Over the course of the past six months, the United States committed to several EU-U.S. trade agreements to support the European economy in the wake of the Russian invasion of Ukraine. The US aims to reduce the European Union economy’s dependence on Russian gas and oil. The EU and the US have restricted energy imports from Russia, and Russia has responded with energy-related sanctions.
Background Information
According to the European Commission, the EU imported 155 billion cubic meters
of natural gas from Russia, as well as €48 billion worth of Russian crude oil and €23 billion worth of Russian refined oil in 2021. During this same year, crude oil was one of the largest energy imports into the EU, amounting to 62%, followed by natural gas at 25%, the majority of both coming from Russia.
Within the EU, Germany is Europe’s largest importer of Russian gas, importing 42.6 billion cubic meters of gas in 2020, followed by Italy who imported 29.2 billion cubic meters of gas in the same year.
Russian sanctions on EU fuel imports were devastating given the EU’s dependency on natural gas and crude oil. Russia imposed sanctions in May 2022 on European subsidiaries of the state-owned energy giant Gazprom who categorized these sanctions as “a ban on the use of a gas pipeline owned by EuRoPol GAZ to transport gas through Poland [and to the rest of the EU].” Since Russia’s sanctions were implemented, the EU has attempted to find new alternatives to Russian oil and gas, and some—including Germany—are rationing oil consumption to mitigate the sudden loss of fuels.
Current Discussion
Due to its dependency on Russian fuels, Germany initially opposed EU plans to target the Russian energy sector.
However, three months after Russia’s invasion of Ukraine, Germany announced support for an embargo on Russian fuel imports, allowing the EU to pass a more aggressive package of restrictive measures against Russia.
Adopted in June, the new package has five main elements:
- Restricts oil imports including an immediate embargo on all crude oil and refined oil products and a gradual embargo on petroleum products and seaborn crude oil for countries lacking the infrastructure to fully transition to non-Russian energy.
- Gradually restrict Russian oil transportation to “third world” countries.
- Prohibits financial relations with the Russian government and state-owned entities, as well as with three major Russian banks and one Belarusian bank.
- Suspends three Russian State outlets from broadcasting as well as advertising for Russian products and services.
- Expands the list of banned items to include any additional chemicals and technologies that could be used to manufacture chemical weapons as well as halts exports to entities in many sectors, including weapons and scientific research.
As a result of the increased severity of EU restrictions on Russian gas and fuel, the EU turned to the U.S and began importing liquified natural gasses (LNGs) and other fuel sources. The EU imported 60 billion cubic meters of LNGs from the United States since April 2016, and experienced a surge in U.S. LNG imports since 2019.
The United States announced it will supply 15 billion cubic meters of LNGs to the EU to mitigate the developing energy crisis abroad. In March 2022, President Biden and European Commission President Ursula von der Leyen announced a joint task force to reduce the EU’s dependence on Russian fossil fuels.
The Task Force has two primary objectives:
- Diversifying LNG Supplies in Alignment with Climate Objectives: the United States will work to ensure at least 15 billion cubic meters of LNG exports to the EU in 2022 with the intention of increases in the future and both entities will work to ensure that any and all expansions of LNG import/export infrastructure will prioritize sustainability and efficiency.
- Reducing Demand for Natural Gas: both the EU and the US commit to decrease dependency on natural gas by accelerating market deployment of clean energy measures through funding advancement of renewable energy technologies.
Concerns
This Task Force will cost about $60 billion dollars. Currently, the EU does not have LNG import infrastructure to sustain this ambitious plan. Most of the regasification facilities in the EU are in coastal countries, so central European countries will have difficulty accessing the LNGs after they have been processed. The United States will also need to build more LNG export facilities as current liquefaction plants have reached maximum capacity. The construction of these facilities would cost upwards of $10 billion in investments.
