James Douglass, Senior Research Fellow, Tulane Energy Law & Policy Center & Partner, Keystone Law
On 27 July 2025, US President, Donald J. Trump, and EU Commission President, Ursula von der Leyen, announced the agreement of the US – EU Framework Agreement on Reciprocal, Fair and Balanced Trade (“US-EU Framework Agreement”). Article 5 of the US-EU Framework Agreement commits the EU to procure US oil, LNG and nuclear energy products worth $750 billion through 2028. Similar commitments have been made in the US trade deals with Japan (LNG and energy is assumed to be part of the overall $550 bn investment commitment made by Japan), the Republic of Korea ($100 bn in LNG over an unspecified period), Indonesia and the Philippines, although not in specific terms.
What are the US administration’s objectives in introducing the requirement to make US energy purchases into these trade deals? On the campaign trail in 2024, President Trump made energy dominance a key part of his campaign message. It can be surmised that other objectives include boosting US exports, altering trade flows (including away from geopolitical rivals such as the Russian Federation), reducing US energy costs through more competition in energy markets, and reviving US manufacturing in areas such as shipping.
The energy purchase commitment made by the EU in the US-EU Framework Agreement, assuming a $250bn a year commitment, would represent a large increase in total US energy exports to the bloc and would effectively mean that the US would become the dominant supplier of the EU’s energy needs. To put this in context, the US sold LNG worth $13 bn to the EU in 2024 while total EU energy imports were over $437bn, although not limited to the energy products mentioned in the US-EU Framework Agreement. Although the commitment in the US-EU Framework Agreement also extends to oil and nuclear energy products there is a vast difference between the historic figures and the new purchase commitment. To achieve this commitment both the US portion of LNG imports and the overall size of LNG in the energy mix in the EU will have to alter dramatically.
It is possible to argue that the energy purchase commitments in the US-EU Framework Agreement somewhat reflect and solidify what is already a trend. Since the Russian invasion of Ukraine in 2022 and the construction of five new LNG import terminals in Germany alone, the share of the United States in supplying the EU’s LNG needs has increased from 16% in 2021 to the current 50% (albeit with a decline of 16% in 2024 from 2023 numbers) while the percentage supplied by the Russian Federation has decreased to 16% (with a slight revival in 2024). Having said this, the US is projected to potentially double LNG export capacity by 2030 and is looking for markets.
The EU energy purchase commitments are made in a trade agreement between the bloc and the United States. Of course, they do not bind the private companies that control the US and EU LNG and wider energy markets and whose investment strategies and commercial decision-making are guided by market forces. For example, European buyers (particularly European utilities) have often been reluctant to sign long-term LNG sale and purchase agreements due to expected long-term LNG demand decline. Also, European LNG buyers of US LNG can redirect US cargoes out of Europe to more profitable destinations.
The economic scenarios in the US and EU are vastly different from an energy point of view. The EU must replace relatively low-cost Russian pipeline gas and more recently LNG (largely through the Yamal LNG project) in order to maintain industrial competitiveness. The transit of gas through Ukraine stopped on January 1, 2025. The EU is currently considering a proposal from the EU Commission to phase-out imports of all Russian oil and gas by January 1, 2028, so this is an issue of high importance within the EU irrespective of the commitments made under the US-EU Framework Agreement.
This is a difficult enough exercise while balancing its legislatively mandated de-carbonization agenda, including the “Fit for 55 Package” introduced in 2021 (also known as the EU’s Climate Law), which requires EU member states to reduce carbon emissions by 55% compared to 1990 levels by 2030, with the goal of climate neutrality by 2050. LNG and nuclear energy reactor fuel and products can help with decarbonization in the short to medium term as it may be seen as a potential replacement for oil or coal in national energy mixes, but this will be politically difficult in certain EU Member States.
There is also the issue of diversification of supply. To achieve the commitments in the US-EU Framework Agreement, the United States will need to supply over 80% of the EU’s LNG, which will be difficult to justify as a bloc or at the Member State level, given the need to diversify energy/fuel types, decarbonization requirements and the need to obtain the best pricing and terms (given the massive expansion of liquefaction capacity in Qatar and other global LNG producers).
There are also challenges with issues relating to the LNG re-gas terminal capacity in the EU at these volumes (even though further capacity continues to be added across the bloc) and the growing regulatory divergence between the EU and the US on issues such as LNG methane regulations.
In the United States, more gas is being utilized for AI data centers and other electrification demands (electronic vehicles, air conditioning, etc.) and domestic gas prices are projected to trend upwards over the coming years. In addition, the Trump administration is cutting subsidies and tax credits for wind and solar projects and there is expected to be more overall demand for gas. US gas producers and traders will allot gas or LNG sales to the buyers offering the best prices and on the best terms.
There are no enforcement mechanisms in the US-EU Framework Agreement for failure to meet the purchase commitment, although a possible mechanism on the US side could be to simply raise (or threaten to raise) tariffs to incentivize the EU to fulfil its commitments.
The EU has discussed implementing a common LNG aggregator procurement mechanism through the bloc aimed at coordinating increasing purchases from US LNG producers, but it remains to be seen how effective this will be, if implemented. The European Commission has also made various statements about more direct involvement in LNG projects to secure LNG offtake and to stabilize LNG prices.
What will be certain, however, is that EU buyers will be very active participants in short-term or spot purchases of US cargoes over the coming years, and we may also see several long-term commitments for US LNG from EU-based offtakers. It is important to remember that the US-EU energy dynamic is playing out against the background of other geopolitical developments, such as the closer economic and geopolitical ties between the world’s second largest gas producer, the Russian Federation, and the world’s largest hydrocarbon consumer, China.
While we are still waiting for the ultimate details of a trade deal to emerge between the US and China, we do know that China has prohibited the import of US LNG cargoes since March 2025 due to trade and tariff tensions between the world’s two largest economies.
Against this background, the announcement on September 2, 2025 of a “legally binding memorandum” between Gazprom and China National Petroleum Corporation for the Power of Siberia 2 natural gas pipeline (“PoS2”) is of great significance. PoS2 will transport natural gas from the Yamal region in Russia (the area of the LNG plant supplying a large amount of the EU’s current recent LNG demand) to northern China, transiting Mongolia, and will introduce a new dynamic into the global energy market. A further 6 bcm per annum (from 38 bcm to 44 bcm) of supply through the existing Power of Siberia gas pipeline was also announced.
PoS2 has a total potential capacity of 50 bcm of gas for the Chinese markets for a proposed 30-year term and is designed to fill the gap entirely in Russian gas sales left by the ramping down and termination of EU gas purchases.
There are many significant issues outstanding (timeline, pricing and financial terms) before the anticipated commencement of construction on PoS2, but this announcement is a game-changer for both China and the Russian Federation and is another significant factor in the overall energy geo-political picture. The contribution that PoS2 will make to China’s energy mix in the medium to long term is likely to have a significant impact on China’s appetite for LNG supply although China has always sought a large degree of portfolio diversification in its energy supply mix.
This paper represents the research and views of the author(s). It should not be construed as legal or investment advice. It does not necessarily represent the views Keystone Law or of the Tulane Energy Law & Policy Center, or Tulane University. The piece may be subject to further revision.
