A Word First
You’ve got to give Germany credit. It acted fast in replacing Russia as the key supplier of natural gas. That success has realigned the global market and formed new alliances.
From on high
"The driving force behind the German government’s new-found interest in the Gulf is the same one that has led other countries to engage with the region for the past hundred years: energy."
A 2022 German report outlines Berlin's growing energy partnership with the Gulf.
The Bow and the Gas
Eighteen months ago, Europe appeared on the verge of a meltdown. The United States, as part of the war against Moscow, directed the bombing of Russia's Nord Stream pipelines and western and central European countries were left to freeze with the approach of winter.
Despite the anxiety and pain, that didn't happen. Instead, Europe, particularly industrial Germany, found new suppliers that today has realigned the global natural gas market and formed an alliance with the Gulf. The implications of this are not merely commercial, rather strategic.
"The driving force behind the German government’s new-found interest in the Gulf is the same one that has led other countries to engage with the region for the past hundred years: energy," a report by the influential Friedrich Ebert Stiftung said in August 2022.
Jittery over Norway
Since 2022, Germany, with gas a quarter of its energy pool, has been buying liquefied natural gas wherever it can find it. Today, Norway is a leading supplier, followed by the Gulf, the United States and Mexico.
But Berlin, and by extension most of Europe, is jittery over Norway. Norway is a close ally of the United States and was said to have been involved in the bombing of Nord Stream in September 2022. The fear is that Moscow could direct a similar and deniable operation to end gas supplies from Scandinavia.
"Our dependence on Norway is too great," Philipp Steinberg, a senior German Economy Ministry official, said. "The crisis has taught us that we must diversify."
For Europe, the most promising prospect has been the Gulf. The Germans have led the way with LNG agreements with Qatar, United Arab Emirates and negotiations with Oman. So far, the volume is small compared to what Russia had been supplying until 2022, but most of the Gulf Cooperation Council states are determined to significantly boost production over the next few years.
The German buying spree has become a source of concern for China. Beijing has invested billions of dollars in Gulf energy and wants more crude oil and natural gas from the region. China has an obvious supplier in neighboring Russia, but the Asian superpower does not want a dependency on a country that had long been an enemy.
‘New chapter’
In March 2024, Germany followed China in tapping into the UAE's growing gas market. Germany's SEFE signed a 15-year agreement with the UAE'S ADNOC for the annual delivery of one million metric tons of LNG. The fuel will come mostly from ADNOC's Ruwais LNG project, a facility that has not been completed. The two companies said deliveries would begin around 2028.
"This LNG supply agreement for the Ruwais LNG project, set to be one of the lowest-carbon intensity LNG projects in the world, marks the start of a new chapter," SEFE chief commercial officer Frédéric Barnaud said. "We aim to further build on our existing relationship and explore joint low-carbon energy developments."
That new chapter marks Germany's entry into the Gulf LNG market. It was something that Berlin and the rest of the European Union, committed to green energy, did not want. But the destruction of Nord Stream ended any chance of a smooth transition from fossil fuel to renewable energy. The assessment is that Europe will need LNG and anything else for at least the next 20 years.
“Europe does not intend to replace lost Russian import volumes on a 1 for 1 basis with LNG imports," the New York-based Evercore ISI told clients in June 2023. “However, European contracting for long term LNG has finally started to increase and now represents a larger portion of global SPA [sales and purchase agreement] volumes than the EU did in 2022."
And that means a new relationship between Europe and the Gulf. For the last decade, Berlin and much of the EU were cool toward Qatar, Saudi Arabia and the UAE, deemed sponsors of terrorism and violators of human rights.
In October 2023, Qatar Emir Tamim Bin Hamad Al Thani flew to Berlin and met Scholz and President Frank-Walter Steinmeier. Many in Germany's parliament condemn Qatar for its support of Hamas, which had attacked Israel just days before Hamad's arrival.
"If Hamas has received financial and non-material support from Qatar for years, Germany cannot buy billions of cubic meters of gas as a thank you," said Michael Kruse, the spokesman for the Free Democratic Party, a partner in Germany's ruling coalition.
The bow to the emir
Today, few are listening. Germany has already signed several LNG agreements with Qatar and other GCC states. The accords will involve significant investment in the Gulf as well as allowing Doha to buy German assets. The partnership is expected to include cooperation in the development of green hydrogen.
A year before the Hamad visit, Scholz and Economy Minister Robert Habeck arrived in Doha. When the emir came out to greet the Germans, Habeck bowed. In return, Scholz and Habeck came away with a deal in which Germany would receive up to an annual two million tons of LNG from 2026.
"We need to make sure that the production of LNG in the world is advanced to the point where the high demand that exists can be met without having to resort to the production capacity that exists in Russia," Scholz said.