And applying even the slightest bit of logical thinking to the situation would make that fact plainly obvious: if Europe actually had a viable alternative to Russian gas, don’t you think they would have switched over to it a long time ago?
Europe—especially Germany—needs Russian natural gas. It’s unavoidable. It’s inescapable. They rely on Russia for their natural gas supply.
European leaders have grown quite fond of bandying about the notion of liberating their economies from their dependence on Russian oil and gas. Unfortunately, the numbers just don’t make sense.
On Tuesday, the FT highlighted how Washington’s pledge to wean Europe off of Russian gas by boosting LNG exports simply doesn’t add up.
As a reminder, the US plan is supposed to work in three steps: first, it will help the EU secure short-term liquefied natural gas supplies to begin displacing Russian gas. Second, Europe will work “toward the goal of ensuring” a bigger market for US gas by 2030. Third, the US would help Europe accelerate its transition to clean energy.
But how much more gas can the US even export? Limits on both exporters’ capacity and Europe’s infrastructure and ability to absorb gas imports by boat suggest that, for the foreseeable future, the notion of offsetting Russian energy exports is pretty much a pipe dream.
The US says it aims to add 15 billion cubic meters of LNG to the EU this year, with more in the years to come. It didn’t specify the origins of the gas, noting it would “work with international partners”. By comparison, Russia currently exports 155 billion cubic meters a year of gas to the EU.
So if I’m reading this correctly, the US wouldn’t even be able to replace 10% of the gas Europe imports from Russia.
But it gets even worse:
However, the baseline for this 15 billion pledge isn’t clear. While the US shipped about 22 billion cubic meters of gas to Europe in 2021, it has already sent about 10 billion in the first quarter of this year. All of it is in the form of LNG, which is much more expensive to ship than gas that flows through a pipeline (as most of the Russian gas arriving in the bloc does).
And now we arrive at the fundamental reason why Europe is so reliant on Russian gas (besides the fact that Europe doesn’t produce much of it itself): because Russia produces a ton of natural gas and it’s in close proximity to Europe. The further you are away from the source of the gas, the more expensive it is to transport that gas to you.
Russia delivers its gas to Europe via pipeline, which is way cheaper and more efficient than putting liquefied gas on cargo ships and sending it across the ocean from America to Europe.
Switching off of Russian gas will be unavoidably more expensive.
Russia is the world’s largest natural gas exporter as of 2020:
Sure, Norway and the Netherlands are in the top 10, but they don’t even export as much gas as Russia does combined. And Norway already supplies 22% of European natural gas, which means it’s not as if Norway is this untapped potential supply of gas in close proximity that can easily replace Russian gas. Same for the Netherlands. Both Norway and the Netherlands are already supplying Europe with lots of gas as it is. It’s not as if they can just magically increase production.
And if anything, Norway’s gas exports are decreasing over time:
The major problem here in the global sense is that production can’t simply be ramped up whenever it’s needed. It takes a long time. There’s only so much infrastructure for producing natural gas. It’s not as if the world can magically double its output of natural gas in a short period of time.
Canada is another big producer of natural gas but Europe getting its gas from Canada runs into many of the same problems as Europe replacing Russian gas with American gas: it would have to be liquefied and shipped over an ocean, plus Canada cannot just magically ramp up its gas production by enough to fill the massive gap left by losing access to Russian gas.
Anyway, I’m getting ahead of myself here. Let’s go back to the article:
Since October, America’s LNG exports to Europe have already more than doubled.
Looking ahead, a team of analysts at Goldman Sachs warned clients in a recent research note that there’s little scope for the US to boost LNG exports between now and 2025.
In other words, if the various countries of the world could simply produce more natural gas whenever they wanted, don’t you think they already would’ve done it? It can’t be done at the snap of a finger.
Another major obstacle to replacing Russian gas with American (or Qatari, or Saudi or Australian) LNG is the lack of necessary infrastructure available in Europe. LNG must be carefully offloaded and “regasified” from its liquid state after arriving at its destination. And most European countries simply don’t have the necessary infrastructure to accomplish this. Perhaps this is why European Commission President Ursula von der Leyen has called on the EU to “pool its resources”, while Germany has suggested renting floating “regasification” vessels.
And even though the bloc’s energy situation is more precarious than it has been in years, the clean-energy partisans are have vehemently opposed the construction of more of this LNG infrastructure for fear that it could undermine their agenda of renewables-first.
And there’s another obstacle: the greens and climate change fanatics won’t even let these European countries construct this LNG conversion infrastructure! In fact it’s the greens who are largely responsible for Europe being so reliant on other countries for energy in the first place, with their constant demands for clean energy which so far has not demonstrated any real ability to power a nation consistently, reliably and over the long term.
Other than nuclear power, that is, but only the French have really embraced nuclear.
Even if Europe did manage to rapidly build out the infrastructure (which is unlikely, given the opposition from the ESG fanatics), they would likely have trouble convincing exporters to cut them in. After all, why would the Saudis (who have so far steadfastly refused to boost production in the face of the Ukraine conflict), or the UAE reroute their oil and gas from rapidly growing Asian markets (where demand is expected to remain robust for years to come) to Europe (where any short-term increase in demand is expected to be quickly offset by the bloc’s pivot to renewables?).
That’s a question President Biden and his European compatriots have been struggling to answer.
At the very least, it would take Europe years to get to the point where they can even begin to think about weaning off of Russian gas.
So they’re left with only two real options now: either bite the bullet and start paying for Russian gas in rubles, like the Russians are now demanding, or start building a hell of a lot more windmills and solar panels.
In other words, start playing by Russia’s rules or no more gas.
The implausibility of quickly and seamlessly pivoting away from Russian gas is clear to most all observers, including investors. Which is why the Russian ruble has actually been rallying lately: markets know Europe has no real choice but to capitulate to Russia’s demands that “unfriendly nations” (and most of NATO-aligned Europe now fits that billing) start paying in rubles for Russian gas.
Of course America is going to fight like hell to prevent this from happening because Russian energy priced in rubles is a direct blow to the 50-year petrodollar system that has underpinned America’s reserve currency status. This is why America is frantically trying to find alternatives to Russian gas for the Europeans.
In other words, it seems like a very simple situation for the Europeans: just start paying for gas in rubles. But of course that goes against America’s interests, and because Europe is largely America’s vassal continent, Europe is facing a very difficult situation.
Which leads me to a point I’ve been continually harping on for weeks now: how much longer can the NATO alliance truly last if America’s interests are increasingly diverging from Europe’s interests?
Europe cannot and will not continue bearing the brunt of America’s deranged Russophobic foreign policy agenda. America demands Europe sacrifice and suffer so America can continue sticking it to the damn Russkies, but how much longer will Europe keep playing ball?