US ratchets up pressure to break Russia's stranglehold over Europe's energy market

U.S. attempts to export natural gas to Europe appears likely to increase the pressure on the region's dominant player at a time when Washington has vowed to break down Russia's stranglehold over the market.

Lithuania became the first former Soviet state to receive a shipment of liquefied natural gas (LNG) from the U.S. on Monday. The deal is aimed to reduce Europe's dependence on Russia's gas supplies.
"We are happy to reach a point where importing gas from U.S. is not only politically desirable but also commercially viable," Lithuania's Energy Minister Zygimantas Vaiciunas said Monday.
While Lithuania is expected to import another shipment of LNG from the U.S. in September, several other European countries could soon opt to follow suit. As a result, the increased competition in the gas industry could help to drive down prices for European customers.

Russia likely to 'dis-incentivize' a second wave of US LNG

In July, Poland became the first Eastern European country to receive a shipment of U.S. LNG. Speaking in Warsaw at the time, President Donald Trump said he hoped for stronger ties between the two countries on energy.
Following a meeting with the U.S. premier, Polish President Andrzej Duda said he expected to sign a long-term transatlantic deal for LNG supplies, before adding that any such agreement would reduce Warsaw's reliance on Russian "blackmailing".
"Some central and east European countries especially Poland and Lithuania might prefer to import U.S. LNG and pay a higher price because they made reduction of dependence on Russian gas one of their main political priorities as they see it as a security issue," Katja Yafimava, a London-based analyst at the Oxford Energy Institute, told CNBC via email.
Yafimava explained that while current price levels meant Russian gas is competitive with U.S. LNG for European buyers, Moscow would likely adopt a strategy to "dis-incentivize" a second wave of LNG from the other side of the Atlantic over the next decade.
Rising shipments of U.S. natural gas have been made possible by the shale revolution in the country. And the world's largest economic and military power is now seeking to peel away business from Russian gas companies, such as state-backed energy giant Gazprom.

Option of US LNG 'used all over the world'

The European market is accountable for approximately 75 percent of Russia's total gas exports, according to the U.S. Energy Information Administration. It's a crucial industry for Russia, as oil and gas revenues attribute to more than 40 percent of the country's federal budget.
Ira Joseph, head of gas and power analytics at S&P Global Platts, argued that while supply diversity offered some degree of energy security for European countries, ultimately the price of LNG would remain the top priority for most buyers.
"The option of importing U.S. LNG is being used all over the world as a mechanism for negotiating new long- and short-term prices with other suppliers not used to the emerging competitive environment," Joseph told CNBC via email.
"(However), if U.S. LNG delivered into Europe is consistently higher priced than Russian gas, the trade will not be sustainable," she added.
US ratchets up pressure to break Russia's stranglehold over Europe's energy market US ratchets up pressure to break Russia's stranglehold over Europe's energy market Reviewed by Alexander Von Stern on 07:04:00 Rating: 5