Trump's return could reshape Europe's gas strategy

Europe is severing ties with Russian gas and implementing further restrictions. By December, an embargo will cover Liquefied Petroleum Gas (LPG) imports. From the new year, there will be a complete ban on re-exporting Russian liquefied natural gas (LNG) from the EU to third countries. Starting in February, bulk carriers loaded with Russian gas will not be allowed to use LNG terminals in Union ports.

Brussels is making every effort to convince the last European customers of Putin (Hungary, the Czech Republic, Austria, Italy, and Slovakia) to abandon Russian resources, instead advocating for American gas.

- We still get a lot of LNG from Russia and why not replace it by American LNG, which is cheaper for us and brings down our energy prices - argued Ursula von der Leyen, the President of the European Commission, during her visit to Hungary, as reported by Reuters.

American gas is a card that the EC Chair uses skillfully. On the one hand, it provides an alternative to Russian maritime supplies and the pipeline transit through Ukraine, which the authorities in Kyiv intend to terminate by year-end. On the other, it could be a key that helps to counterbalance Donald Trump's potential return to the White House.

Europe faces a challenging task. The return of Trump signifies changes to the rules of engagement. The Republican President had already announced during his campaign that he would impose tariffs on Europe ranging from 10 to 20 per cent. He has frequently expressed his confrontational stance towards economic relations with Europe and his pressures regarding defence spending within NATO.

Ursula von der Leyen thus relies on an economic argument. She draws on a key tactic left by her predecessor Jean-Claude Juncker in 2018, presenting to the US President a joint business venture on LNG if the price proves competitive.

The EC Chair has already discussed with the president-elect about replacing Russian liquefied gas with cheaper American gas.

The United States is already one of the principal LNG suppliers to the EU. According to data from the Agency for the Cooperation of Energy Regulators (ACER), the Union purchased 21 million tonnes of LNG from the US in just the first half of this year, constituting 46 per cent of total LNG imports by sea to Europe. It is projected that by year-end, the volume of American gas will reach around 40 million tonnes.

LNG supplies accounted for about 37 per cent of gas supplies to the EU in 2024, mainly from the USA, surpassing extraction from the North Sea and the Norwegian Continental Shelf (31 per cent). Russian gas imported via pipelines accounted for about 13 per cent of supplies, while the share of gas from Russia was approximately 20 per cent when considering Russian LNG, explains Dr Kamil Lipiński, Head of the Climate and Energy Team at the Polish Economic Institute, in his discussion with money.pl.

As he recalls, the main LNG importers included France (22 per cent), the Netherlands (16 per cent), and Spain (15 per cent). - These countries unfortunately also led in importing Russian LNG. Poland's share in the total imported LNG to the EU during this period was about 5.4 per cent. - He notes.

For most EU countries, moving away from Russian gas is an obvious energy security strategy for the entire Community. However, does entering into subsequent gas agreements with the USA, which under Trump's leadership could become an uncompromising competitor at any time, not pose another risk arising from gas dependency?

Brussels assumes that for Trump, business will be the priority, and gas agreements with the EU will act as a feedback mechanism. Put simply, trading with the Union should be profitable enough for Trump to mitigate adversarial policies, such as customs duties.

Experts emphasise, however, that for energy security, diversification of supply routes and maintaining balance are essential.

The key to the EU's strategic autonomy concerning the USA and Norway, as well as third countries in the process of diversifying gas supplies, will be the utilisation of the market power of aggregated European demand for this resource. In this context, an interesting proposal of strengthening Europe's bargaining power in the gas market appeared in Mario Draghi's report, which suggested the creation of a common EU LNG purchaser that would negotiate contracts with major players in the USA, Qatar, and other third countries – Dr Lipiński highlights.

Von der Leyen's efforts are moving in this direction. By negotiating larger contracts with Trump, she aims to reduce the price as much as possible so that gas from the USA is genuinely cheaper for Europe than Russian gas, which is burdened with additional risks.

Following the shale revolution, the USA became a key player in the LNG market, significantly expanding its LNG infrastructure. The primary liquefied gas export terminals include Sabine Pass (Louisiana), Cove Point (Maryland), Corpus Christi (Texas), Cameron (Louisiana), and Freeport (Texas). In Europe, American bulk carriers are received by ports in Belgium (Zeebrugge), France (Dunkirk, Montoir-de-Bretagne), Spain (Barcelona, Bilbao), the Netherlands (Rotterdam), and Poland (Świnoujście).

Europe is in a different position today compared to 2022. Community countries have largely learned from the energy crisis and have made significant changes to supply routes. The development of infrastructure to receive LNG and mandatory reserves of stored gas provide security today.

And although gas storage facilities in Europe were sufficiently stocked at 81 per cent in November and December due to a wave of cold, slightly lower than in the same period in 2023 (90 per cent) and 2022 (87 per cent), it is still a high level that poses no threat to supply security this winter.

- As indicated in the analyses presented in the Winter Outlook 2024/25 by ENTSOG, even in the event of a complete halt in Russian gas supplies to the EU and a challenging situation in the global LNG market, the supply security for protected customers—households, small and medium-sized enterprises, and public consumers—will be maintained, the PIE analyst emphasises.

Despite this stabilisation, Brussels must constantly monitor the situation, as energy resources are currently as effective a tool in politics as military capabilities.

- It should be borne in mind, however, that this balance can be quite fragile – damage or shutdown of key LNG or Norwegian gas importing infrastructure in Europe, or events reducing the export volume of LNG, such as failures and strikes, will translate into potential price fluctuations of gas in Europe - Dr Lipiński notes.