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EU caves on demands to buy more US gas in bid to stave off trade war

Anna Isaac
Germany's Chancellor Angela Merkel talks with US President Donald Trump. The President was fiercely critical of German's energy ties with Russia during a recent Nato conference - REUTERS

The EU has caved in to demands to buy more US gas in a bid to cool trade tensions with the world’s largest economy.

Gas and soybeans topped President Donald Trump’s list of goods he wanted the EU to buy more of during discussions in July with European Commission President Jean-Claude Juncker. The shopping list formed part of Mr Trump’s strategy of using tariffs to lever concessions from trading partners.

The plans to purchase more US gas were unveiled ahead of crunch trade talks set to take place on August 20. The summit is aimed at halting the escalation of tit-for-tat tariffs on billions of imports imposed by the US and EU in recent months.

The EU’s counter tariffs cut to the heart of Mr Trump’s political heartland ahead of crucial midterm elections in November. Products targeted include iconic US brands such as Kentucky whiskey and Levi’s jeans.

Confirming the move the EU said it would “import more liquefied natural gas from the United States to diversify and render its energy supply more secure".

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“The EU and the US will therefore work to facilitate trade in liquefied natural gas.”

The potential opportunity for US exporters of Liquified Natural Gas (LNG) is considerable.

The EU currently imports 70pc of the gas it needs, and that share is set to rise. The bloc has taken 10pc of US LNG exports since 2016.

Growing European demand “could welcome imports of liquefied natural gas from the US, if the market conditions are right and prices competitive”, the European Commission said.

However the Commission also highlighted the need for the US to reduce barriers to trade in gas. One regulatory restriction -  the need for LNG exports to be given prior approval before they are sent to the EU - should be lifted, the Commission said.

This energy source was also at the heart of tensions during Nato talks last month, when Mr Trump excoriated the German-Russian gas pipeline Nordstrom II. Germany was “totally controlled by Russia” due to its dependence on energy from the nation, Mr Trump said.

Nord Stream gas pipeline

The American president noted that Nato was making great efforts to contain threats emerging from the Kremlin only to then sign massive business deals such as the Nordstrom 2 project.

“So we're supposed to protect Germany, but they're getting their energy from Russia. Explain that. It can't be explained,” he said.

The Russian economy has been severely affected by low oil prices in recent years. As a result the nation has tried to increase the market share for its other fossil fuels in the EU. It aims to have 40pc of the bloc’s gas market in the years ahead.

Commissioner for Climate Action and Energy, Miguel Arias Cañete, said that diversification was vital in order to ensure the security of the EU's gas supply and therefore boosting US imports was prudent.  

Mr Cañete added: "This is happening at a time when EU indigenous gas production is declining more rapidly than foreseen and there is an accelerated phase-out of coal power plants in the EU."