Russian liquefied natural gas continues to be shipped to Europe even though we have a readily available source from our ally across the Atlantic. For Europe’s energy security and to ensure the survival of Ukraine, it’s time to divest from Russian LNG, says Daniel Dalton
Keir Starmer has promised “an improved and ambitious relationship” with European partners. As Britain’s elections saw a swing to the left while the European Union elections saw a swing to the right, there is one common priority we should all focus on: energy.
Cooperation on energy security will advance UK-EU interests in three of our most important challenges: how to combat the continued threat of Putin’s Russia; how to increase global support for Ukraine; and how to keep energy affordable, clean and reliable for British families and consumers.
First, on Russia. Both the UK and the EU have worked hard to remove Russian gas from our energy supply. This has been mostly achieved for pipeline gas, but Russian liquefied natural gas (LNG) continues to be shipped to Europe. The recent EU effort to ban ‘trans-shipment’ of LNG (while still allowing EU countries to import and use the Russian gas themselves) is a cop-out. Billions of Euros will still be paid for this LNG, funding Putin’s war machine. A full ban, enforced by law and sanctions in both London and Brussels, is needed.
Second, energy security is essential both to the short-term survival of Ukraine and its eventual rebuilding. Putin’s forces are targeting Ukraine’s energy infrastructure: new long-term sources will be needed to avoid the country repeating its past reliance on Russian gas.
However, a full divestment from Russian gas brings up an uncomfortable topic: how will we make up for this lost supply and continue to support Ukrainian recovery? Energy demand isn’t slowing and our expanding renewable energy technologies aren’t ready to support our power grid on their own. Removing such a massive supplier means that even small supply-chain disruptions will now potentially lead to price spikes in the UK market. Those price spikes are made all the more likely by domestic policy that prioritises net zero deadlines, when neither the technology nor the market are currently able to deliver at that pace. Household energy bills face being squeezed from all sides.
Fortunately, we have a long-term solution readily available from our ally across the Atlantic. Within the last few years the United States has become the world’s largest exporter of LNG, overtaking Russia. Two-thirds of America’s gas exports are now being diverted to our markets, to replace the Russian gas that has been cut off. This has created price stability for both the UK and continental Europe.
Energy security for Europe and Ukraine
The same US LNG is also critical for Ukraine’s recovery efforts. One of the largest exporters, Venture Global, signed an agreement with Ukrainian energy firm DTEK to supply short-term cargoes ahead of this upcoming winter, and long-term supply to Ukraine and Eastern Europe for the next twenty years. This is an extraordinary commitment by the American private sector, and one that underscores the importance of American LNG to the future security of Europe.
The opportunity now exists for a long-term stable energy supply, for decades to come, from our closest NATO ally. Across Europe, this has prompted action. New and expanded LNG terminals are rapidly being built in France, Italy, Spain, and Germany. Here in the UK, Grain LNG, a division of National Grid, has signed a long-term contract with a Venture Global – the same firm that will supply Ukraine – with the goal to meet 33 per cent of all UK gas demand.
It is this expanded US supply that provides the foundation both to ban Russian LNG for good, and support Ukraine’s future energy independence – all while keeping UK and EU energy affordable. The cost of energy has slipped out of the headlines in recent months, but if our future energy supply from the US would be cut off the consequences could be devastating.
This worrying situation is a real possibility, because of new development across the pond. The current US administration has placed a ‘moratorium’ on issuing new LNG export permits, which has introduced real uncertainty in the market and, potentially, uncertainty for Europe’s energy supply over the next several years. Our demand for LNG will only grow as energy demands increase. The current administration’s moratorium – if it is not overturned – will mean US LNG exports cannot rise to meet that demand. This undermines our energy security, and also our long-term climate goals because it will force reversion to dirtier fuels.
The LNG moratorium simultaneously harms American jobs, undermines European energy security, and weakens Ukraine. The only obvious beneficiary is Vladimir Putin. A positive first start for new UK-EU cooperation would be to jointly push for President Biden and Vice President Harris to end the moratorium and approve LNG export projects that are critical to our national security. If not, the resulting drop in US energy exports will leave both Britain and Europe badly exposed.
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By City AM
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Imports of US LNG have virtually brought the EU economy to the edge of the abyss and continuing such imports in preference of the far cheaper Russian gas will make an extremely bad situation far worse.
Meanwhile, Western sanctions are acting as a growth catalyst for the Russian economy which has overtaken both Japan's and Germany's economies in 2024 to become the world's fourth-largest economy after China, the US and India and which is growing this year at a healthy 3.2%.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert