Merz Seeks LNG Deals in Gulf Region to Hedge US Energy Exposure

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(Bloomberg) — German Chancellor Friedrich Merz has set his sights on the Middle East to try and diversify energy supplies for Europe’s biggest economy and reduce dependency on LNG imports from the US.

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Merz and a delegation of corporate leaders will leave Wednesday for Riyadh, where he’s scheduled to meet Crown Prince Mohammed bin Salman, the de facto ruler. On Thursday, he’ll move on to Qatar and United Arab Emirates, before returning to Berlin Friday evening.

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“High dependency is a problem in view of the authoritarian development of the US government and the risk of geopolitical blackmail,” said Susanne Nies, an energy expert at think tank Helmholtz-Zentrum Berlin. Germany “should also consider alternatives such as more pipeline gas from Norway and LNG from Canada or Australia,” she said.

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Merz’s three-day trip, his first visit to the Gulf region as chancellor, is part of Germany’s strategy to diversify its energy imports globally and find new markets for industrial exports, according to officials in Berlin who asked not to be identified because the matter is confidential.

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Besides energy, Merz will also discuss options for closer defense cooperation as well as the tense security situation in the region. However, the visit will be overshadowed by concerns over possible renewed US attacks on Iran, following a brutal crackdown on protesters by the regime in Tehran. 

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Merz’s trip comes more than three years after his predecessor Olaf Scholz traveled to the Gulf states in September 2022 in an effort to secure LNG deals after Russia’s attack on Ukraine. The subsequent ban on Russian pipeline gas cut off more than half of Germany’s natural gas imports at the time. 

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Germany has since then boosted purchases from other regions. LNG accounts for about 13% of total imports, with about 94% of LNG imports coming from the US. The Trump administration has used energy as leverage in tariffs negotiations, with Europe last year pledging $750 billion of purchases through 2028.

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But in view of Trump’s recent comments on taking over Greenland and renewed tariff threats, Germany sees its exposure to US energy imports as potential security risk. Similar to China, the Trump administration has begun to use its economic leverage as strategic lever.

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One possible stumbling block is that Gulf LNG suppliers expect buyers to commit to contracts of at least 20 years, but Germany has banned all LNG imports from end-2043 as part of its climate policies. That has given German companies a reason to stick with US export terminals as traders there allow for greater flexibility.

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“The very high dependence on the US is problematic because it creates new geopolitical and price risks,” said Claudia Kemfert, who leads the department of energy, transportation and environment in the German Institute for Economic Research in Berlin. “The lesson to be learned from this is that Germany should reduce its overall dependence on fossil fuels and not just switch supplier countries.”

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