Trump's LNG diplomacy and how Asia got caught between gas and tariffs

Business Times

5 days ago

[SINGAPORE] Energy security, thrust into the spotlight in 2022 by the Russia-Ukraine war, is once again facing a geopolitical stress test. This time, the pressure is coming from the US – and it comes with a pipeline.
In a bid to revive his push for energy dominance, US President Donald Trump is touting US liquefied natural gas (LNG) as a bargaining chip in trade talks. With the Jul 9 tariff deadline looming, some of Asia's biggest energy buyers are scrambling, as tariff relief appears increasingly tied – among other demands – to buying American gas amid mounting economic pain.
According to shipping data provider Kpler in a Reuters report, US LNG shipments to Asia hit 1.86 million tonnes in May – the highest since December – and are poised to climb further. But with multiple countries now vying to secure volumes, supply could tighten, raising a geopolitical question of who's willing to pay a premium to stay in Washington's good books.
The idea of using LNG as a diplomatic lever isn't new. It began taking shape during Trump's first term. Backed by the White House, a US$44 billion Alaska LNG project was pitched as a strategic energy bridge to Asia. But the venture stalled as oil majors, concerned over steep costs and uncertain economics, backed away.
On day one of his return to the White House, Trump reversed former president Joe Biden's pause on new LNG export approvals, effectively reopening the door for stalled projects – chief among them the long-delayed Alaska LNG venture. But despite this, the project continues to struggle to lock in firm financial backing.
As the Jul 9 deadline approaches, Japan, which counts Australia as its top LNG supplier, followed by Malaysia and Russia, is putting new cards on the table. Prime Minister Shigeru Ishiba has signalled Tokyo may offer financial backing for the Alaska project as part of its broader bid to avoid sweeping tariffs.
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Stung by sweeping US steel tariffs, South Korea has quietly shifted course, eyeing increased LNG imports as a way to stay on Washington's good side and push for tariff relief. Taiwan plans to have US LNG cover nearly three-quarters of its total gas needs by 2028. Even India is getting in on the act, following talks between Prime Minister Narendra Modi and Trump that could see more American gas folded into its long-term supply mix.
Interestingly, Malaysia's national oil giant Petronas recently said it was exploring long-term deals with North American sellers, including Louisiana-based Commonwealth LNG, as part of a strategy to deepen its footprint in high-growth markets such as China – the world's largest LNG buyer – and Vietnam. Whether political considerations are at play is unclear, and the move appears to be commercially driven.
All this points to a familiar playbook: the US is leveraging trade deficits to extract sector-specific concessions. Short-term LNG deals may well get signed, but the trust that underpins global energy flow – built over decades on neutrality – and market logic could be beginning to fray.
In a bid to secure stable supply, Singapore recently formed a new centralised gas procurement unit, Singapore GasCo. While chiefly focused on ensuring reliability, the move could also help cushion the city-state's gas-reliant power sector – which runs entirely on imported natural gas – from the risks of increasingly politicised commodity flows.
Some Asian nations are mulling diversifying their supply and could turn to Canada's Pacific-facing terminals or Qatar's ultra-low-cost LNG, not just for competitive pricing, but for the relative political calm they offer.
For many in Asia, the real shift may not be about gas at all, but about the growing need to insulate critical supply chains from becoming bargaining chips in the next trade standoff.