MNI INTERVIEW: EU Needs Cheap U.S. LNG To Avert IRA Trade War

The U.S. needs to take additional steps to help Europe cope with the economic impact of the war in Ukraine, including finding ways to cut the cost of liquefied natural gas exports to European industry, if it is to head off the danger of a trade war over green subsidies included in its Inflation Reduction Act, a senior member of the European Parliament’s International Trade Relations Committee told MNI.

An EU-U.S. taskforce is working to find a solution to the dispute over the IRA, whose USD369 billion in green spending is said by Brussels to violate international trade rules and to threaten the competitiveness of EU’s industry, with a deal needed before the enactment of the legislation at the end of this year.

The EU has the capacity to hit back hard if needed, International Trade Committee Vice Chair lIuliu Winkler said in an interview, referring to the “Sovereignty Fund” proposed by Commission President Ursula von der Leyen in September.

“We can show you that we have enough money to stabilise investment in EU. We can be protectionist too,” he said, declining to declare himself optimistic on the chances of a deal, particularly following recent comments made by U.S. Treasury Secretary Janet Yellen, who dismissed the idea of executive tweaks to the IRA bill to allow Europe-based firms to benefit.

“It was a forceful declaration of a kind that makes you nervous,” Winkler said. “I know from experience that when you want to solve a problem then solutions appear and when you don’t want to find a solution then you are prevented by the legal text.”

The EU is shouldering most of the cost of sanctions on Russia following its invasion of Ukraine, Winkler said, adding that reducing the cost of U.S. LNG would be “first and foremost” in any deal. European gas prices are currently four times those in the U.S., with U.S. companies benefitting from the massive rise in Europe’s LNG imports since the start of the war.

CHEAPER LNG

“I hope that in DC things can be seen as a whole package, about China and the war, Russian sanctions and the energy crisis, the new potential of the U.S. as an energy exporter and our path to sustainability which would be more efficient if we did it as a common policy,” Winkler said, without providing details as to how the U.S. could cut the cost of LNG supplied by its companies.

With Europe focused on reindustrialising in a post-globalisation world, Winkler warned that the dispute with the U.S. comes at the worst possible moment.

“If we don’t solve during 2023 some of the energy price issues hitting us then already the loss of competitiveness will not be possible to recover,” he said, conceding that Europe also needs to abandon what he described as an overly ideological approach to green transformation as well as unrealistic deadlines for the phasing out of nuclear power and for achieving zero emissions in transport by 2035.

“We are overdoing the regulations and that puts a very serious burden on European industries,” Winkler said.

An upcoming free trade deal with Australia, whose conclusion is now targeted by mid-2023 after delays caused by the foundation of the AUKUS alliance, will be key for the EU’s reindustrialisation agenda, he said, given Australia’s strategic supplies of raw materials.