Ukrainian war, EU begins to detach itself from gas Russia: US LNG arrives

Ukrainian war, the European Union begins to detach itself from Russia’s gas. Friday 21 March 2014: in the midst of the crisis for the annexation of Crimea, which began a month earlier, the President of the European Council Herman Van Rompuy – some with good memories recall – warns that the energy dependence of the EU on Russia must be drastically reduced. “If we don’t act now, by 2035 we will be 80% dependent on foreign oil and gas exports,” he says. Since then, the Union’s dependence on Moscow gas, rather than decreasing, has increased: if in 2014 imports of natural gas from Russia made up about a quarter of the total gas consumed in the EU (source Ispi), today they account for 40 %, (Iea, data 2021). Only today, with eight years of delay and only under the pressure of the invasion of Ukraine by Russia, is preparing, with difficulty, to detach itself from the Kremlin gas. American President Joe Biden, and the war in Ukraine, achieved what Donald Trump had forcefully asked for in Brussels, in vain: the beginning of the energy decoupling of the European Union from Russia, also thanks to liquefied natural gas with stars and strips. The invasion of Ukraine, explains a senior EU official, does not only question “the European security architecture”, but also “the entire energy policy of the last decade”, which puts the EU today in the position of suffer severe economic damage if Russian gas supplies were to fail. The agreement, announced by Biden and the President of the European Commission Ursula von der Leyen in the US embassy in Brussels, was communicated overnight by the Commission, but the details were released by the White House at least twenty minutes before the release. of the Berlaymont. And these are not negligible details, namely the numbers: for 2022 the US is committed to supplying the EU with an additional 15 billion cubic meters of liquefied natural gas (LNG), compared to the 22 billion cubic meters delivered in 2021. So, approximately 37 billion cubic meters by 2022. The US, explains the senior official, has historically been reluctant to export gas, for fear that prices will rise on the domestic market, but will increase production. For this reason, the political agreement signed today provides an indispensable framework for the drafting of contracts, which will be between private individuals, but which the agreement favors: in essence, the US undertakes to supply the EU with a certain quantity of liquefied natural gas. and, in return, the EU is committed to ensuring constant demand. So, goodbye to short-term contracts which, if they saved money in the past years, now come back like a deadly boomerang against the EU: in Brussels “I observe a certain change of mentality on the longevity of contracts”, notes a senior official EU. The goal “well before 2030”, said President Biden, is to supply the EU with 50 billion cubic meters of liquefied natural gas a year in addition to the approximately 22 billion in 2021 (according to senior EU officials). The additional quantity of LNG that the US undertakes to supply in the medium term (it takes some time to increase production) is equal to about “one third”, notes a senior EU official, of the current total import of gas. from Russia, which today amounts to about 157 billion cubic meters a year. It will also be necessary to build new regasifiers in Europe: since the gas cannot be transported by pipeline across the Atlantic, the gas must be reduced to a liquid state, transported on large LNG carriers, regasified on arrival and transported via pipeline. These facilities require substantial investments, but have the advantage that they can also be used for hydrogen in the future, one of the long-term goals of the green transition. All of this will have costs for Europe but, with a revisionist power in the east, directly bordering on NATO countries, the potential future cost of appeasement begins to be clear: Polish Prime Minister Mateusz Morawiecki said that Putin is rebuilding “the Empire of Evil “. Beyond the strong image, Poles and Baltics are Ukraine’s staunchest supporters because they know that, if Russia wins the war, then it could aim to review other borders to the west as well. “I know that eliminating Russian gas – Biden said – it will entail costs for Europe, but it is not only the right thing to do from a moral point of view: it also puts us in a much stronger strategic position “. As for the price that American LNG will have, the agreement does not fix it, because it will be the subject of contracts, but contains “a clear reference” to the spot price of US natural gas, much more stable than the European benchmark, Dutch Ttf Gas, subject to to wild fluctuations due to the war in Ukraine. And the volatility “will continue”, predicts the EU source. In any case, the EU, to ‘break away’ from Russian gas as soon as possible, will also focus on other suppliers, such as Qatar, but no one is under the illusion that all this is enough to compensate for Russian gas. And therefore, observes the senior official, “it will also be necessary to intervene on the demand side”, an aspect neglected up to now, but on which a lot of ink will be poured “in the coming months”, he predicts. And he cites the example of Japan, a large manufacturing country, which after the Fukushima disaster managed to reduce consumption “by 30%”, introducing “severe” energy saving measures. “A lot can be done to reduce demand,” he points out. Whether Europeans are gifted with the same discipline and self-sacrificing spirit as the Japanese remains to be seen. In the words of the Estonian Prime Minister Kaja Kallas, “difficult times await us”.