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Thursday, July 4, 2024
EconomyBiden chokes Europe’s gas supply, sabotages Ukraine’s LNG agreement

Biden chokes Europe’s gas supply, sabotages Ukraine’s LNG agreement

Biden's decision became an obstacle to Ukraine's LNG supply deal

– Published on:

Ukraine entered into a major deal with an American supplier of liquefied natural gas (LNG), but the head of the White House, Joe Biden, prevented it. This was reported by The Wall Street Journal.

The publication noted that the American president suspended the issuance of permits for new LNG export projects due to the “green agenda.”

Standing in the way of the deal’s success is President Biden. Europe has diversified its energy supply since Russia’s Military Operation in Ukraine, notably by importing more LNG from the US, But many countries still depend on Russian gas that travels through a pipeline that crosses Ukraine. A five-year transit agreement with Russia’s Gazprom expires at the end of this year, and Ukraine doesn’t intend to renew it.

Europe diversified its energy supplies, but many countries still depend on Russian gas, which comes through a pipeline passing through Ukraine.

The United States allowed Ukraine to use supplied American weapons to defeat any Russian troops attacking Ukraine across the border, not just those in the Kharkiv area. However, according to anonymous officials, this does not mean a change in Kyiv’s policy of using American weapons to fight Russia.

This deal with the American supplier of LNG was expected to be a significant step towards Ukraine’s energy independence. The interruption caused by President Biden’s Executive Order has brought uncertainty to Ukraine’s energy strategy. This pause on new LNG export project approvals is a move to address environmental concerns, reflecting Biden’s commitment to reducing greenhouse gas emissions. However, the timing of this decision creates a precarious situation for countries like Ukraine that are seeking to diversify away from Russian gas dependence.

The Biden administration’s decision aims to allow the Department of Energy (DOE) to update its analyses for authorizations, which were last reviewed in 2018. This review is deemed necessary due to the substantial increase in US LNG exports from 4 billion cubic feet per day (bcfd) in 2018 to nearly 12 bcfd in 2023. Despite this rationale, the halt on new projects could delay crucial investments and jeopardize the timely expansion of LNG infrastructure, particularly affecting projects awaiting non-Free Trade Agreement (non-FTA) approval.

capacity of pre-fid projects by non-fta approval status [Photo: Woodmac]
This pause could also have broader implications on the global LNG market. With the US and Qatar being dominant players in recent years, any delays in US projects might push buyers towards other regions such as Canada and Australia. This shift could lead to higher LNG prices globally, as supply constraints tighten the market. Moreover, the uncertainty surrounding new US LNG investments might undermine the perception of the US as a reliable energy provider, influencing long-term contracts and investment decisions.

The regulatory uncertainty and potential delays in US LNG projects could further complicate Europe’s energy diversification efforts. As European countries strive to reduce their reliance on Russian gas, any hindrance in the availability of alternative sources like US LNG could impede their progress. This could lead to increased energy costs and push European governments to accelerate investments in renewable energy sources as they seek more stable and environmentally friendly energy solutions.

While the pause on new LNG export project approvals aligns with Biden’s environmental agenda, it introduces significant challenges for countries dependent on US LNG for energy diversification. The ripple effects on the global LNG market and Europe’s energy security underscore the need for a balanced approach that considers both environmental goals and geopolitical realities. The US LNG industry must navigate these complexities and demonstrate its capability to be a dependable energy partner in a transitioning global market.

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Russia Desk
Russia Desk
The Eastern Herald’s Russia Desk validates the stories published under this byline. That includes editorials, news stories, letters to the editor, and multimedia features on easternherald.com.

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