On January 26th, President Joe Biden announced a big step back for U.S. energy shipments to Europe. The Administration’s decision to ‘pause’ permit approvals for new liquified natural gas (LNG) facilities will have profound consequences for the energy security of Italy, and the European Union as a whole. The decision has understandably caused concern and criticism across Europe, as well as confusion. Why would the U.S. deliberately undermine the energy security of its European allies, and provide an economic boost to Russian President Vladimir Putin? – writes Claudio Scajola, former Italian Minister of Economic Development and Interior.
It is all the more surprising because in the two years since the Russian invasion of Ukraine, Europe and the U.S. have made extraordinary and unprecedented progress towards mutually-beneficial cooperation on energy security. This process was sparked by one simple fact: it was in the interests of everyone in the Western world that Europe’s reliance on Russian energy be reduced as quickly as possible, for as long as possible. Security of energy supply shot to the top of the priority list for NATO countries.
The U.S. LNG boom proved to be the lifeline that Europe was looking for. Shipments to Europe have jumped 141% since 2021, and fully two-thirds of America’s exports now come to Europe. More will be needed in the years and decades to come. This is a win-win. Over 70,000 American jobs are linked to the future of LNG exports and, as a result of this new European demand, U.S. GDP would be boosted by up to $40bn. These figures should be set to increase further as demand continues to rise.
That demand will rise is a certainty. The emergence of a new, secure supply of energy from a NATO ally has spurred European nations into long-term thinking on energy. Italy opened its latest LNG terminal in Tuscany in May of last year; another $1billion storage facility is currently being built in Ravenna, on the Adriatic Sea. My country is not alone: shovels are being readied all across Europe. In total, 33 new LNG facilities are in the works all across the continent. A commitment to energy security and new infrastructure in Europe, will fund good jobs and successful businesses in the U.S. until at least the mid-2040s.
This brings us back to the central question being asked by European policymakers: Why? Why has President Biden put a stop to one of the most-significant Western security projects in recent years? The stated reason from the White House is environmental, that fossil fuels such as LNG need more scrutiny. This is less than convincing. Europe is widely known as the global leader on climate change and emissions-reduction targets – and yet the mainstream European parties would never take such a decision. Climate change targets and the energy transition must be delivered, for the good of humanity. But humanity also demands that we not allow dictators and warmongers to make the running. Increasing the economic or security weaknesses for the West, helps no-one and does not advance any progressive goals. The only person whose goals would be furthered by this decision, is Vladimir Putin.
In 2022, President Biden made a personal commitment to Europe, to support the transition away from Russian energy. European leaders believed his sincerity, and much of the promises have come to pass, as U.S. LNG now makes up almost half of all European LNG imports. The concern now is that what appeared to be a permanent solution, may end up being a temporary mirage. The two decades from 2000-2020 were defined by European over-dependence on Russian energy and poor domestic decision-making. If President Biden’s policy is not reversed, the 2020s and 2030s will be decades defined by uncertain supply and intermittent price shocks. In Italy and across Europe we will look back at these past few years as a rare and brief period of calm and good sense, and wonder how on earth such a promising situation was given away so casually.
President Biden’s promise made in 2022 was the right approach, but it appears that American grand strategy has now been replaced with tactical error. It is not too late to correct that mistake. The permit pause needs to be reversed.
Author: Claudio Scajola, former Italian Minister of Economic Development and Interior.