US-China Trade Conflict Halts LNG Exports, Boosts Russia Energy Ties

The ongoing trade friction between the world’s two largest economies is increasingly impacting the global energy market, with liquefied natural gas (LNG) emerging as a significant point of contention. Recent developments show a marked disruption in the flow of energy resources between the United States and China, signaling deeper geopolitical shifts.

US LNG Exports to China Halted

For more than ten weeks, no shipments of US liquefied natural gas have reached China, confirming that the trade dispute has directly permeated the global energy sector. The last recorded delivery arrived in Fujian province on February 6th, originating from Corpus Christi, Texas. Subsequently, prohibitive tariffs, which escalated significantly to 49%, have effectively stopped this trade route. One shipment was reportedly diverted to Bangladesh to avoid the steep levy.

Industry experts express skepticism about a swift resolution. Anne-Sophie Corbeau, an analyst at Columbia University, stated, “I don’t think Chinese LNG importers will go back to contracting US cargoes“ under the current circumstances. This cessation mirrors a previous blockage that lasted over a year during the administration of current US President Donald Trump, which only resolved after specific concessions were made.

China Strengthens Energy Ties with Russia

With US LNG facing prohibitive barriers, China appears to be reinforcing its energy relationship with Russia. Zhang Hanhui, China’s ambassador in Moscow, confirmed that numerous Chinese companies are actively exploring partnerships with Russian suppliers. Russia already ranks as the third-largest LNG supplier to China, following Australia and Qatar.

Further solidifying this energy axis, discussions are underway for the construction of the Power of Siberia 2 gas pipeline. This project would significantly deepen the bilateral energy connection between Moscow and Beijing, making Russian gas even more accessible to the Chinese market while US trade remains stalled by tariffs.

Impact on Long-Term Contracts and Projects

Despite the current pause, major Chinese firms like PetroChina and Sinopec hold 13 long-term agreements to purchase LNG from the United States, with some contracts extending as far as 2049. These deals were instrumental in securing financing and justification for developing large-scale LNG export terminals in the US and Mexico.

However, the confluence of inflation, high tariff costs, and potentially softening Chinese demand is reportedly pressuring developers to renegotiate terms. Gillian Boccara, an analyst at Kpler, considers a near-term resumption of US-China LNG trade unlikely. Furthermore, energy consultant Richard Bronze predicts a potential restructuring of global LNG trade flows. He anticipates a possible decrease in Asian gas demand by 5 to 10 million tonnes, which could consequently exert downward pressure on European gas prices.

The trade conflict continues to reshape crucial global supply chains, establishing natural gas as a new arena for dispute with potentially extensive energy and geopolitical consequences.