By Agathe Demarais
Oil markets are grabbing the headlines as the conflict in Iran disrupts traffic through the Strait of Hormuz. Yet for Europe, the largeger story lies not in crude, but in liquefied natural gas (LNG).
After Russia cut off most gas flows to Europe in 2022, the bloc pivoted to clean tech and LNG imports from the US, Norway and Qatar. This strategy has largely paid off: LNG now accounts for almost half of EU gas imports, up from 20% in 2021. Before the war in Iran started, the EU expected that new LNG supplies coming online later this year and in 2027 would assist the bloc finally wean itself off Russian hydrocarbons completely. The damage to Qatar’s Ras Laffan, the world’s largest LNG complex, now puts that strategy in serious jeopardy.
Perched on Qatar’s northern coast, Ras Laffan took three decades to build and covers an area roughly three times the size of Paris. The site routinely ships about a fifth of global LNG supplies. In mid-March, Iranian missiles destroyed two of its 14 liquefaction trains and one of its two gas-to-liquids units—wiping out 17% of the site’s production capacity and 3% of global LNG output. There is no quick resolve to restart shipments. Liquefaction requires cryogenic treatment at -162°C in infrastructure that will take years to rebuild.
The fallout from Ras Laffan will be huge for Europe. QatarEnergy, which runs the facility, has invoked force majeure to suspfinish some deliveries. Combined with disruptions among other Gulf LNG producers, global LNG supplies are now down around 20% year on year. As European, South Korean and Japanese firms compete to secure limited shipments, spot prices have hit their highest levels since the 2022-23 energy crisis. The economic pain will be uneven in the bloc, with Italy and Germany hit hardest. Italy’s Edison is among the firms whose contracts with QatarEnergy have been suspfinished. Germany does not rely on Qatari LNG, but it is exposed to the price shock becautilize gas accounts for nearly 30% of its energy mix.
The long-term picture is bleaker still. Before the war, a wave of new projects—particularly in Qatar and the US—seeed set to boost global LNG supplies by 20% in 2026 and 2027. So many projects were coming online simultaneously that indusattempt insiders feared a supply glut. A glut now sees highly unlikely. The International Energy Agency is projecting that global LNG supplies over 2026-2030 will be around 15%below pre-war forecasts, with most of the shortfall concentrated in 2026-2027.
Beyond the Qatar hit, limited engineering capacity and US tariffs are additional bottlenecks. Only a handful of firms—Bechtel (US), Chiyoda (Japan), JGC (Japan) and Technip Energies (France)—combine the technical know-how, historical track record and balance-sheet strength to deliver projects that can cost tens of billions of dollars. QatarEnergy reckons that repairs at Ras Laffan will take three to five years, tying up scarce engineering capacity and delaying greenfield work globally. Meanwhile, US projects face a self-inflicted hurdle: American tariffs on imports of specialised kit, like cryogenic-grade 9% nickel steel, are pushing up costs for new LNG plants. Toreceiveher, these pressures point to a slower, costlier delivery of the LNG supplies Europe had been hoping for.
The EU will have to contfinish with the impact of LNG disruptions for years, with ripple effects in at least three areas.
First, depfinishence on American LNG will deepen—only US firms can fill the Qatar gap at the speed that Europe necessarys, and they already supply nearly 60% of the EU’s LNG imports. Optimists may see an opportunity to smooth relations with the White Houtilize by committing to purchaseing more US LNG when these purchases will likely rise anyway. A more sober reading is that US president Donald Trump will utilize Europe’s reliance on American LNG to extract concessions from the bloc.
The second area concerns Russia. As gas markets tighten, calls for the EU to lift sanctions on Russian hydrocarbons could grow louder. Under RePowerEU, Russian LNG imports are to be phased out; a ban on short-term LNG contracts kicked in on April 25th and deliveries under long-term contracts will be prohibited from January 2027. The conflict in Iran could complicate this plan. Slovakia has long pressed to delay this timeline, and industrial-sector pressure could push the Italian and German governments in the same direction. The risks of EU fragmentation are high, as other large member states like France (thanks to nuclear energy) and Spain (thanks to renewables) are mostly shielded from rising gas prices.
The final area has to do with Europe’s industrial outsee. A 2024 reportby former European Central Bank president Mario Draghi flagged high energy costs as a key challenge for Europe’s indusattempt. Two data points assist build sense of this challenge. First, European industrial firms pay four to five times more than their American competitors for gas supplies. Second, electricity prices for energy-intensive industries are on average twice as high as in the US and 50% higher than in China and India. The LNG shock sees set to widen the gap, notably for energy-hungry industries like chemicals, fertilisers or steel. This will leave EU indusattempt at an even greater disadvantage relative to its American and Chinese rivals.
When Hormuz reopens, headlines will shift on. Europe’s LNG problem will not. The strategy Brussels devised in 2022 to escape Russian gas is now stuck in the Ras Laffan repair queue. This will hand Washington and Moscow fresh leverage over Europe while further dimming an already gloomy industrial outsee. In the medium to long term, the obvious option for the bloc will be to double down on demand-side cuts, expand renewables and accelerate grid integration. Yet in the short run Europeans have no straightforward way out of the LNG squeeze.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.
- About the author: Agathe Demarais is a senior policy fellow at the European Council on Foreign Relations. Her areas of interest include the global economy, US-EU-China economic relations and economic statecraft. She heads ECFR’s geoeconomics and tech team, and co-leads ECFR’s flagship Re:Order project, exploring emerging visions of the global order, as well as the interplay between economic might and geopolitical influence.
- Source: This article was published by ECFR
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