A Gas Pivot

Eamon Drumm

Liquefied natural gas (LNG) imports will be on the table when the EU and the United States inevitably sit down to discuss tariffs and the war in Ukraine. US President Donald Trump has repeatedly called on allies, including Japan and European countries, to buy more American oil and gas, and European Commission President Ursula von der Leyen has signalled that increased LNG imports could be part of a deal to avoid a trade war.

But Brussels is still keeping its options open. The EU backed down from prohibiting purchases of Russian LNG in its February sanctions package. Member states remain divided on the issue, with Baltic and some Nordic nations, and Poland, supporting a ban, but France and Germany are among those against. Increasing gas prices are a reason for the discord, one that also puts pressure on leaders to urgently seek short-term fixes over a long-term energy strategy. 

Europe is in a tough spot. It is dependent on imported LNG and other fossil fuels to meet its energy needs. This will continue in the near future despite the continent’s fast-growing renewable power generation capacity and other longer-term green investments.

The vulnerability is at the crux of several critical issues that the EU is attempting to tackle simultaneously. The bloc needs to: 

  • secure natural gas supplies and minimize exposure to geopolitical risks by diversifying its energy sources and reducing reliance on a single supplier country, whether Russia or the United States
  • lower volatile energy prices that are at the root of Europe’s industrial competitiveness problem and raise the cost of living
  • double down, politically and fiscally, on ambitious goals for electrification, renewables, and decarbonization that will increase long-term energy security and independence 

There is no ideal way out of this situation, and any solution will involve trade-offs. But the most strategic way forward, perhaps counterintuitively, is to implement a ban on imports of cheap Russian gas. 

Since 2022, Europe has already shifted away massively from the Kremlin’s fossil fuels. US suppliers stepped in to fill the gap, becoming Europe’s largest source of LNG in 2023 and providing more than 50% of imports in 2024. The latter figure corresponds to about 6% of Europe's total energy demand.

The EU has never sanctioned Russian pipeline gas or LNG, though it has a nonbinding target to phase them out by 2027. Many member states continue to rely on Russian imports in the meantime. Though EU imports of Russian pipeline gas have decreased markedly since 2022, a tight market in 2024 led to a massive increase in Moscow’s fossil fuel revenues. Europe was the largest buyer of Russian pipeline gas and LNG. 

A ban would be a hard decision, but the right one. 

In negotiations with Trump, it could be offered as a major “concession”. But it would also be a big step toward achieving Europe’s strategic goal of decoupling from Russian fossil fuels. A ban would automatically shift European buyers to American suppliers, increasing Europe’s reliance on them. This may not be an optimal development in light of recent transatlantic tensions, but, given Europe’s options, the United States offers more reliable supplies than Russia. 

Global market forces and the independence of European energy providers also mitigate any overreliance on the Americans. Despite Trump’s exhortations and Europe’s promises to buy more LNG, the transatlantic energy sectors consist of for-profit companies that are relatively insulated from political manipulation. This is notably unlike Gazprom and Rosneft, which Russia has and will continue to weaponize to geopolitical ends. The Kremlin will seek a full resumption of gas shipments to Europe as part of any settlement on Ukraine. Europe’s refusal to go along would align it with US sanctions policy and prevent Moscow from driving a wedge between allies on this issue. 

Europe’s position can also benefit from global market trends. First, a ban on Russian gas would likely shift Russian supply to China, which would in turn import less from the United States, thereby freeing up supply and lowering prices. Second, Europe’s demand for LNG—and exposure to its high prices and fluctuations—will probably peak in 2025. The continent’s LNG imports already declined by 20% in 2024. Third, a global LNG supply glut is predicted to begin by the end of this year or early 2026. Finally, and perhaps ironically, the Trump administration’s overturning a Biden-era ban on new LNG export permits will help reduce prices for European buyers at the same time Washington is strong-arming its allies to buy more. 

Lower gas prices will, in turn, increase the competitiveness of Europe’s industries and allow governments there to refocus resources on clean energy and grid investments. Europe may have to swallow price increases from this year’s transition to more US LNG, but the payoff would be investment in energy independence down the road.