporter of lithium-ion (Li-ion) batteries to the United States, and these batteries often have dual-use implications, including for drones. If the United States places tariffs on Canadian Li-ion imports, then it could diminish US and allied military capabilities.

Trump has made it clear that he seeks to address migration and fentanyl trafficking, and that he intends to do so with the threat and possible use of tariffs. These threats have certainly drawn the attention of US neighbors. But the short-term gains earned by threatening or imposing tariffs could lead to harmful direct and second-order consequences. A number of factors need to be weighed, and it would be useful if the administration paused major actions until its appointees were in place so they can provide strategic thoughts and input before precipitous actions are taken.

David Goldwyn is president of Goldwyn Global Strategies, LLC, chairman of the Atlantic Council Global Energy Center’s Energy Advisory Group, and the former special envoy and coordinator for international energy affairs at the US State Department.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and Indo-Pacific Security Initiative and editor of the independent China-Russia Report.

This article reflects their own personal opinions.

The post Tariffs on Canada and Mexico could hurt Trump’s quest for US energy dominance appeared first on Atlantic Council.

DOGE should focus its tech talent on making the National Environmental Policy Act (NEPA) work the way it was intended: to make federal decision-making sensitive to environmental impacts but not create the byzantine paperwork exercise that haunts many projects. To do that, DOGE should leverage artificial intelligence (AI) technologies to streamline bureaucratic processes.

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NEPA doesn’t need to be so cumbersome

On January 1, 1970, then-President Richard Nixon signed NEPA, and it quickly became a cornerstone for environmental protection in the United States. NEPA doesn’t establish limits for harm—it is a “process” statute requiring federal agencies to identify planned actions that may significantly affect the environment and to describe those impacts in detail, for both the project as proposed and for a range of alternatives. Federal agencies must then state which action they will take, and which measures they’ll implement to mitigate the impacts.

But NEPA has long been a cumbersome process. The law and its amendments call for brevity in words and time, but the collective parts of an environmental impact statement (EIS) can run hundreds or even thousands of pages long and take more than two years to prepare—often by outside firms. Neither the environment nor the participants in the process benefit from that excess—decision-makers rarely even read the EIS.

It’s time for a dramatic change in the way that federal environmental review is carried out. The emergence of AI creates a tool to make that change a reality.

AI can streamline government processes

The Bureau of Ocean Energy Management (BOEM), where I have served, launched an effort in this direction in February 2020 during the last year of the first Trump administration.

BOEM’s initial idea was simple: EISs and other environmental documents were being created anew by the agency for each proposed action. Some parts of those documents were unique to the action involved, but much of the information, such as a required description of the affected environment, was largely identical for activities in the same geographical area. BOEM realized that an information base kept updated by agency scientists would save staff from unnecessary, repetitive review and speed things up.

BOEM named its initiative Status of the Outer Continental Shelf (SOCS) reflecting the agency’s jurisdiction. It began by compiling environmental documents prepared and vetted by the agency over the years and initiating a study to develop a model for decision-making using that information base. The model would not take humans out of decisions but instead provide them with objective indices of impacts on the environment based on defined categories of concern, such as the presence of endangered species and importance to tribal culture.

SOCS is underway now in BOEM, and its potential is made dramatically more significant with the emergence of generative AI.

Here is the concept: couple the SOCS information and model with generative AI and then fine-tune a custom AI tool for BOEM that can prepare EISs and other environmental documents. On top of that, use AI to facilitate public engagement faster and better than is currently done by providing a way for anyone to ask questions directly to the AI tool about projects and NEPA documents.

This concept can work for any federal agency making decisions with environmental impacts, not just BOEM.

How AI can fix NEPA

That said, one approach for developing a new AI-based tool could follow these steps:

• Upload contextual documents, including NEPA, other environmental laws and regulations, plus guidance documents and judicial decisions—the more, the better. Include EISs that are exemplary documents so the AI tool can learn what an EIS should look like—that is, it should communicate key issues concisely, clearly, with supporting graphics, focus candidly on important issues, and specify clear and enforceable mitigation measures (as conditions of approval).
• Have the AI produce an EIS template drawing from these uploads and integrating a decision-making model if an effective one becomes available—something DOGE should include in its NEPA-related efforts. A good model should transparently address the full range of impacts of greatest concern. It also needs to be user friendly for agency staff who are not modelers themselves.
• Task the AI tool to prompt the human team with requests for information specific to the EIS-proposed action.
• Fine-tune the AI tool through iterative refinement. This would include human experts systematically reviewing, correcting, and updating AI-generated output, since generative AI models can “hallucinate” facts that require fixing. The review should also look hard for and correct model bias—such as the Google Gemini AI model which, when asked for images of the Founding Fathers, only came up with people of color.
• Have the human experts closely review completed draft EISs for accuracy and quality. This task should become easier over time as reviewers gain experience.
• AI tools can also enormously improve public engagement with EISs. Google’s NotebookLM is one option currently available for free. Users can upload an EIS (or any other document) and ask questions about it. The answers are reliable and the tool can even generate an engaging podcast.
• Eventually, it may become possible simply to task an AI agent to produce a draft EIS, making sure it can access information specific to the project concerned.

NEPA is fixable

So, why aren’t EISs being prepared this way now? It’s partly because generative AI is still novel and government is slow to change. NEPA itself is not an obstacle. The statute and its regulations provide flexibility for how an EIS should be drafted.

To be sure, agency lawyers will wring their hands about what courts may do with AI, but that’s not a good reason to hold back. With rescission of the Chevron doctrine by the Supreme Court, which eliminated deference to agencies by judges, predicting judicial outcomes is impossible, and NEPA can be amended if warranted.

Government information technology (IT) policies are perhaps an even greater inhibition for AI innovation than nervous lawyers. IT requirements, some of which are legislated, are necessary for system security. But the process of change allowed under them can be suffocating and lead agency program staff to avoid innovation.

These organizational inhibitions make improving environmental review under NEPA a strong candidate for prioritization for the Department of Government Efficiency envisioned under the second Trump administration.

DOGE, which aims to bring in technology-focused staff from outside of government, working with the White House Council on Environmental Quality on the inside, could deliver a needed shake-up. It could bring the NEPA process into the 21st century. That would mean a more efficient path to renewable energy growth and the quest for net-zero carbon emissions, while creating a better understanding of the adverse environmental impacts of projects.

Go for this one, DOGE; it’s waiting for you in plain sight.

William Yancey Brown is a nonresident senior fellow at the Atlantic Council Global Energy Center. From 2013–2024, Brown was the chief environmental officer of the Bureau of Ocean Energy Management in the US Department of the Interior, where he oversaw the implementation of NEPA.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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The post DOGE should use AI to fix environmental review appeared first on Atlantic Council.

The “maximum pressure” strategy employed from 2018 to 2022 against the illegitimate Nicolás Maduro regime in Venezuela did not serve US interests. Stringent oil sanctions imposed on Venezuela forced the retreat of Western oil firms from the country, principally benefitting adversaries. During the maximum pressure campaign, Venezuela’s oil production was rerouted to China at discounted prices, Iran supplied the diluent Venezuela required for oil production, and Russian investors became more critical amid a dearth on Western investment.  

A democratic transition remained elusive while repression and human rights violations continued. Venezuelans suffered, US adversaries expanded their influence, and Maduro remained. 

The current system of issuing specific licenses for Western oil producers to operate in Venezuela has yielded superior results. The benefits of this policy have been the following:    

1. Venezuelan oil exports have been diverted to friendly nations.
2. Treasury has increased visibility on all oil-related transactions, decreasing the clandestine shipment of oil through shadow tanker fleets operated by the Chinese defense establishment, Iran, or PDVSA.
3. Compensation to the regime is limited to taxes and royalties, which are required by Venezuelan law.
4. The system has enabled the return or reemployment of qualified engineers and technicians to restore production from degraded oilfield infrastructure.

The incoming US administration should prioritize inflicting more harm on the regime and its enablers than the Venezuelan people—or US interests.

To do so, sanctions must be linked to clear objectives. An uncalibrated reapplication of maximum pressure would cede influence to China, Russia, and Iran, while doing little to loosen the regime’s grip on power. Instead, the existing system of specific licenses should be maintained and expanded. To punish Maduro, the administration should continue to target individuals who enable his illegitimate rule, adding to the 180 individuals already sanctioned by the Treasury. A targeted sanctions policy—not maximum pressure—is the only way to ensure that US actions to confront the Maduro regime impose their desired effect, and do not play into the hands of Beijing, Moscow, or Tehran. 

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Executive summary

Syria has the potential to significantly increase its oil and natural gas production, which can provide energy and government revenue that are critical for its stability and reconstruction. Syria was an oil exporter in the decades prior to its civil war, and its natural gas production started to increase on the eve of the war. Most of Syria’s oil and natural gas fields are located in eastern Syria, in areas that are currently largely under the control of the predominately Kurdish Peoples’ Protection Units (YPG) and where US forces are deployed. The YPG is an affiliate of the terrorist-designated Kurdistan Workers’ Party (PKK) but has been a partner of the United States in its campaign against the Islamic State of Iraq and al-Sham (ISIS). Control of these oil and natural gas fields plays a role in the developing conflict between the new central government and the YPG, and will potentially serve as an issue of disagreement between Washington and Ankara. In the future, Syria will likely be integrated into regional natural gas trade and might become a transit state for Israeli and Egyptian gas heading to Turkey and to Europe. Turkey announced its intention to begin exclusive economic zone (EEZ) delimitation negotiations with Syria. This will likely spark opposition from Cyprus and Greece, which might turn to Washington and Brussels for support.

1. Syria’s energy resources and infrastructure

Prior to the outbreak of Syria’s civil war in 2011, the country’s oil and natural gas reserves meant it was self-sufficient in terms of energy supplies. Before the civil war, Damascus also exported oil. Sales of oil and gas provided 20 percent of the government’s revenue.¹

Most of Syria’s oil and natural gas fields are located in the eastern part of the country. As of publication, the YPG controlled the bulk of the fields in northeast Syria. Control of these fields is a major factor in the new regime’s efforts to establish its full authority in Syria. The new central government aims to gain control of these fields, and this plays a role in the unfolding conflict between it and the YPG, as well as disagreements between Turkey and the United States.

Foreign actors are already increasing their involvement in Syria via the energy sector. Qatar and Saudi Arabia have pledged to supply fuel to Syria.²

Turkish companies such as TPAO and BOTAŞ are positioned to play a leading role in future oil and gas exploration and production in Syria, while Turkish power companies will likely play a major role in Syria’s electricity sector. Azerbaijan will also likely play a role in developing the Syrian energy sector.³ Azerbaijan has already sent significant aid to Syria, including fuel supplies. Due to its close alliance with Turkey, Azerbaijan will likely work together with the Turkish government and Turkish energy companies in energy provision and development in Syria. In addition, foreign companies such as Total and Shell, which operated in Syria before the civil war, will have an advantage in gaining access to Syrian exploration and production.⁴

2. Oil

The US Energy Information Administration (EIA) estimated in 2015 that Syria possessed 2.5 billion barrels of proved oil reserves.⁵ Syria’s crude is heavy and sour.⁶ In 2010, Syria produced 383,000 barrels per day of oil.⁷

Estimates of Syria’s oil output on the eve of Bashar al-Assad’s ouster range between 40,000–80,000 barrels per day.⁸ Up until Assad’s departure, Iran was providing the bulk of Syria’s oil supplies, up to 100,000 barrels a day. Tehran supplied this oil to Syria essentially for free, via a credit line that Damascus did not pay. Iran stopped supplying oil to Syria on December 9, 2024.⁹ Iran has told the new regime in Syria that it owes Iran between $30–50 billion for these fuel supplies and other aid during the Assad period.¹⁰ According to press reports, the new government in Syria does not intend to pay these Assad-era debts. Instead, it responded that Iran owes Syria $300 billion for the damage its forces did there.¹¹

3. Oil refineries

Syria has two oil refineries, located in Homs and Banias, and both are state owned. Before the war, these refineries’ capacity met Syria’s refined product demand.¹² However, the refineries suffered extensive damage during the civil war.

4. Natural gas

In 2015, the EIA estimated Syria’s natural gas reserves at 240 billion cubic meters (BCM). Syria possesses both wet and dry gas.

Syria’s natural gas is used for power production and is needed for reinjection into Syria’s oil fields. According to BP, Syria produced 8.7 BCM of natural gas in 2011, which fell to 3 BCM annually by the 2024 fall of the Assad regime.¹³ According to IEA estimates, natural gas provided one-quarter of Syria’s electricity supplies in 2022.¹⁴

Syria has not explored for oil and natural gas in its EEZ, though legal preparations to commence exploration were under way prior to the war. Like its neighbors in the Eastern Mediterranean, Syria is likely to discover oil and gas resources in its EEZ.

Prior to the war, several foreign companies engaged in natural gas development in Syria, including Canada’s Suncor Energy, the United Kingdom -based energy group GulfSands Petroleum, and China’s Sinochem. In addition to its oil production, Total also developed the Tabiyeh natural gas project. Damascus contracted the Russian energy holding Soyuzneftegaz to explore in Syria’s EEZ, but exploration didn’t commence.

5. Electricity

Provision of electricity to the public is one of the new Syrian government’s most important tasks to establish its rule and attain stability. Syria’s leader Ahmed al-Sharaa has stated a goal of providing eight hours per day of power by late February.¹⁵

Ankara has pledged to support Syria through restoration of electricity supplies to the public. Turkey has already extended electricity supply in Syria: the Idlib region receives power from Turkey, and Ankara is extending its reach to repair power plants in Syria. Turkey’s Minister of Energy and Natural Resources Alparslan Bayraktar stated that in the first phase, “[Turkey] must bring electricity to the places in Syria where there is no electricity very quickly. We will do this here first with imports. With medium-term plans, we are planning to increase the electricity installed capacity and the production capacity there.”¹⁶

Turkey and Qatar have committed to deploy floating power-supply vessels to provide electricity to Syria.¹⁷ Turkey has deployed a fleet of such vessels in various countries, including in Africa.

Prior to the outbreak of the civil war, Syria generated close to 29.5 billion kilowatt hours of electricity annually, while its consumption was 25.7 billion kilowatts.¹⁸ The bulk of this came from thermal power plants fueled by oil and natural gas. The Tishrin hydropower plant in the Aleppo district provided 4 percent of Syria’s electricity.

6. From exporter to importer

In almost textbook manner, the civil war broke out just as Syria’s growing oil consumption became equal to its declining production. Thus the regime had dwindling financial means to sustain its power and provide public goods, coopt support, and pay the security services. The revenue drop from oil sales was a major factor in the regime’s inability to cope with public unrest and, thus, its decision to rely on support from Iran, Russia, and Hezbollah.

During the Arab Spring, governments in regional countries rich in oil and gas survived the challenge, supported by government subsidies to the public for energy and other goods. However, states like Egypt that went from energy exporters to energy importers, and states like Syria with dwindling oil production rates, were not able to mitigate the effects of rising fuel and foods costs through increasing subsidies because they no longer had significant revenues from energy exports.¹⁹

7. Future developments

Syria has significant potential to increase its oil and natural gas volumes. Syria can also serve as a transit state for natural gas from Israel and other producers in the Eastern Mediterranean to Turkey and onward to Europe. Turkey will play a major role in Syria’s reemerging energy sector. US, UK, and EU sanctions waivers and exemptions for World Bank loans are necessary to facilitate the investment for energy supplies in Syria. The World Bank has ended loans for fossil fuels projects, and an exemption will be necessary to allow public finance for Syria’s energy sector.

Turkey will likely lead the reconstruction of Syria, especially in the field of energy.²⁰ Ankara plans to help develop Syria’s oil and natural gas resources and use energy exports to fund reconstruction. As Bayraktar explained, “We aim to develop these projects . . . we are acting with a vision to bring this potential of Syria to the Syrian economy and to use the resources obtained from there for the development, construction and development of Syria.”²¹ He stated that Syria’s oil production can increase significantly and the oil can be sent to Turkey’s refineries. The minister stated that Turkey will work with the new government in Syria on an infrastructure masterplan.²²

Improvement of Syria’s electricity supplies can benefit Lebanon, which also suffers from insufficient power supplies. Bayraktar said Turkey could also send electricity to Lebanon via Syria.²³ Future natural gas supplies from Syria or transited via Syria could also be supplied to Lebanon, which could greatly improve Lebanon’s economic prospects.

As developments unfold, the control of Syria’s oil and gas fields and power plants will change hands. As pointed out above, most of the oil and gas fields are located in areas controlled by the YPG and in proximity to US forces, which are partners of the Kurdish militia. Thus, the status of the oil and gas fields is intertwined with Damascus’s efforts to disband the YPG as well as the developing understanding between Turkey and the United States regarding Syria. The new regime in Damascus, together with Turkey, will challenge and likely prevail over the YPG and other Kurdish militias.

Discord between the new regime in Syria, Turkey, and the United States over the status of the Kurdish militias in Syria is likely to change with the departure of the Joe Biden administration. The Donald Trump administration will likely withdraw the US forces, albeit probably several months after entering the White House.

Syria will likely be integrated into regional gas trade and, as noted earlier, might serve as a transit state for gas exports from Israel and Egypt to Turkey and Europe. While this may sound farfetched, it is not without precedent. During 2021–2022, Biden’s energy coordinator, Amos Hochstein, led efforts to establish Egyptian gas exports via Jordan, along the Arab Gas Pipeline, to Syria and onward to Lebanon. Lebanon and Syria signed gas import agreements with Egypt while, in parallel, Egypt agreed to import additional Israeli gas volumes via Jordan.²⁴ Essentially, increased volumes from Israel would have enabled Egyptian exports to Syria and Lebanon, and Israeli gas would have been supplied to Syria and Lebanon. All the participants in the plan were aware of the reality that Egypt would be supplying Israeli gas to Syria and Lebanon.

Export of Israeli gas and/or electricity to Syria—perhaps under the Egyptian or Jordanian label—could provide quick relief for Syria’s energy shortages. However, the lack of direct relations between Syria and Israel, and the currently poor state of relations between Ankara and Jerusalem, prevents this. Despite the harsh rhetorical exchanges between Israel and Turkey in recent weeks, the two countries share interests in Syria: stability, prevention of the country being used as a springboard for terrorism, and removal of Iranian militias and influence.

If stability is reached in Syria, Damascus will likely succeed in increasing its natural gas production and might be able to export gas to markets such as Lebanon and Turkey. Prior to the civil war, Egypt led efforts to extend the Arab Gas Pipeline to the Turkish border. A pipeline connection on land or a pipeline via Syria’s EEZ to Turkey would not require major investments.

Turkish officials announced that Ankara would like to quickly delimitate its maritime EEZ border with Syria in order to initiate oil and gas exploration.²⁵ The borders set between Syria and Turkey will likely pose a challenge to the declared EEZ of Cyprus. Thus, the Syrian-Turkish EEZ decision could trigger reaction from Cyprus and Greece, which could appeal to Brussels and Washington to take action.²⁶

Finance for energy projects in Syria will require the removal—or at least the waiver—of US, EU, and UK sanctions that were imposed on Syria under the Assad regime. The United States has already declared a waiver of its sanctions for six months to facilitate humanitarian supplies to Syria, including fuel.²⁷ The Trump administration is likely to support the removal of the sanctions on Syria. The president can grant waivers, even if the congressional sanctions are not removed. The actions of the new regime in Syria, and of Turkey in Syria, will affect congressional approval of sanctions removal.

An exemption from the World Bank and Group of Seven (G7) countries’ limitations on funding of fossil fuel projects would also be needed in order to access public finance to support the rebuilding of Syria’s energy infrastructure and production. The Trump administration is expected to remove the limitations on public finance for fossil fuels, which were adopted during the Biden administration. The Trump administration  will likely advise the World Bank to remove the limitations as well. However, this could take time, while Syria will need loans to reestablish energy supplies quickly.

To summarize, this paper recommends the following action:

1. The U.S. should support a process that leads to Syria’s oil and gas fields returning to central government control.
2. Unlock World Bank and regional public bank financing for fossil fuel projects in Syria.
3. Remove Western sanctions or grant waivers to allow investment and trade with Syria.
4. Washington should work with Ankara to integrate Syria into regional electricity and natural gas trade.

Energy will play a major role in the developing events in Syria in the coming months. The new government’s ability to provide electricity and fuel will strongly affect public support and is necessary to jump-start the economy. Foreign engagement in Syria will focus heavily on the energy sector. Turkey will rebuild electricity supplies, while Saudi Arabia and Qatar will likely pay for the replacement of the free Iranian fuel supplies that Tehran had provided to Syria. Further along, Syria might play a role in regional natural gas trade.

Professor Brenda Shaffer is a nonresident senior fellow at the Atlantic Council Global Energy Center, a faculty member at the US Naval Postgraduate School and Advisor for Energy at the Foundation for Defense of Democracies. Follow her on X @ProfBShaffer.

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The post Syria’s energy sector and its impact on stability and regional developments appeared first on Atlantic Council.

The five-year natural gas transit contract between Russia’s Gazprom and Ukraine’s Naftogaz expired on January 1, ending a long history of Russian gas reaching Europe—and Moldova’s 2.5 million citizens—through Ukrainian pipelines. Kyiv elected not to extend the contract because, although it was earning approximately $800 million per year in transit revenue, Moscow was earning billions of dollars from the post-invasion residual annual transit of 15 billion cubic meters of gas, which was funding its ongoing assault on Ukraine. Hungary and Slovakia, which are both highly dependent on Russian gas, will be impacted, but it is Moldova that has been dealt the greatest blow. 

While Moldova’s lack of preparation for the end of Russian gas transit is in large part responsible for the country’s current predicament, the Kremlin’s war on Ukraine is the principal cause of the current crisis. Amid Russia’s ongoing aggression, Chișinău and the European Union must work to find a way to stave off Moldova’s energy emergency and the looming humanitarian crisis in Transnistria, which risks further destabilizing the region. To break this cycle of annual energy crises in the future, Moldova will need to make concrete, meaningful reforms to its energy sector, which is the only way to diminish Russia’s leverage over the country.

A state of emergency

For Moldova, the end of Russian gas transit exacerbates both a rapidly deepening energy crisis and an ensuing political crisis. The official Moldovan government in Chișinău prospectively declared a state of emergency over energy concerns on December 13 and has instituted energy saving measures, such as dimming lights in public and commercial buildings by 30 percent. Transnistria, located on the “Left Bank” of the Dniester River and administered by the internationally unrecognized Transnistrian government, also declared a state of emergency, and all nonagricultural industry in the region has been shuttered. It has also set up communal heating centers and is helping residents find firewood.