The United States and European Union on Friday announced a new partnership to reduce the continent’s reliance on Russian energy, a step top officials characterized as the start of a years-long initiative to further isolate Moscow after its invasion of Ukraine.
“We're coming together to reduce Europe's dependence on Russia's energy,” U.S. President Joe Biden told reporters in Brussels as he announced the liquefied natural gas (LNG) deal.
Biden asserted that Russian President Vladimir Putin uses energy to “coerce and manipulate his neighbors” and uses the profits from its sale to “drive his war machine.”
Under the plan, the U.S. and other nations will work to supply 15 billion cubic meters (bcm) of liquefied natural gas (LNG) to the European Union this year to help wean it off Russian gas supplies, the transatlantic partners said.
Yet, U.S. officials were unable to say exactly which countries will provide the extra energy this year. Even larger shipments would be delivered in the future.
The EU is aiming to cut its dependency on Russian gas by two-thirds this year and end all Russian fossil fuel imports by 2027.
Russian energy is a key source of income and political leverage for Moscow. Almost 40% of the European Union’s natural gas comes from Russia to heat homes, generate electricity and power industry.
Biden said the partnership he announced jointly with a top European Union official will turn that dynamic on its head by reducing Europe’s dependence on Russian energy sources, as well reducing the continent’s demand for gas overall.
The president said such a step is not “only the right thing to do from a moral standpoint” but “it’s going to put us on a stronger strategic footing.”
Concerns over the security of supply were reinforced this week after Russia ordered the switch of gas contract payments to roubles, raising the risk of a supply squeeze and even higher prices.
U.S. LNG plants are producing at full capacity and analysts say most of any additional U.S. gas sent to Europe would have to come from exports that would have gone elsewhere, and already high European gas prices would have to rise further to attract those cargoes to the 27-nation bloc.
LNG under contract cannot be easily redirected.
“It normally takes two to three years to build a new production facility, so this deal may be more about the re-direction of existing supplies than new capacity,” said Alex Froley, gas and LNG analyst at ICIS.
Senior U.S. administration officials did not specify what amount or percentage of the extra LNG supply would come from the United States.
Even if the 15 bcm is achievable, “it still falls well short of replacing Russian gas imports, which amounted to around 155 bcm in 2021,” analysts at ING Bank said.
Biden and European Commission President Ursula von der Leyen also announced a plan to form a task force to reduce Europe’s reliance on Russian fossil fuels.
The longer-term objective would be to ensure, until at least 2030, about 50 bcm per year of additional U.S. LNG, von der Leyen and Biden said.
It was unclear whether it referred to amounts additional to last year’s 22 bcm of U.S. exports to the EU.
Von der Leyen said it is important for Europe to shift away from Russia and toward energy suppliers that are trustworthy, friendly and reliable.
“We aim to reduce this dependence on Russian fossil fuels and get rid of it,” she said.
The EU has already stepped up efforts to secure more LNG after talks with supplier countries, resulting in record deliveries of 10 bcm of LNG in more than 120 vessels in January.
Meanwhile, Germany, the EU’s biggest importer of Russian gas, said it has made “significant progress” towards reducing its exposure to imports of Russian gas, oil and coal.
However, Economy Minister Robert Habeck also said it could take until the summer of 2024 for Europe’s largest economy to wean itself off of Russian gas.
German utilities on Thursday said their country needed an early warning system to tackle gas shortages as Putin’s demand for gas payments in roubles left companies and EU nations scrambling to understand the ramifications.
Some countries, such as Italy, said they would continue to pay in euros. The CEO of Poland’s PGNiG said the company – which has a contract with Gazprom until the end of this year – could not simply switch to paying in roubles.
Russia’s demand for payment in roubles for gas still needs to be backed by a concrete mechanism.
A spokesperson for Germany’s Uniper said on Friday: “We have not received any official notification or request to process the settlement in roubles.”
The German economy minister said the government will consult with its partners about Putin’s demand for payment in roubles.
