Article originally in the Financial Times.
Donald Trump has threatened the European Union with a trade war if it does not buy more American oil and gas. Although Brussels has indicated it is open to the idea, it does not have the power to buy – and European countries are importing record volumes of cheaper liquefied natural gas from Russia.
After Monday’s inauguration of the new American president, the question of whether Europe can act unitedly and buy more American fuel hangs over transatlantic relations. “Major purchases of our oil and gas. Or TARIFFS!!!” Trump said on social media last month.
The Union is having a hard time getting rid of Russian fuels
Shortly after his re-election, European Commission President Ursula von der Leyen supported the idea: “Why not replace Russian gas with American liquefied natural gas?” But the EU executive is not a consumer of gas and can do no more than signal to the US president that European companies are interested. for US liquefied gas, officials and analysts say.
The Union has committed to buying more liquefied natural gas from the United States in 2022. But officials say they have no plans to update that promise anytime soon. “What conditions do we have to come up with to make this happen? We will not reevaluate everything on January 21,” said one of the EU officials.
The fundamental problem is the inability of the Union to get rid of cheaper Russian fossil fuels. Last year, EU companies imported a record amount of liquefied natural gas from Russia. “This gas should come from the United States,” said Mike Sommers, executive director of the American Petroleum Institute, America’s largest oil and gas lobby group.
The EU fears supply cuts after Moscow gradually shuts off pipelines to Europe, so it has not tried to ban liquefied gas, as it did for Russian coal, or set a price cap on Russian liquefied gas transported by tankers, as it has for Russian oil .
Slovakia would be against it
Instead, the EU set an indicative target to completely divest itself of all Russian fossil fuels by 2027 and allowed governments to ban Russian exporters from using EU gas infrastructure. Some ministers have complained that this is not enough to force companies to break existing contracts.
According to diplomats involved in the negotiations, liquefied natural gas could be included in the new round of sanctions, but that would require the unanimous consent of all 27 member states, with Hungary and Slovakia likely to be opposed.
President Joe Biden’s administration added two smaller Russian liquefied natural gas facilities to the U.S. sanctions list in January but refused to include Yamal, a major supply terminal for Europe and other parts of the world.
One of the “very logical” steps would be for Donald Trump’s administration to impose tougher sanctions on Jamal, as the incoming president seeks to push for more US liquefied gas exports to Europe, Center for Global Energy Policy analyst Tatiana Mitrová said.
The question of price is decisive
The US industry believes it has more than enough spare capacity to replace Russian liquefied gas in Europe’s energy mix. S&P Global Commodity Insights said a total of 10.3 million tonnes of liquefied natural gas from US plants under construction are already under contract for Europe.
Another 9.5 million tons are also available for buyers including Europe. These volumes exceed the 17 million tonnes of Russian liquefied natural gas the EU imported last year and “will be operational in 2029 or much earlier”, S&P said.
As one of his first steps in office, Trump has promised to lift a freeze on new liquefied natural gas export capacity imposed by the previous administration. The EU also has the option of importing more in regasification terminals, which convert the transported liquefied fuel back into gas.
However, the main problem is price sensitivity. In addition to appeasing Trump, the EU is trying to protect its industry and reduce high energy prices, especially in Germany, which is Europe’s largest economy.
Gas prices in the EU are roughly more than three times higher than in the United States and remain stubbornly more than twice as high as they were before Moscow invaded Ukraine in 2022. “The issue of prices is delicate and decisive,” said one senior EU official.
A new wave of deliveries
Anatol Fejgin, chief commercial officer at Houston-based liquefied gas exporter Cheniere Energy, told the Financial Times that US LNG flows to Europe will be driven by business decisions and price signals rather than government regulations.
“The United States of America is very different from Qatar and other parts of the world. There are no direct transactions between governments here,” he said. One way Brussels or EU member state governments could get involved is by creating a strategic liquefied natural gas reserve that could include supplies from the United States, Fejin suggested.
Demand for natural gas in the EU is expected to fall by up to 25 percent by 2030 compared to 2023 levels, with countries including Qatar and Canada also expected to start producing more, according to International Energy Agency forecasts.
“We are at the beginning of a new wave of LNG supplies,” said Michael Stoppard, head of global gas strategy at S&P Global Commodity Insights. “With each passing year, it becomes easier for Europe to find an alternative to Russian liquefied gas, especially from 2026.”
