As Russia has been excommunicated from the world economy over its invasion of Ukraine, it has had profound effects on energy supply flows. In Liquid Natural Gas, where the US used to be a major supplier to China, and Russia used to supply Europe by pipelines, supply chains have now shifted, as China avails itself of cheap discounted Russian energy, and Europe, starved by Russian cutbacks in deliveries, has turned to the US to fill the gap as it struggles to top off reserves it will need to get through the peak demand heating season this winter

US LNG exports to China are down by 95% between February and April compared to the same time a year prior. At the same time China has increased its import of Russian LNG by 50%, according to Chinese customs data. Previously the US had been the largest supplier of spot LNG volumes to China just one year ago.

This year most US LNG exports have headed to Europe, as prices there soared when Russia cut back on supply, ostensibly due to a turbine trapped in Canada due to sanctions impacting pipeline operations.

As a result, five European countries, France, Spain, the UK, the Netherlands, and Poland, accepted 54.1% of US LNG exports in April.

This state of affairs however is poised to change. In China, state majors, and energy firms, have recently inked long-term deals with American exporters for LNG deliveries which will begin in the end of 2022 and 2023.

Meanwhile Russia is currently seen as trapped by a pariah status, and is looking to shift all of its economic ties eastward. Analysts note this risks making Russia too dependent on and intertwined with China, something which could have geopolitical ramifications elsewhere.

Russia is already linked to China by a natural gas pipeline, with another to come. However the transition will take time, and Russia will inevitably feel the pull of the massive oil and gas markets of Europe.

Nikos Tsafos, the James R. Schlesinger Chair in Energy and Geopolitics at the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS) said, “Russia could eventually build a sizable business geared toward Asian markets, but the shift will be neither immediate nor easy, and it will depend critically on foreign partners, including China. To secure a contract with China, Russia had to offer a bargain deal: China pays far less for Russian gas than Europe does.”