Subcommittee Chairman Ros-Lehtinen Opening Statement - Essay Example

Subcommittee Chairman Ros-Lehtinen opening ment: The Middle East and North Africa region uses over 35% of the world’s oil supply, and over 20% of the global natural gas production. We know that energy resources are vital for the region, and as such they plan an important role in the shaping of the geo-political landscape that impacts our foreign policy. We also know that the Middle East and North Africa is the world’s most volatile regions prone to unrest, instability, political upheaval and conflict. In Libya, we saw armed groups occupying many of this strategically important oil fields and export terminals for nearly a year until a partial agreement was reached in April, and in Iraq, we’ve only recently begun to see that country tap the potential of it proven oil reserves which is the source of 90% of its budget but now that Iraq’s second largest city, Mosel, fell this week to Al-Qaeda affiliated Islamic state of Iraq, _ ISIL and the increase deterioration of the security situation in that country, there’s no telling what the future has in store for its energy sector. But that just highlights the problem; most of those countries relay heavily on the sale of oil or gas as their main driver for their economies and anything upsets the delicate balance can be extremely detrimental to their economic outlook and has the potential upend the global energy market. Then of course we have the recent discovery of large oil, natural gas sorry off the coast of Israel. This has huge implications for our friend and democratically the Jewish state of Israel because seemingly overnight, Israel has gone from energy dependent on some unreliable partners to now to now commanding a large sum of natural gas that can transform its relations with its neighbors. The instability of Egypt over the last few years, coupled with large energy subsidy providers to Egyptians, has seen overconsumption in Egypt and has harmed its energy outlook. Both Israel and Jordan had been reliant on gas from Egypt but now that Israel has the potential to export large sums of gas that Jordan needs, this could be an opportunity for those nations to strengthen their ties. Israel’s potential could also transform its relationship with Egypt and other Middle Eastern countries as they look for regional solutions to the energy needs. Yet Israel’s natural gas boom hasn’t just affected its relationship in the middle east and north Africa region, it is also seen a promising and expanding relationship with Greece and Cyprus. The recent discovery of large hydrocarbons in the east Mediterranean has helped forge an emerging and strategic relationship between these three countries and this relationship has the potential to completely alter the political-economic security situation in the region. Their cooperation has the potential to increase the global supply of energy from friendly more stable nations and reduce the world’s dependence on some of these rogue regimes. And by rogue regimes, we mean always Iran. Under this week’s nuclear deal, the administration eases the sanctions on the regime and effectively allowed to breathe life back into its faltering economy. The Iranian economy is dependent on its oil sales and congress had implemented a strong sanctions program including several bills that I authored that impose the strictest sanctions on Iran and in effort to get Iran to curb it solicit nuclear program. According to the JPOA, Iran must not exceed 1 million barrels a day on average for a 6 months term, news reports have suggested that Iran is surpassing this threshold and if this pace continues Iran will be in violation of the terms of agreement. Even if that happens because we eased the sanctions, it will not be easy, in fact, it will be nearly impossible to reinstitute sanctions, once the genie is out of the bottle, on sanctions in Iran that’s it. The foreign affairs committee held a hearing yesterday on Iran and one of the major takeaways was that the in term deal or any subsequent deal reply heavily on monitoring and verification. We do have the tools to monitor and verify how much Iran is exporting yet we don’t seem to be doing anything to respond to the violation of the terms. I hope that we can get an explanation on this today as well as hearing how U.S. policy is adjusting to the changing landscape of the Middle East and North Africa’s energy sector especially now that developments in the U.S. have seen us move from energy dependence to potentially becoming a net energy exporter. The implications are far reaching and quickly shifting but are our foreign policy objectives adjusting appropriately? We’ll find out today and with that I’ll turn to my good friend ranking member of our subcommittee Mr. Duetch of Florida. Questions and Answers Rose-Lehinen: The terms of the joint plan of action limits the amount of oil that Iran is allowed to export, and reports indicate that the regime has surpassed the 1 million barrel per day that must average for the first 6 months. Why is Iran, according to reports exceeding that and are we going to ensure that over the remaining months it reduces its exports to meet the requirements of the JPOA? Also, what countries are receiving the all of this Iranian oil, rumor is that Iran is shipping hundreds of thousands of barrels of oil to Syria? Are we counting and monitoring this? Next, the natural gas discoveries off the coast of Israel are a potential game changer? Not just for Israel but for Greece and Cyprus too, who played an important roles in developing eastern Mediterranean hydrocarbons and they will continue to play vital roles in its distribution. Thanks to our good friends from Florida Mr. and our ranking member Mr. Duetch, we in congress have had many opportunities through their congressional Hellenic Israel alliance to discuss what this means for Israel, for Greece, for Cyprus, for their relationship, how this can help improve their economies, and security going forward but the discovery of these large natural gas fields has also led to the speculation that Lebanon may have similar resources off its shores and that too would be a game changer for that crisis ravage nation. However, there is dispute between Lebanon and Israel over their maritime boarders and it appears that it’s an impasse; would you give us an update on where we stand on this? What is the administration doing to help resolve this and what outstanding issues remain to be resolved? And then next, last month this subcommittee held a hearing on the GCC about the deepening riffs, the emerging challenges and one of the topics that came up was the possibility of friction between the U.S. and some of our gulf partners because they believe, perceive that we’re moving away from our traditional relationships and leaving them alone and out to dry specially as it relates to Iran. Has this energy boom in the U.S. impacted these traditional alliances that we have with the states in the region particularly the Gulf States? Thank you, sir. Mr. : Thank you madam chair, let me take this one at a time, on iran and I’m glad you asked the question, as you and your staff all aware I come regularly in a classified forum to discuss specifically. I’ll stick to what I can say here in this format, under the JPOA the agreement that was signed the tenants of that agreement was that Iranian exports remain at current levels and we have worked to make sure that that happens as you know based on the congressional mandated sanctions that have been regularly implemented over the last 2 years, Iran’s exports were reduced to 50-60% and the current levels that we saw when the time that we reached the JPOA were in the range between a million and a million point one million barrels a day. It’s very difficult to set numbers when it comes to oil. That is over the period of 6 months of the entire time of the JPOA, January 20 to July 20, so far, as we look at the numbers, we are comfortable that at the moment those numbers are being kept and that Iran’s exports are being kept to that range of a million to a million point one million barrels a day, part of the explanation that you see a discrepancy in public reporting is two major issues, one is that in many of the countries that report their oil purchases from Iran or from any country, when they say crude oil or oil, they lump together a number of products, and its not just crude, crude plus other things such as condensates, and condensates were not included in the congressional sanctions, for exceptions, and therefore we continue the process of looking for the breakdown of what is this crude oil. If you isolate out the crude oil the numbers are quite different, the second issue that you raised later which is the Syria question, and it is true, that over the last few months Iran has begun to direct shipments of crude oil to Syria for the first time. They were done every once in a while before that. That is because Syria’s ability to get crude oil on the market and from traders has vanished, and as a result Iran had to step in. But that is a very different kind of delivery because unlike the other six customers that they still have, Syria doesn’t pay so this doesn’t contribute to the overall economic benefit to Iran, and therefore does not remove the economic pressure that the sanctions sought to bring. So when we look at what is the current level of exports, we mean people who are buying. Let me add one more point to that which is important to say, even when they do sell this million to one point one million barrels a day to these six customers, they are not getting the money or the access to the cash. That money is still going to accounts that are blocked in those countries and have to remain under certain conditions in those countries. So with that, I think we’re still comfortable but concerned about some of the reports, we continue to engage vigursly and regularly with every single one of the countries that you mentioned. On Lebanon, you are correct. With the discoveries of the offshore in Israel and Cyprus, it has become clear that many countries in the region want to take a look at their offshore and Lebanon clearly has potential and we think that’s good thing. And we are hopeful that Lebanon can reach a point where they can come together as a country and put together a transparent bid round, have international high standard oil companies come and explore in that region. There’s also a dispute on the maritime boundary between Israel and Lebanon. It’s an area of about 860 km2. I have been going back and forth to Lebanon to Israel for over a year now, we have shared some ideas for a pathway forward between the two countries, its quiet difficult when you have two countries that are at a war with each other and yet we think that there some progress being made that will allow both countries to independently continue to explore in the case of Israel and for Lebanon to begin to explore for natural resources off its coast, it’s not going to be easy, it will continue to be difficult but we think that without some kind of mechanism to allow both countries to understand live within a boundary that they accept, it would be difficult for companies to enter the Lebanese market and explore in an area that would have a political legal challenge to its products. Ros-Lehtinen: the last question was on the Gulf States and how the energy question has impacted our relationship? Mr. H: as you and the other members of the subcommittee mentioned, in the Gulf, energy and hydrocarbons are the lifeline of these countries, and they account for a significant percentages of their economies and many of them understand the need to diversify. We follow the relationship between these countries, these are just like any place in the world, these are both strong and complex at the same time, and so far we have not seen anything that spillover into energy issues, I think there’s even in areas of dispute, in some areas there are cooperation in others there isn’t, including energy. They have mechanisms and ways to talk to each other we have good and strong relations with all of them, but we also have some areas of agreement and some areas of disagreement as we do with many countries so I think so far I have not seen any sign that there is any geo political change in the region that would lead to a change in energy capacity. Thank you madam chair. MR. CONNOLLY: Mr. Hotchstein, I’d like to make sure that we have clarity about your lengthy exchange with Mr. Cloy. Can you drink them, can you smoke them, can you fill a car with them? I mean because leaving it at the way it is right now still allows interest to be drawn on that there is cheating going on and people are taking advantage of legal loophole to exceed the allowable amount of export from the land and I’m inviting you to clarify. MR. HOTCHSTEIN: Common sales are not in crude oil or product of crude oil. They are product of natural gas; they are liquid products of natural gas. They are exported mostly separately and occasionally, they are exported together with crude oil. That does not make them the same product. It was in the interest of the economic pressure on your own articulate that difference between crude oil and the other products as the Congress did and in its final legislation. MR. WEBER: Excuse me. Well, gentleman you have a question coming from Texas. In our District liquid gas, ethanes, propanes, methanes, are products that are used to produce plastic products and that has methane specifications for plastic explosives, by the way, but if that is what you are looking at and use to help clarify; that is my question madam chair. Thank you I would like to help my colleague make the clarifications, but given that long list, I’m I right, our friend from Texas just tipped off that isn’t that a loophole, aren’t we allowed to earn export dollars with that sort of exception to the sanctions? MR. HOTCHSTEIN: Again, let me clarify once again, as I said before, it now an exception to the sanctions, the sanctions are on all petroleum products and can as both be based on where the distinction came in particularly, directly that crude oil should be the only product that we judge whether a country can receive an exception from the sanctions for a period of a hundred and eighty days as long as they are significantly reducing. And, I would also say that this provision has been enormously successful and has been the key component to putting that economic pressure on Iran and they are allowed to bring us the exports down by over 50%. MR. CONNOLLY: Thank you for that very important clarification. Is there any, well, is it a policy of the United States Government having successfully negotiated Phase 1 of the nuclear stand-down agreement with Ira? Are we allowing them some ventilation in terms of crude oil products or hydrocarbon products of any kind beyond the limits that existed prior to that negotiated Phase 1 agreement? MR. HOTCHSTEIN: The only thing that we have done as a result of the GPOA in the sector has been to no longer ask countries to significantly reduce but, to ask countries to remain at the current levels. MR. CONNOLLY: Alright. MR. HOTCHSTEIN: That is the only thing that has changed. Let me just add one thing; they still don’t have any access to the money that result from these transactions. Those moneys have to remain in the bank accounts of those countries. MR. CONNOLLY: Mr. Hotchstein, the point politically is that there are people who have perhaps unwillingly suggested that with that agreement the administration or the United States allies have taken sort of boot off the neck of the line which is to respect the sanctions. If I understand what you just said, your testimony is that is incorrect. MR. HOTCHSTEIN: We have made some modifications but the only one that we have done was to say that we are staying at current levels. The Iranian is still under Euro economic pressure. MR. CONNOLLY: Mr. Hotchstein, you are a diplomat, not a politician. Politicians sometimes, like you enjoy created insecurity. This is not one of those times; we need clarity. Did the administration agree to take it fall out with Iran without considering the sanction including recovering exports for any period of time as a gift or as a word for entering into these negotiations or are the sanctions the same today with respect to this subject as they were proposed in the prior agreement? MR. HOTCHSTEIN: The sanctions are largely the same and there has been, but, I do have to say that there was one large modification to the sanctions as a result of the GPOA that keeps the Iranian oil in exports at the level that it was on the day that we entered the GPOA. They are not increasing or expected to increase. MR. CONNOLLY: Right. We didn’t increase, we froze it at the level that existed prior to the agreement. MR. HOTCHSTEIN: Correct. MR. CONNOLLY: Now, in other words, no change. MR. HOTCHSTEIN: Correct. MR. CONNOLLY: Now walk with me every step Hotchstein, this is not that hard. MR. HOTCHSTEIN: I understand. MR. CONNOLLY: It’s really not that hard. You use languages like largely intact; you know. Aaah.. Please remember the world you are operating in. You have got a whole bunch of people sneezing on that word as Aha! When it isn’t true what you just said finally is that the sanctions are the same today as they were before the agreement. We just frozen them in place, rather than actually just tightening them. Is that correct? MR. HOTCHSTEIN: That is correct. MR. CONNOLLY: Thank you. Madam Chairman, if you will allow me a little indulgence, I would appreciate it. Could you talk a little bit, I mean this sharing is supposed to be about energy policy and not just about Iran and Israel. How does the growing independence, if I can use that word, the growing self-reliance, if you will, because of domestic – huge exponential increase in domestic production here in the United States: How long is that shift going to affect your job? I mean; when you look down the road, how would US Energy policy in the Middle East be different say 15 years from now, 10 years from toady that is said today, if there is a shift today. Clearly, that is going to have some impact in our relations with the region if we just stick to politics. MR. HOTCHSTEIN: Without any doubt, we are in a new world, not only around the world but, in the United States, and as we looked at the transition from the middle consumers to exporters, that changes not only the dynamic of our own energy, but the position that we have globally, I think that people are drawing the wrong conclusion from that. As you heard today around the media and even in this hearing, that we are somehow changing or reducing our engagement with the Middle East. Like I said before, we have a very strong and complex long relationship with the Middle east and they will continue; but, that is too globally. What we can do when we are in the position to do today as in the years to come as we become an exporter is to think about how that provides part of the answers to some of the questions that we are seeing playing out. Now, we would like to see a world where no country is relying on a single source of energy and if we can eb helpful in diversifying the enrgy makes for countries and sources, I think that would not only benefit those countries but, our own National Security and Economic global security. And that is true whether we are taking about Europe, or whether we are talking about the Central America in the Caribbean. The reliance on a single source creates great political difficulties we have seen played out in in 3 months and the United States has been part of that as we started exporting. Work Cited http://www.ustream.tv/recorded/48657656 Read More