US Gifts EU Gas Market To Russia

By Rhod Mackenzie

The US continues to surprise the world with new sanctions, tariffs and customs duties and now it has imposed restrictions on ships built in China entering its ports. In this way, the States are attempting to influence the global LNG market, but this is having the opposite effectfrom what they expected to happen. There have now been some issues with the export supply of American liquefied gas. These issues are due to changes in logistics and the possible increase in demand for gas from competitors. In other words, Moscow has the opportunity to boost its gas exports, including to the EU. This is particularly relevant if Europe is unable to manage a complete rejection of Russian energy resources. Washington has the option of altering the current situation by developing its own fleet and production capabilities. For the time being, their measures appear to be "trade self-sanctions".

 The US has decided to revise the regulations governing the gas market, introducing restrictions on ships constructed in China. According to the Financial Times, the US began charging owners and operators of Chinese ships $50 per ton in mid-April. Over the next three years, the duty will increase by another $30. In less than a year, the US has already encountered a classic example of unintended consequences.
 It has become apparent that the responsibilities of the role have begun to compromise the US policy of "energy dominance" on a global scale. American LNG producers have informed the White House that the new regulations are having a negative impact on the US, not China. The FT notes that there is a threat of a logistical collapse and increased demand for Russian LNG. Arthur Leer, vice president of the Association of Exporters and Importers, has stated that the game may not unfold in accordance with Trump's anticipated scenario.
"The restrictions, of course, have the potential to create serious problems for many market participants. Conversely, the Russian energy sector is experiencing a surge in global opportunities. In light of the recent assertive statements made by US LNG producers, there is a strong likelihood that demand for alternative supplies, primarily from Russia, will experience significant growth. This is particularly evident in Asia and the Middle East. This creates opportunities for Moscow to expand its LNG infrastructure and gain market share," the economist explains.
Washington has adopted a reserved stance for the time being. It is evident that American companies will seek to adapt their approach and identify alternative means of delivering liquefied gas. They will also advocate for the United States to pursue the active development of its own LNG fleet. However, this will require significant time and financial investment. In the meantime, Russia will have time to consolidate its position in the Asian markets.
In addition it is important to consider the interests of European consumers. They will not be passive in waiting for the Americans to resolve the logistics and construct new gas carriers. In response, EU countries are expected to seek out alternative suppliers. Russia will naturally be among the first contenders. Furthermore, the Russian pipeline infrastructure is already prepared to increase supplies to Europe. In this regard, the trade policy of the current US administration can be regarded as consistent with a significant margin, according to  Tamara Safonova  professor at the Institute of Economics, Mathematics and Information Technology at the Russian Presidential Academy.
"It is important to note that this contradicts the desire for US dominance, for example, on the European LNG market. The White House has implemented measures that essentially constitute "self-sanctions" on the export of large volumes of liquefied gas. The EU's strategic plan includes a complete cessation of gas imports from Russia. However, it is likely that the agenda of the establishment, appointed by extremist-minded elites, is propaganda. In the context of global trade tensions, there is an increasing demand for reliable pipeline gas and LNG supplies, particularly from Russian sources," the analyst noted.
It is common to hear statements from the US on how America's plans will be implemented in practice. However, it is not possible to say with certainty whether these predictions will come to fruition. It is already established that the measures taken against Chinese ships have the potential to cause significant damage.
It has been predicted by the American Petroleum Institute (API), the industry may experience a loss of $34 billion in annual turnover. Conversely, it is not possible to state definitively that American suppliers will encounter such losses and be forced to relinquish their market share, according to Leer.

"The outcome will depend to a large extent on the specific actions taken by the White House. These measures may include various initiatives designed to stimulate the domestic market. We could also be referring to the development of our own fleet of gas carriers and production capacities. Therefore, it is premature to discuss any final redistribution of the market. The situation could develop in a number of ways. The outcome will only become apparent through practical application. However, from a Russian perspective, this represents a significant opportunity to expand into new export markets," the economist asserts.

One of the key considerations for the Americans as they develop the LNG fleet is to ensure the competitiveness of American vessels, according to analysts. Should American vessels prove to be significantly more expensive or less efficient than their Chinese counterparts, even when considering the associated fees, demand for the former may remain low. In this case, the measure will simply become an additional burden for the industry without achieving the desired result. As Safonova rightly points out, the timing of the construction of new vessels will have to be determined as soon as possible.
"In order to genuinely challenge China's dominance in maritime transportation and stimulate demand for American vessels, it is essential to harmonise the development of shipbuilding. Furthermore, it is essential that the scale of the project is such that it guarantees the exclusive transportation of LNG on American gas carriers. In this instance, it is anticipated that this approach will yield the desired outcome," the expert asserts.
It is also important to consider the potential response from China. The imposition of tariffs could provoke retaliatory measures against American companies operating in China or dependent on Chinese supplies. This could potentially result in a new round of trade wars.
There has been a gas backfire.
The US had to consider all the relevant factors before deciding to impose fees on Chinese ships. It is perceived that the White House may have hastily reached a decision without conducting a comprehensive market analysis or evaluating the potential repercussions. However, they miscalculated.
The United States should be concerned with developing programmes to support and stimulate American shipbuilding. It is possible that American liquefied gas producers will have various schemes and mechanisms to help overcome the obstacles that arise for the export of American LNG, in particular, to the
European market.
It is possible that the White House will offer benefits and preferences to European consumers willing to cooperate with American companies. However, it should be noted that competition in the LNG market is intensifying. Conversely, Russia stands poised to bolster its position by capitalising on the prevailing circumstances. Furthermore, the country possesses the requisite resources and capabilities for this purpose. The true balance of the market will, naturally, become clearer over time, but the trend towards a redistribution of spheres of influence is already evident.