This year, France is the world’s largest consumer of American liquefied natural gas (LNG). This was not an outcome that France wanted, but it is a new energy and geopolitical reality that will reshape bilateral relations. Emmanuel Macron and Joe Biden, who are meeting in Washington this week, will have to discuss such thorny energy issues to keep the transatlantic alliance strong: like containing import bills that weaken European economies, and reducing US LNG emissions to be consistent with energy transition goals.
First, sharing the burden of war is imperative. The US would like to see Europe allocate more money for its defense budget, but French (and European) taxpayers believe they are already paying a heavy economic price for their support for Ukraine. Europeans are the main victims of the energy war launched by Vladimir Putin because of their energy dependence. France’s gas and electricity bills will remain at record highs in 2023, almost 10 times higher than 2020. The idea of taxing the oil majors’ superprofits has been adopted by the European Union (EU), and others. But the best way to ensure prices fall sustainably is to reduce demand and increase supply.
To incentivize additional investments in supply, the Europeans can guarantee a long-term market for American gas to replace Russian gas and coal. It is a compromise compared to the medium-term objectives of energy transition, but a necessity for the security of supply. This will require strong actions such as the signing of new contracts. The French utility, Engie, has already signed two new contracts this year to import more American LNG, signaling a new pragmatism but also a volte-face. Engie sold its LNG portfolio to Total in 2017 and canceled a freshly signed LNG contract in 2020 under environmental pressure from the French government.
In exchange, Joe Biden has the power to ease export rules, and even increase them by swiftly permitting new gas infrastructure. The Americans would have to accept the consequences, including rising gas prices at home, as the US domestic gas market becomes increasingly connected to the international market. The Biden administration, which was elected with an aggressive climate agenda, has already had to reconsider its position on the production and export of fossil fuels. On both sides of the Atlantic, new geopolitical realities are settling in, even as it becomes more urgent to advance decarbonization.
Second, cleaning up American gas is essential to pursuing carbon neutrality goals. The global commitment to address methane emissions is gaining momentum, but work remains. The EU and US will have to agree on common transatlantic standards for measuring and verifying emissions across the entire LNG chain. New technologies to monitor methane leaks, capture emissions, and blend LNG with low-carbon gases, will accelerate the greening of operations. The Europe-America maritime corridor will be able to demonstrate that it is possible to decarbonize the LNG chain from production to consumption, including maritime transport.
The war in Ukraine, the shortage of hydroelectric energy and nuclear failures explain why France has already doubled LNG imports compared to last year, with half coming from the United States. The Kremlin’s decision to cut exports on nearly all gas pipelines to the European market has exacerbated the need for increased imports from other sources, such as Norway, Qatar, and Azerbaijan. But it is American molecules that have done the most to replace Russian gas. France, the world’s largest importer of US LNG this year, overtaking both China and South Korea.
France did not seek this dependence on “dirty American gas.” While the US became an LNG exporter in 2016, France only started importing US cargoes at the end of 2018. Ségolène Royal, Minister of the Environment at the time, wanted to block its importation, and her successor Nicolas Hulot was unwilling to revisit the controversy. The aversion to US LNG is partly explained by the perception of its negative environmental impact and by the 2011 national ban on shale gas exploration. It also reflects a French exceptionalism rooted in a geopolitical desire not to become overly dependent on American power and not to weaken Russia too much.
There are complaints in France that the US government is somehow benefiting from skyrocketing energy prices. But it is traders of US LNG who reap the rewards from higher prices in Europe (including Total Energies, Shell, and other trading firms, not just US companies.) This point on profits from the European gas crisis was addressed by US senior officials before the French state visit, when such allegations were described as “false.”
The reality is clear: France will remain one of the largest importers of American gas in the years to come for cyclical and structural reasons. French society must therefore look upon this source of supply with dispassion, which will be part of the energy landscape alongside renewables, hydrogen and new nuclear technologies. It is, after all, keeping French factories working and French homes heated despite the best efforts of the Russian regime.
A healthy energy dialogue between Paris and Washington will help maintain a strong transatlantic bond throughout the war in Ukraine and other geopolitical turbulence. Today's stronger bilateral bond will have to use the gas supply chain as a springboard to venture into cleaner energies and technologies to survive economic woes, trade wars, environmental concerns and changing governments.
Leslie Palti-Guzman is a non-resident senior associate at CSIS and senior fellow at NYU SPS Center for Global Affairs. She is Co-Founder & CEO of Gas Vista, a market intelligence firm on Seaborne Commodity.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
