Bloomberg News

Ukrainian Crisis Not Wasted by Washington Lobbyists

April 11, 2014

Russian Naval Infantry Soldiers

Russian naval infantry soldiers parade during the flower laying ceremony at the Soviet-era World War II memorial in the Crimean port of Sevastopol on April 3, 2014. Photographer: Olga Maltseva/AFP via Getty Images

A lot of Washington interest groups owe Russian President Vladimir Putin a big thank you.

Putin’s annexation of Ukraine’s Crimea region last month is being cited in Washington as a reason to do everything from building an oil pipeline to accelerating private space flight and even boosting the export of liquefied natural gas.

“This is truly classic behavior,” said Burdett Loomis, a political science professor at the University of Kansas who specializes in lobbying. “You can create a narrative that puts you on the side of the angels.”

Crises have long jolted Washington into action, serving as catalysts for policy. Think Sputnik: the low-orbit satellite the Soviet Union launched in 1957, stoking fears the U.S. was falling behind in a race to space. It helped build support for the program that put Americans on the moon.

Full coverage of the Crisis in Ukraine:

  • Ukraine Premier Bids to Calm East After U.S. Warns Russia
  • Ukraine Miners Don Camouflage as East Revolt Mimics West
  • Ukraine Sees $7 Billion IMF Funding This Year

“You never want a serious crisis to go to waste,” Rahm Emanuel, Chicago’s Democratic mayor who served as an Illinois congressman and President Barack Obama’s chief of staff, said during a 2008 Wall Street Journal conference.

Billionaire Elon Musk, who owns Space Exploration Technologies Corp., seemed to take that advice to heart when he told a Senate Appropriations subcommittee on March 5 that U.S. dependence on Russian-made rocket engines poses supply risks.

Russian Rides

Musk’s SpaceX is seeking to transport U.S. astronauts to the International Space Station, a service now provided by Russia.

“It’s just kind of embarrassing that the United States has to thumb rides with the Russians,” Musk, who is also chief executive officer of Tesla Motors Inc. (TSLA:US), said in a Bloomberg Television interview in March.

Russia’s military intervention in Ukraine also boosted calls to expedite U.S. natural gas exports.

“Having more of our gas reach the market will reduce volatility and provide diversity,” Karen Harbert, president of the U.S. Chamber of Commerce’s 21st Century Energy Institute, told reporters on a conference call on March 4 -- the same day Putin said Russia would cancel the price discount on natural gas it sold to Ukraine.

Efforts by other Washington-based lobbying groups including the American Petroleum Institute to lift 1970s-era bans on the export of oil also have gained steam.

“We’ve just had a consistent drumbeat going since the beginning of last year,” said Erik Milito, API’s director of upstream and industry operations. “We just kept doing it, and this became a more heightened debate during the whole Ukraine situation.”

Exxon, Chevron

Milito said lawmakers from both parties are paying attention to the message from API, whose members include Chevron Corp. (CVX:US) of San Ramon, California, and Exxon Mobil Corp. (XOM:US) of Irving, Texas.

“The last thing Putin and his cronies want is competition from the United States of America in the energy race,” Senate Energy and Natural Resources Committee Chairman Mary Landrieu, a Louisiana Democrat, said during a March 25 panel hearing. She has urged U.S. energy regulators to approve Sempra Energy’s (SRE:US) gas-export project in her oil-rich state.

Oil exports provide a “golden opportunity” to help Ukraine and other European allies erode Russia’s influence, John Hess, chief executive officer of New York-based Hess Corp. (HES:US), said in a brief interview yesterday following a presentation in Washington. “It’s easier to get oil to them than natural gas,” he said.

Keystone Bid

Five days after Russia announced the annexation of Crimea, executives from Calgary-based TransCanada Corp. (TRP), which wants to build Keystone XL across six U.S. states, and the API participated in a news conference in Washington. The event, featuring Canadian Ambassador Gary Doer, was meant “to underscore the vital role the Keystone XL pipeline, and other projects like it, can play in America’s economic and national security,” according to the e-mailed announcement.

Senator John Hoeven, a North Dakota Republican who helped arrange the event, had recently visited Ukraine and “saw firsthand the importance of becoming energy secure,” according to an e-mail announcing the conference.

“It’s a common thing when there’s a crisis for companies to see opportunity, and they will use advocacy to pursue their interests,” James Thurber, director of the Center for Congressional and Presidential Studies at American University in Washington, said in an interview. He said industry can also be part of the solution in responding to crises.

Trade Talks

While the U.S. has extended more than $1 billion in aid to Ukraine, lawmakers and the White House are using the situation to jump-start stalled talks on reviving a tariff-cutting trade program that expired in July.

The American Apparel & Footwear Association, the Consumer Electronics Association and the National Confectioners Association are part of a coalition lobbying for renewal of the program, known as the Generalized System of Preferences. Renewal “would benefit Ukraine immediately,” U.S. Trade Representative Michael Froman said during a House Ways and Means Committee hearing April 3.

The coalition immediately tweeted his assessment to its followers.

“There’s a desire to help Ukraine, and that moves GSP up the list,” said Dan Anthony, vice president of the Washington-based Coalition for GSP.

Trade Talks

The crisis also is being used to promote a proposed trade deal, known as the Trans-Atlantic Trade and Investment Partnership, between the U.S. and 28-nation European Union.

“The recent developments in Ukraine only make it more clear why TTIP is important,” Froman said during a March 22 interview in Brussels.

With the U.S. and Russia embroiled in their biggest standoff since the Cold War, some military experts are calling for Obama to reconsider his military strategy. The U.S. in 2012 announced plans to cut the Army’s presence in Europe by half and decided to reduce defense spending by $487 billion over a decade.

“Everybody in the Pentagon and in the defense industry is using the Ukraine crisis as a warning for why the department needs to spend more on military technology,” Loren Thompson, chief operating officer for the Lexington Institute, an Arlington, Virginia-based consultancy on defense issues, said in a phone interview.

Missile Defense

Thompson said the crisis may boost support for missile-defense systems supplied by contractors including Raytheon Co. (RTN:US) and Lockheed Martin Corp. (LMT:US), and armored vehicles made by companies including General Dynamics Corp. (GD:US) and BAE Systems Plc. (BAESY:US)

“It’s really not a kinder, safer world out there than it was 10 or 20 years ago,” Mark Signorelli, BAE’s vice president and general manager for combat vehicles, said in a phone interview. He said the situation in Ukraine highlights the impact of shutting down certain programs or reducing them below the point where they can be ramped up quickly.

Signorelli said developments in eastern Europe may prompt the Army to start reprioritizing existing spending authority on modernization and procurement.

Spokesmen from General Dynamics, Lockheed Martin and Raytheon either declined to comment on the effect of the Ukrainian situation on their business, or said the crisis was having no impact.

“There’s a fair amount of self-interest, and a lot of that self-interest is cloaked in good public policy for the United States or for the Ukrainian people,” Loomis, the Kansas professor, said of lobbyists using the crisis to their advantage. “You’ve got a wave coming up, and in a sense they’re surfing that wave.”

To contact the reporter on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Elizabeth Wasserman


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