Trump’s Russia tariffs could threaten to deepen Europe’s LNG squeeze

The European Commission has expressed its intention to collaborate with the United States to minimize disruptions caused by the recent tariffs imposed on Russian energy, as announced by President Donald Trump. The European Union is grappling with another potential squeeze on its liquefied natural gas (LNG) supplies, due to the new sanctions that could impact the LNG flows the EU continues to depend on.

These sanctions, stemming from the Lindsey Graham Sanctions Act, allow the US President to impose tariffs of up to 100% on countries still purchasing Russian oil or natural gas, with China and India being the main targets. While the law does not automatically impose tariffs on the EU, its practical implementation remains uncertain, introducing a new risk for European governments and companies still reliant on Russian gas.

The EU is striving to restore storage levels to at least 80% by November, but winter gas storage levels are at their lowest point since 2011. The EU faces fierce competition from Asian bidders, which is further distancing it from its goals. EU Foreign Affairs chief Kaja Kallas was asked about the potential impact of the Lindsey Graham bill on European partners, stating she did not think it would harm them and hoped it was not true.

The European Commission has expressed clear expectations that the Graham law should not introduce new commercial barriers in the bilateral EU-US relationship and has pledged to engage with the US to ensure this outcome. The Middle East escalation, beginning with US and Israeli airstrikes on Iran on February 28, has led to the closure of the Strait of Hormuz and damage to a critical Saudi pipeline, disrupting LNG transit.

Meanwhile, the EU is phasing out Russian LNG, with gas imports from Moscow reaching 17%, thanks to exemptions granted to landlocked countries and long-term contracts anxious to avoid legal challenges from Gazprom. A complete ban on LNG imports from Moscow is set to take effect on January 1, 2027. The EU's decision to punish major Russian energy buyers with tariffs of up to 100% has the potential to create friction with countries still dependent on Russian gas, including France, Belgium, the Netherlands, and Spain.

Ben McWilliams, an affiliate fellow at the Brussels-based think tank Bruegel, believes that Trump's new tariffs "should not change much" as no Russian LNG is expected to enter the bloc after the 2027 ban. However, he doubts Russia will be able to reach alternative markets, as there has been ample time for utilities and traders to prepare.

The implications of these sanctions extend beyond LNG, as maritime services may also be at risk. Under the new US law, if all tankers found transporting Russian LNG are sanctioned, the consequences could impact not only the vessels themselves but also the owners, operators of foreign ports, and even European companies that maintain and repair such vessels.

The Danish ship repair shipyard of Fayard has come under intense scrutiny and political pressure for servicing Russia-linked Arctic LNG carriers. Swedish MEP Jonas Sjöstedt and German MEP Hannah Neumann have called on Fayard to cease servicing these vessels, arguing that their maintenance contributes to Russia's illegal war against Ukraine.