Few events in recent years have proved to be as transformative of international relations as Russia’s invasion of Ukraine and the resulting imposition of sanctions on the Russian economy. The war and sanctions have severely curtailed or destroyed most of the remaining trade and diplomatic relations between Russia, the West, and forced Western companies to cease operations in Russia and create highly fragmented trade blocs.
Every major industry will be battered by these seismic shifts, but none more so than energy: Prior to the invasion, Russia was Europe’s principal supplier of imported oil and natural gas, so European efforts to replace those imports with supplies acquired elsewhere will have a powerful impact on the global trade in both commodities.
This effect has already been seen in the petroleum industry, where there has been an increase in European demand for non Russian supplies, which has contributed to rising gasoline costs all over the globe, including the United States. However, the most significant long-term impact will be felt in the market for LNG (liquefied natural gas), which was once a small factor in the global energy equation but is rising in importance. As Europe turns away from Russian gas, it will become increasingly reliant on LNG imports to satisfy its needs — and this, in turn, will result in new trading partnerships and an accompanying transformation of global energy geopolitics.
All of this is because European leaders over many decades have chosen to rely on Russia’s vast oil and gas resources (and before that the Soviet Union) for affordable energy to power their countries. Russian gas imports have been particularly important in recent years, as the European Union (EU), has tried to reduce its dependence on coal (due to its high carbon content and nuclear power) out of fear of accidents. Europe will have a total of 20,000 gas imports by 2020. obtainedAbout 30 percent of its imported oil comes from Russia, and a staggering 57 percent of its import natural gas.
Prior to Russia’s invasion, plans were in place to further increase Europe’s reliance on Russian natural gas, largely through construction of the Nord Stream 2 pipeline. Nord Stream 1, which opened in 2011, runs beneath the Baltic Sea, from Vyborg in northern Russia to Lubmin (Germany); a parallel conduit, Nord Stream 2 was completed in 2018 and is expected to be complete in late 2021. Many prominent figures in the U.S. and Europe had protested construction of Nord Stream 2 on the grounds that it would increase Europe’s dependence on Russian energy and thereby give Moscow greater sway over European decision making in a crisis. German officials were still deciding whether to approve it in February. However, Vladimir Putin began assembling forces for the invasion. The new German chancellor Olaf Scholz was there. suspendedThe certification process.
The European energy system will be severely disrupted by the cancellation of Nord Stream 2 and other measures taken to wean Europe from Russian oil and gas. Europe will have to find alternative fuels. The Europeans are, of course, also trying to increase their reliance on renewable sources of energy, and some — like France, the Netherlands and the United Kingdom — plan to renew their reliance on nuclear power. Their economies have been built around oil and gas and it will be difficult for them to stop their hunger for them. In the months and years to come, it will be a priority for policymakers to search elsewhere for these resources.
It will not be easy to secure additional oil and natural gas imports. Finding more oil will be tough enough — the major suppliers are now producing at near-maximum capacity — but acquiring more gas will prove even more difficult. Petroleum is a liquid and can be easily transported by tanker ships from any supplier anywhere on the globe. Europe has many ports and refineries that can unload and process crude oil. This means that it will be able to get enough supplies to meet its basic needs for the next few months, even if it is forced to pay more to compete with Asian and other consumers.
However, it will be difficult to import additional gas. Natural gas can be delivered by pipeline, but most of Europe’s piped gas comes from Russia, and the construction of alternative conduits, say from North Africa or the Caspian Sea area, will take many years. Gas can also be delivered by sea in the form of LNG, but that requires an elaborate infrastructure for liquefication on the supplier’s part and for regasification at the receiving end — infrastructure that is only available in certain parts of the world. Europe currently has 28 large-scale LNG import facilities. It is still building more. However, it will need a larger number to increase its dependence on LNG. It faces fierce competition to access the few gas producers that have the liquefication facilities required to export LNG.
These challenges were highlighted when President Joe Biden announced that Ursula von der Leyden was the president of the European Commission. joint plan to eliminate the EU’s reliance on Russian gasAll by 2027. The U.S. promised to double its LNG shipments from the United States to Europe, from approximately 25 to 50 billion cubic metres per year. Meanwhile, the EU agreed to purchase additional amounts from other sources as well as to build dozens more regasification plants. With Russia playing a diminished role in supplying Europe’s energy, the handful of major LNG suppliers are thus set to enjoy increased geopolitical clout.
This power shift can be illustrated by comparing the top five oil and gas producers. To begin with, the LNG trade is highly concentrated: While the top five exporters of oil (in rank order) — Saudi Arabia, Russia, Iraq, the United States and the United Arab Emirates (UAE) — account for approximately 50 percent of global exports, the top five suppliers of LNG — Qatar, Australia, the U.S., Russia and Malaysia — account for 70 percent of such exports. These groups can be expanded to the top 10 and the concentration will increase. even more pronounced: The world’s top oil exporters control 70% of the global market, but the leading LNG suppliers hold an astonishing 89 percent.
Another way to see the similarities between oil and LNG exporters can be found in the comparison. There are many differences between the top 10 list of each category, even though there are overlaps with Russia, Nigeria, and the United States. Saudi Arabia, long considered the epicenter of global oil production and the dominant force in the Organization of the Petroleum Exporting Countries (OPEC), doesn’t appear on the LNG list, which is led by its arch-rival Qatar. The LNG list also features Australia, which was never considered an energy superpower.
As Europe increasingly relies on LNG for a greater share of its natural gasoline, the few major LNG exporters will be able to exert more influence in international affairs. It is worth taking a closer look at the top LNG exporters.
Occupying a small peninsular attached to Saudi Arabia’s Persian Gulf coast, Qatar possesses the world’s third-largest reserves of natural gas (most of it found in offshore areas) and is the world’s leading exporter of LNG. It is a member of, along with other oil-producing countries, the Gulf Cooperation Council (GCC), which is a multilateral military arrangement that is supported by the United States. But Qatar’s rulers have sought to pursue a more independent stance than its fellow GCC members, supporting rebel groups in Libya and Syria that were opposed by Saudi Arabia, and retaining cordial relations with Iran. Saudi Arabia, Bahrain, UAE and Bahrain cut diplomatic relations with Qatar in 2017 and denied Qatari planes access into their airspace. Relations were only restored in 2021 when Qatari troops participated in the Saudi-led intervention against Yemen. Despite the quarrels with its neighbors Qatar has become a unique role in the Gulf region. It hosts the Gulf’s largest military base. Al Jazeeramedia network and hosting delicate negotiations such as the peace talks between Taliban and United States. With Qatar likely to remain the world’s leading supplier of exportable gas, it is poised to play an even more pivotal role in the years ahead.
Often thought of as an outlier in global politics — noted in particular for its loyalty to the U.K. and well-established military ties with the U.S. — Australia has begun to play a more autonomous and muscular role in world affairs. The country has been a major importer of vital resources for many years, including iron ore and bauxite. It was not known, however, as an oil supplier, and it is only recently, with the development of mammoth fields discovered off the country’s northwest coast, that it has emerged as the world’s second leading supplier of LNG. Most of this gas now goes to China, Japan and South Korea; in fact, Australia is China’s leading supplier of LNG. But as China has begun to play a more assertive role in the Asia-Pacific region — for example, by militarizing small islands in the South China Sea — Australia has become leery of overreliance on the Chinese market. Australia’s leaders have increased their military spending to give themselves more autonomy. This was reflected in the recent Australia-U.K.–U.S. security pact, as well as the acquisition of nuclear submarine technology. Australia will be able, thanks to the increased income from LNG exports and its military capabilities, to play a greater role on the international stage.
The United States
For decades, the U.S.’s energy politics have largely been governed by its dependence on fossil fuel ImportsNot exports. The United States was heavily dependent on imported petroleum until the dawn of the 21st Century. This dependency played an important role in shaping its foreign policies, especially toward the Middle East. But the introduction of advanced drilling technologies — notably hydraulic fracturing, or “fracking” — has allowed the U.S. to exploit its vast shale reserves and largely eliminate its reliance on imported oil. Fracking has led to an explosion in natural-gas production, which has allowed the replacement of domestic coal plants by gas facilities and, for first time, large-scale gas export. The United States had no LNG export terminals in operation until 2015, but now it has seven. Another dozen are awaiting financing and government approval. The U.S.-EU joint plan was announced on March 28. It will accelerate the approval process and help Europe to get off Russian gas. This move is being welcomed by those on both sides of the Atlantic who seek to terminate Russia’s dominance of the gas trade, but has raised concern among those who fear it will perpetuate Europe’s reliance on fossil fuels and so slow the transition to a green energy future.
These few vignettes demonstrate how the world’s growing reliance on LNG — now being accelerated by Europe’s drive to reduce its reliance on Russian gas — is upending the global energy equation and enabling new actors to assume leading roles. How all this will play out in the years ahead remains to be seen, but it is already evident that political analysts’ tendency to equate “energy geopolitics” with a certain lineup of familiar players now needs to be reconsidered, allowing for the incorporation of major LNG exporters into our calculations.