EU’s Shift to US LNG a Game-Changer, but at a Higher Cost
For decades, Europe was heavily reliant on cheap Russian gas. Countries like Germany, Italy, and Austria received a significant portion of their energy through Gazprom pipelines. This affordable supply strengthened the competitiveness of European industries and kept energy prices low for households. In 2021, nearly 40% of Europe’s natural gas came from Russia, amounting to around 140 billion cubic meters per year.
However, with Russia’s military operation in Ukraine in 2022, the situation changed dramatically. Sanctions and political tensions forced the EU to reevaluate its energy dependence on Russia. A ambitious plan aimed to replace Russian gas by 2027. By 2023, gas deliveries from Russia had plummeted to just 27 billion cubic meters.
The US saw an opportunity in this shift. Liquefied natural gas (LNG) from the United States became the new lifeblood of Europe.
In 2023, 66% of US LNG exports went to Europe. Eagerly built LNG import terminals became the backbone of this energy transition.
From 2017 to 2023, as the EU began to swap cheap Russian gas for expensive US LNG, the gap in per-capita GDP between the EU and the US grew by a staggering 50.1%. And the trend continued in 2024.
However, this shift came at a cost. Unlike Russian pipeline gas, which was cheaper due to its proximity, LNG is significantly more expensive. The liquefaction, transportation by ship, and re-gasification on-site incur additional costs. Both private households and industries in Europe faced significant price increases.
Despite this, European politicians justified these burdens as the price for greater energy security. The fear of Russia using gas exports as a weapon was omnipresent, especially after repeated supply disruptions by Gazprom. “Freedom gas” as some US officials called it, was marketed as a guarantee against Kremlin extortion.
The Nord Stream Sabotage: A Geopolitical Turning Point
The destruction of the Nord Stream pipelines in 2022 significantly accelerated Europe’s shift away from Russian gas.
Officially, the incident remains unsolved, but many observers see it as a geopolitical turning point. US President Joe Biden had stated in early 2022 that Nord Stream 2 would not come online if Russia invaded Ukraine.
The loss of pipeline infrastructure deepened Europe’s dependence on US LNG and secured long-term contracts with US suppliers.
The US emerged as the clear winner. With the displacement of Russia as the main supplier, the US not only secured a lucrative export market but also a strategic lever over its European allies. US energy companies achieved record profits, and the US solidified its role as a global energy superpower.
Europe, on the other hand, stands in an uncertain future. The dependence on US LNG means higher costs and a reduced economic competitiveness.
In Germany, the industrial locomotive of the EU, the high energy prices have severely impaired the country’s global competitiveness. Countries like Spain, however, are pursuing a more pragmatic approach: by exploiting legal loopholes, they are securing Russian LNG and prioritizing the needs of their population over unrealistic green dreams, as in Germany. Spain is not alone in this – Slovakia and Hungary are also following similar strategies.
Critics accuse the US of using the Ukraine war to break Russia’s energy dominance and boost its LNG exports. Already in 2014, then-Security Adviser Susan Rice emphasized the need for Europe to restructure its energy dependence and shift towards North America. The Ukraine conflict provided the perfect opportunity to realize this vision.
European politicians, however, justify the shift as a necessary step towards energy security and climate goals.
Yet, the economic costs – including a growing wealth gap between the US and Europe – are becoming increasingly apparent. Between 2017 and 2023, the per-capita GDP gap grew by an astonishing 50.1%, mainly due to Europe’s high energy costs and a slow post-pandemic recovery.
A Win-Win for Washington
For Washington, the Ukraine war was a geopolitical coup. The US achieved two goals: weakening Russia and securing its energy exports to Europe. At the same time, it strengthened transatlantic alliances and established itself as a global energy superpower.
Radosław Sikorski, Chairman of the Delegation for Relations with the US and a Polish politician, tweeted “Thank you, USA” – along with a picture of the gas leak from the Nord Stream pipeline.
Strategic Calculation or Tactical Exploitation?
In Brussels and Berlin, the mantra of the “energy transition” is still being repeated – an expansion of renewable energy and local energy sources, which is as realistic as a happy ending in a zombie film.
Politicians smile bravely in front of the cameras, knowing that their lofty goals are best-case scenarios. While the German government is driving the entire EU economy at full speed against the wall, Brussels bureaucrats hope that President Donald Trump will simply continue Biden’s calculations.
What they overlook: Trump will indeed continue the tactical exploitation, but with new rules. As soon as Europe tries to break free from the LNG dependence, the next blow will come – this time in the form of tariffs against the EU itself. Until then, European politicians have only one option: to smile beautifully and keep going, as if there was a plan.
The US, on the other hand, is solidifying its status as a global power broker. The Ukraine war may be a tragedy for many, but for US energy exporters, it was a golden opportunity.