The normalization of trade with Moscow will exacerbate an impending LNG glut in global markets. Donald Trump’s economic and strategic vision is riddled with contradictions, none greater than the clash between his ambition to flood the world with American oil and gas and his desire to reintegrate Russia into the global fold.
Europe is currently importing significant amounts of U.S. shale gas, and LNG prices have soared to €15 MMBtu (£12.50), primarily because Russian gas flows to Europe have slowed to a trickle. The global market has lost 120 billion cubic meters (BCM) of supply stranded in Western Siberia.
“There is a fundamental conflict between U.S. gas entering Europe from one side and Russian gas from the other,” said Professor Alan Riley, an expert on European energy at the Atlantic Council.
The specifics of Trump’s plan to partition Ukraine remain uncertain. Some view it as a repeat of the 1938 Munich Agreement, akin to the dismemberment of Czechoslovakia. Others liken it to Yalta 2.0, a revival of Roosevelt and Stalin’s 1945 carve-up of Eastern Europe, with Putin regaining global stature and strategic parity.
It is premature to conclude whether these negotiations will ratify aggression or betray Kyiv. Trump, who despises the perception of being Putin’s puppet, does not want to be seen as the leader who mishandled Ukraine.
Kremlin apologists whisper in one ear, while pro-Ukrainian hawks speak into the other, emphasizing that the battle against China is being waged in the Donbas. “It resembles a medieval court. Ukrainians tell me that Boris Johnson is exerting a lot of positive influence over this,” said Prof. Riley.
“There is a sense in the UK and NATO that Putin is playing Trump along and will drag this out, but I think people are jumping to conclusions,” he added.
A Trumpian twist may still await Putin if he rejects the deal, which may not include all four annexed oblasts, Zaporizhia, or the full coastal strip to Crimea. The offer could be limited to the devastated fringe of land conquered at immense cost, with the British Army of the Dnieper and troops from Poland, France, and Scandinavia stationed on the other side.
Markets are already anticipating a post-war settlement. European (TTF) gas contracts for March dropped by 6% on Thursday, with even steeper declines for winter 2026 contracts. The January spike in crude prices has also subsided.
Ukraine holds a strategic advantage in peace negotiations: its legacy infrastructure of 160 BCM of gas pipelines from Russia, could fully restore Gazprom’s lost flows to Europe.
If even half of this Siberian gas resumes flowing to Europe, it would displace imported LNG from Texas. “The price would crash and infuriate Trump,” said Thierry Bros, a professor at Paris Science Po and former energy planner for the French government.
Prof. Bros noted that the EU could absorb 50 BCM of Russian gas while still purchasing U.S. LNG, provided it is used to replace coal in power plants, similar to the UK’s strategy.
“It is feasible for Europe to keep Trump satisfied as long as the Commission does not act recklessly—but that is a big ask; they don’t know what they are doing,” he said.
Both European Commission President Ursula von der Leyen and European Central Bank President Christine Lagarde have suggested that Europe could avoid a trade war by increasing LNG imports from the U.S. The incoherence of this approach is staggering.
The EU’s energy agency projects that the bloc’s gas demand has peaked and will decline sharply in the late 2020s. U.S. LNG, once liquefied at -162°C in a $10bn (£8bn) facility and shipped overseas, has a greenhouse gas footprint comparable to coal.
Does the EU plan to force European utilities to abandon long-term contracts for Norway’s cleaner pipeline gas in favor of Trump’s LNG?
Rather than making superficial proposals, the EU should focus on radical economic reforms that boost consumption and reduce its mercantilist dependence on exports. Achieving this, however, requires an ideological transformation.
Yet Trump himself embodies the height of incoherence. On one hand, he urges the world to buy U.S. LNG and oil, locking in energy dependence on America. On the other, he weaponizes trade, undermining U.S. credibility as a reliable supplier.
He faces another obstacle: LNG is expensive. It cannot compete with solar and battery storage in sunny regions, which encompass most of the global population. Even before considering the return of Russian gas, the International Energy Agency (IEA) predicted an “unprecedented” LNG glut in the late 2020s. The world cannot absorb the additional 250 BCM expected over the next five years.
“The result will be an overhang of capacity that depresses international gas prices and fuels fierce competition,” the IEA reported.
The breakeven cost for new LNG is at least $8 MMBtu, but India refuses to purchase imported LNG above $3-$5. While India will absorb some LNG when prices drop, it will not sustain a golden age for U.S. gas. Instead, India’s latest budget allocates resources to 100 gigawatts (GW) of nuclear power and an aggressive 500 GW renewable energy expansion.
China has also strategically opted out of gas as a “bridge fuel,” fearing that the U.S. Navy could blockade LNG shipments through the Malacca Strait. Instead, China is ramping up its Shaanxi coal mines. Global Energy Monitor reports that China added 95 GW of coal-fired plants last year. Officials insist these plants will operate at low capacity, serving as backups for intermittent renewable energy.
Regardless of whether one believes this strategy, one fact is undeniable: Xi Jinping neither needs nor wants Trump’s gas.
The oil and gas industry has embraced the notion of a fossil fuel supercycle over the past three years, fueled by Putin’s war. Energy majors have abandoned green initiatives and staked their futures on business as usual, with Trump as their champion.
The partition of Ukraine and Russia’s reintegration will determine whether this supercycle is real or whether the industry is living in a fantasy.
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