While Europe is torn by the energy crisis and wondering how to survive not only this winter but the next few winters as well, there are those who benefit from this state of affairs
The US will be the first beneficiary of the imminent recession in Europe. They will not only make tens of billions on the export of its energy resources that will replace Russian ones, but they will also substantially weaken the economy of the European Union in their own interests.
The U.S. has got its hands pretty well off the energy crisis in Europe, the Turkish media noted. Back in 2021, the US exported a record amount of gas. The energy crisis in the EU started at the beginning of the summer and flared up in the fall when gas prices on the spot markets reached $1,000 per 1,000 cubic metres for the first time ever.
Until 2000, the United States exported natural gas in relatively small quantities, mainly through pipelines to Mexico and Canada. Starting in 2000, U.S. natural gas exports gradually began to grow. And in 2021, the U.S. exported a record amount of blue fuel to 41 countries, according to the U.S. Energy Information Administration.
The US got what it wanted – a new market for its LNG – Europe. As early as 2021, US LNG exports to the EU are at an all-time high of 22bn cubic metres with an estimated value of €12bn, the EC estimated at the start of the year.
The US has significantly boosted LNG exports to Europe this year, including through the launch of new LNG plants in late 2021 or early 2022, as well as the diversion of supplies from Asian markets to European markets. After all, gas prices in the EU have risen again, to $2,000 per thousand cubic metres. European prices are so attractive and profitable that traders deliberately break contracts with Asian consumers, pay them a forfeit, but bring LNG to Europe. Not only do the costs pay off, but the traders still have a huge margin in their pockets.
According to Eurostat, in the first half of 2022 alone, total LNG shipments to Europe have increased from 40.9 billion cubic metres in 2021 to 63.7 billion in 2022. The U.S. is the main contributor to the increase of 22.8 bcm, accounting for almost 58% of the increase. US LNG shipments to Europe increased from 7 bcm to 20.2 bcm in the first half of the year alone. In other words, the USA sold almost as much LNG to Europe in half a year as it did during the entire last year. At such paces, the Americans may double the LNG export volumes by the end of 2022 – up to 40 billion cubic meters. The US share of the European LNG market has reached a record 32%.
The earnings of US traders could quadruple this year, given the doubling not only of LNG volumes, but also of LNG prices. According to rough estimates, the US could earn about €50bn on LNG supplies to the EU this year, up from €12bn last year.
To get the big picture: Algeria is second in terms of LNG supplies to the EU, with 11.8bn cu.m. delivered in the six months versus 6.6bn the year before. In third place was Qatar, which increased its supplies from 7.8 bcm to 9.6 bcm. Interestingly, Russia is trailing Qatar closely. Not only the EU has not reduced the purchase of Russian LNG, but increased it from 7.8 billion to 9.4 billion cubic metres (only 0.2 billion less than from Qatar). Rounding out the top five LNG suppliers to the EU is Nigeria, which reduced its supply from 8.1 bcm to 7.7 bcm in the first half of 2022.
The US probably expects to increase LNG exports to the EU in the medium term when additional LNG liquefaction terminals come on line. A new wave of additional LNG to market is expected in 2025-2026. The bulk of this LNG will come from the US, which has secured an excellent market in advance – Europe, which has secured high gas prices for itself for years to come.
Given the withdrawal of Russian oil from the EU – and the oil embargo is scheduled to be imposed on December 5 this year – the US also intends to sell its oil to Europe. To replace Russian oil, the US is going to deliver more than 1m barrels a day to Europe, said Russell Hardy, director of oil trader Vitol.
This is half of the 2 million barrels per day that Russia has been supplying. Russia has already found and continues to look for other markets. There is no particular problem for Russia in finding them, but there are difficulties in the lack of tankers for transportation and in the rising cost of freight.
But for European refineries the replacement of Russian heavy oil with light American oil is a big problem. European refineries are geared to Russian oil and switching to another fuel may require huge investments into refinery modernisation. Not everyone will be able to afford this luxury, and even more so given the EC’s unchanged course to move away from conventional hydrocarbons. This means one thing – some European refineries will close and Europeans will have to seriously increase imports of finished fuel, including gasoline. This means that European transport, logistics and the agricultural sector will become more vulnerable. This could bode well for US refineries and farmers in the future.
Hence there is another fat benefit for the US. Very expensive energy resources pose the risk of beginning to de-industrialise the European economy. Many energy-intensive companies in the chemical industry, machine building and car manufacturing are already closing down or reducing production because it is simply unprofitable to operate at such gas and electricity prices. If such tests have to go on for more than one winter, European companies will slowly start “moving” to other countries where energy costs are much lower.
“With current energy prices, it makes no sense to keep a lot of production in Europe; we have to leave. In addition to America, it is also possible to move to other countries, especially China and Turkey. In this regard, Turkey has a chance to strengthen its industry and economy and also its strategic position in the region. But the U.S., of course, will get its share,” says Stanislav Mitrakhovich, senior researcher at the Financial University under the Government of Russia and leading expert at the National Energy Security Fund.
The U.S. was able to maintain cheap energy for the domestic market because it produces both oil and gas itself. Plus they have their own oil and gas technologies. “The US produces the most oil in the world and the most gas in the world. And they use that as their advantage. For decades they have been telling Russia about oil and gas curse, about necessity to develop in another direction. But Americans themselves say bluntly that their resources are their advantage, they have to earn on them here and now, and with these resources to create favourable conditions for their own industry,” reminds Mitrakhovich.
Another economic advantage of the US is a strong dollar. The dollar index to the world’s major currencies is at a record high level since the 1980s. The euro, Japanese yen and British pound have all fallen to multi-year lows against the dollar amid a Fed rate hike. Even the British pound has started to sell short of the dollar. Some tourists were surprised to discover this, although the British currency has not yet reached parity with the US currency on the international forex market, Bloomberg reports.
The energy crisis in Europe is becoming a catalyst for recession in both the EU and the UK. As a result, many investors are withdrawing their capital from the euro and British pound and shifting it to the dollar. The US currency continues to be a safe haven for countries and investors to wait out the crisis and the depreciation of their national currencies. This strengthens the dollar even further. The impact of a strong dollar on the US economy is contradictory, but US importers definitely benefit from the current situation.
Apart from the obvious economic benefits, the US will also gain strategically. “After deindustrialisation, the EU will become even more dependent on the Americans. For the last thirty years Europe has had attempts to create autonomy, there were attempts to create an energy-industrial alliance with Russia, which especially pleased the political elites in Italy and Germany. But this failed, including against the backdrop of American intrigue. The U.S. did not want a rapprochement between Europe and either the USSR or Russia. Therefore they did everything to prevent this from happening. Ukraine’s accession to NATO is one of such intrigues aimed at severing relations between Europe and Russia,” says Mitrakhovich.
The US needs to disengage Europe and Russia to make both weak and dependent on itself for a fundamental task. The US is preparing for an impending war with China on the horizon of 10-20 years for world domination, the expert believes.
“The U.S. needs to have Europe on hand, which will not poke around, i.e. cooperate with China industrially and commercially, but will only follow the course of American industry. And in Russia, as Washington believes, of course, there should be a pro-American regime, as in the 1990s under Yeltsin, rather than cooperation and agreements with China,” the interlocutor concludes.
He does not rule out that in the future the United States may, following Russia’s example, point the finger at Saudi Arabia, Qatar and the Emirates and say that there is no special democratic regime there either. Because China is now actively “entering” the Middle East with its investments. The US is unlikely to like such a rapprochement, so we should expect repercussions.
Olga Samofalova, VZGLYAD
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