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EU strikes gas deal with US to reduce reliance on Russia

·Business Reporter, Yahoo Finance UK
·2-min read
US president Joe Biden and European Commission President Ursula von der Leyen have agreed on a major gas deal
US president Joe Biden is currently in Brussels, and met European Commission president Ursula von der Leyen on Friday to strike the gas deal. Photo: Reuters

The EU has signed an agreement with the US to boost its supply of liquified natural gas (LNG) in a bid to curb its reliance on Russian energy.

The deal means the US will supply the bloc with at least 15 billion additional cubic metres of LNG by the end of the year.

Meanwhile member states will work to ensure demand for 50 billion cubic metres until at least 2030. LNG imports from Russia stood at around 14 billion to 18 billion cubic metres annually in recent years.

The move was announced during a three-day visit by US president Joe Biden, and is part of a new task force to strengthen European energy security.

Biden is currently in Brussels and met European Commission president Ursula von der Leyen on Friday.

At a joint press conference, Von der Leyen said: “We aim to reduce this dependency on Russian fossil fuels and get rid of it. This can only be achieved through additional gas supplies, including LNG deliveries.

"We as Europeans want to diversify away from Russia towards suppliers that we trust, that are our friends, that are reliable."

Read more: European stocks muted as Biden arrives in Europe to offer US gas to EU

It comes amid efforts by the EU to cut its reliance on Russian gas by two-thirds this year, in response to Moscow’s invasion of Ukraine.

Russia currently supplies around 40% of gas imports to the European Union to heat homes, generate electricity and power industry.

Putin threatened to require European customers that rely on Russia gas supplies to pay in roubles. That would increase demand for the Russian currency, pushing up an exchange rate that has slumped under sanctions.

The geopolitical conflict has helped drive energy prices to record highs in recent weeks, which were already rising before the war.

Read more: UK consumer confidence continues to fall as cost-of-living crisis deepens

The White House said that greater energy efficiency can be immediately achieved through increasing the use of smart thermostats and heat pumps.

"It will work to ensure energy security for Ukraine and the EU in preparation for next winter and the following one while supporting the EU’s goal to end its dependence on Russian fossil fuels," it said.

"Immediate reductions in gas demand can be achieved through energy efficiency solutions such as ramping up demand response devices, including smart thermostats, and deployment of heat pumps."

Mike Yarwood, senior research fellow at Oxford Institute for Energy Studies, said Europe would have to steel itself to pay higher gas prices for years to come to achieve its targets.

Watch: Why are gas prices rising?