The Four Key Reasons Why The US Will Never Stop Targeting Russia’s LNG Sector
Authored by Simon Watkins via OilPrice.com,
Perhaps even more than its targeting of Russian oil exports, the U.S. has been laser-focused on its liquefied natural gas (LNG) sector as they key area it wants to effectively destroy over the long term. Last week’s suspension of Russia’s flagship Arctic LNG-2 project by lead operator Novatek is the latest of Washington’s trophies in this regard, but it is very unlikely to be the last.
As U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt said on 24 April:
“[Novatek] has recently had to suspend production at its Arctic LNG-2 liquefaction facility, in part because of sanctions that the Biden administration has led.”
He added:
“We’re going to keep tightening the screws […] We’re going to continue to designate a broad range of entities involved in development of other key energy projects, future energy projects as well, and associated infrastructure including the Vostok Oil Project, the Ust Luga LNG Terminal, and the Yakutia Gas Project.”
So, why is the U.S. so concerned about Russia’s LNG sector?
The first of four key reasons is that LNG has become the most important swing energy source in an increasingly insecure world. Unlike oil or gas that is transported through pipelines, LNG does not require years and vast expenses to build out a complex infrastructure before it is ready to transport anywhere. Once gas has been converted to LNG, it can be shipped and moved anywhere within a matter of days and bought reliably either through short- or long-term contracts or immediately in the spot market.
Around a year before the Kremlin ordered the first Russian troops into Ukraine on February 24, 2022, China foresaw the critical significance of global energy dependency, as extensively discussed in my new book on the evolving dynamics of the global oil market. So, beginning in March 2021, a 10-year purchase and sales agreement was signed by the China Petroleum & Chemical Corp (Sinopec) and Qatar Petroleum (QP) for 2 million tonnes per annum (mtpa) of LNG. This was followed by several other major LNG deals prior to Russia invading Ukraine.
In the zero-sum game of emergency global energy supplies, China’s hoarding of LNG prior to the 2022 invasion meant that Europe – critically dependent on Russian gas and oil – would be even more exposed if these supplies suddenly stopped. Russia had been banking on this to produce the same response from Europe to its 2022 invasion of Ukraine as had occurred after its 2008 invasion of Georgia and its 2014 invasion of Ukraine and subsequent annexation of Crimea. That is, Russia expected Europe to do absolutely nothing meaningful to sanction its aggression.
The Kremlin was nearly right in its calculations, with the effective leader of the European Union (E.U.) – Germany – only concerned about ensuring its own continuity of gas and oil supplies from Russia in 2022 at all costs, as also analysed in detail in my new book on the new global oil market order. Its acquiescence to Russian hostility yet again was only stopped when the U.S. with U.K. support in Europe and the Middle East worked to establish new emergency supplies of LNG from elsewhere. This determination to never again allow the European Union states to just roll over in the face of Russian aggression due to their over-reliance on Russian energy is the second key reason why the U.S. continues to mercilessly target its LNG sector.
