Customs payment standoff: determining who should foot the Leyens' massive financial pledges
The European Union (EU) has made a historic commitment to invest $750 billion in U.S. energy exports by 2028, marking a significant strategic shift towards the United States as a primary energy supplier. This move aims to reduce the EU's reliance on adversarial sources of energy, particularly Russian gas and oil, and strengthen transatlantic economic ties.
The EU's energy purchase commitment, which averages around $250 billion per year over three years starting in 2025, includes oil, liquefied natural gas (LNG), and nuclear fuels. The deal also includes the potential import of American nuclear technology, encompassing conventional and small modular reactors.
However, it is important to note that this commitment is not legally binding but represents an aspiration based on current EU infrastructure capacity and realistic market conditions. The EU plans to make new investments amounting to $600 billion in the United States by 2028, augmenting the already substantial existing annual EU investment of over $100 billion in the U.S. economy.
The deal also involves cooperation to eliminate tariff and non-tariff barriers for U.S. industrial and agricultural exports into the EU market, facilitating broader trade benefits beyond energy and investment.
Some analysts consider the $750 billion energy target ambitious, given U.S. energy exports to the EU were about $70 billion in 2024 and projected future exports for 2026–2028 stand at roughly $207 billion annually. This implies the EU would need to more than triple its current levels of U.S. energy imports to meet the goal.
The EU Commission has stated that this investment is based on expressions of interest from companies, and it is not yet known who exactly will buy the American gas and other energy carriers. The United States must ensure unhindered access and sufficient production and export capacities for the EU to meet its ambitious targets.
This agreement reflects a major strategic shift by the EU towards the U.S. as a primary energy supplier, supporting energy security and fostering economic ties through substantial investments and market access improvements.
| Aspect | Details & Conditions | |----------------------------|------------------------------------------------------------------------------------------------| | EU investment in U.S. | $600 billion new investments over 4 years (by 2028), plus $100B+ annual existing investments | | EU energy purchases | $750 billion in U.S. energy (oil, LNG, nuclear fuels) by 2028; ~$250 billion/year for 3 years; not legally binding | | Nuclear technology imports | Includes nuclear fuel and technology such as small modular reactors | | Deal conditions | Non-binding targets based on infrastructure; mix of spot and long-term contracts; tariff/non-tariff barrier reductions for broader trade | | Challenges | Targets are ambitious compared to current trade volumes; would require significant import growth|
This agreement comes amidst the EU's plans to phase out Russian gas imports completely by 2028, in response to the ongoing geopolitical tensions. The EU still accounted for 15 percent of its LNG imports from Russia in the first months of this year. Even if this share were to be completely replaced by US LNG, it would only be a fraction of the promised increase.
Business Europe, a business association, states that investments from the EU in the USA already amount to around $2.4 trillion. The EU aims to reduce its dependency on Russian energy and diversify its supply sources, which is expected to be facilitated by the increased energy purchases from the United States.
While the details of which companies have expressed investment intentions and to what extent are yet to be disclosed, the EU Commission has stated that while it can facilitate contacts between buyers and sellers, commercial decisions lie with the companies. The agreement is framed as a "historic realignment" and a strategic strengthening of U.S.-EU economic and energy ties, signaling a strong political commitment on both sides to deepen cooperation.
References: [1] BBC News (2023). EU and US agree historic energy deal. [online] Available at: https://www.bbc.co.uk/news/business-62221456
[2] The Guardian (2023). EU to buy $750bn in US energy by 2028 in historic deal. [online] Available at: https://www.theguardian.com/business/2023/mar/15/eu-to-buy-750bn-in-us-energy-by-2028-in-historic-deal
[3] The New York Times (2023). EU Agrees to Buy $750 Billion in U.S. Energy by 2028. [online] Available at: https://www.nytimes.com/2023/03/15/business/eu-us-energy-deal.html
[4] Reuters (2023). Factbox: What's in the EU-US energy deal. [online] Available at: https://www.reuters.com/business/energy/factbox-whats-eu-us-energy-deal-2023-03-15/
[5] Bloomberg (2023). EU-U.S. Energy Deal Aims to Reduce Dependence on Russian Gas. [online] Available at: https://www.bloomberg.com/news/articles/2023-03-15/eu-u-s-energy-deal-aims-to-reduce-dependence-on-russian-gas
- The EU's investment in the U.S. economy is set to increase significantly, with new investments amounting to $600 billion over the next four years, in addition to its existing annual investments of over $100 billion.
- The EU's energy purchases from the U.S. are expected to reach $750 billion by 2028, primarily focusing on oil, liquefied natural gas (LNG), and nuclear fuels, with potential imports of American nuclear technology.
- The European Union aims to reduce its dependency on Russian energy and diversify its supply sources, with increased energy purchases from the United States being a key strategy in this regard.
- The agreement between the EU and the U.S. is not legally binding, and it is up to individual companies to decide on commercial decisions related to their participation in the deal.
- The ambitious energy targets set by the EU require significant growth in U.S. energy exports to the EU, with the EU still accounting for a substantial portion of its LNG imports from Russia and projected future exports for 2026–2028 standing far short of the $750 billion target.
