Trade relations between the U.S. and Europe are on the fritz. The latest in all the noise is the suggestion that the U.S. could restrict LNG exports to the EU if trade negotiations break down.
This is a low blow, as Europe imports most of its gas. And if you haven’t noticed…the world is in a bit of a shortage at the moment. Cutting off exports would be legally and practically difficult, but a distressing notion nonetheless.
While the idea of using U.S. energy dominance as a negotiating tool isn’t surprising, I had originally pictured this strategy as being reserved for rivals, not allies. But there’s the Trump administration for you.
Hey, all. Peter Zeihan here. Coming to you from Pozza Della Cava caves in Ovierto, Italy. Today we’re looking at some of the strange things that are happening in US European relations. As you may or may not remember, the Trump administration is carrying out 200 simultaneous trade talks and none of them are really going anywhere, which means it’s really up to secondary officials that normally wouldn’t have much power in negotiations to kind of set terms.
And one of them, Andrew Pozner, the US ambassador to Europe, has said that if talks between the Trump administration in Europe don’t go well on things like, well, this is neat on things like auto tariff levels that the United States is going to stop sending liquefied natural gas to the continent. Now, that’s it’s a total dick move, but that doesn’t mean it won’t work.
Two things. Number one, Europe imports nearly 90% of their natural gas. And before the Ukraine war, it was more or less an even split between stuff from North Africa liquefied natural gas. It was imported from multiple countries, stuff from the former Soviet Union and then Norway. What’s happened now is that two of those got away because of the Ukraine war. The flows from Russia have stopped and because of the Iran worshiping strait, a former flows from Qatar, which is the largest LNG supplier to Europe pre-war, have also stopped. That means US natural gas is one of the few sources of energy that the Europeans can still access, and if that is to go away for any reason, then the Europeans are kind of screwed.
So that’s kind of piece one. Piece two is how this would happen. It’s kind of difficult to imagine. That doesn’t mean it can’t happen, though. The issue is private enterprise. The United States doesn’t have a state or company. It just has private companies that are buying natural gas on the American market, cooling other facilities, typically on the Texas or Louisiana coast, and then shipping it out. So if the United States was going to bar those companies from selling to Europe as part of negotiations, there were definitely a bevy of lawsuits. But if there’s one thing about this administration that we really do understand is it’s deeply disinterested in general business conditions or the role the government plays in business, and it’s really not constrained by legal norms at all.
So while from a clear, clean legal point of view, I don’t see how this would happen, I don’t think that would really dissuade the federal government under this administration at all. So will this work? This is one of the things that in my projects, in my books in the past, pre Trump, I said we should probably expect that the United States will try to leverage its energy, security and economic strength in order to get whatever it wants out of anyone. It’s just a little frustrating from my point of view, to see this used against allies as opposed to potential foes, but, you know, bygones.
