The price of partnership with the United States has shifted significantly. Washington is leveraging defense assurances and trade access to pressure allies in Europe and Asia to commit to long-term contracts for its fossil fuels. This strategy aligns with the Trump administration’s geopolitical objectives, focusing on energy dominance and economic leverage.
The scale of these agreements is enormous. The European Union plans to import up to A$1.15 trillion in US energy, primarily liquefied natural gas (LNG), by 2028. This would represent more than a fourfold increase over current levels, although analysts express skepticism about the feasibility of such a dramatic rise. Meanwhile, Indonesia has committed to $24 billion in US energy imports, and Japan is considering a similar path.
Geopolitical Strategy Behind Energy Deals
These deals are not driven by free trade principles. Instead, they reflect the Trump administration’s use of trade and security incentives to secure long-term fossil fuel profitability and dominance. The strategy aims to bolster energy sources under pressure from clean technology advancements, enhance US control over global energy flows, and counter China’s influence as a leading manufacturer of clean tech.
As Prime Minister Anthony Albanese meets with US President Donald Trump, he faces pressure to support US economic interests, a complex situation given Australia’s status as a major LNG exporter.
America First: Economic Motivations
Historically, the US relied heavily on energy imports due to declining domestic oil production. However, the fracking boom transformed the landscape, making the US a net exporter by 2019 and the world’s top LNG exporter by 2023, surpassing Qatar and Australia.
The Trump administration’s push for allies to purchase more fossil fuels follows a straightforward “America First” logic. Here are the key reasons:
- Preserving Business: The US accounts for 22% of global oil production and 25% of gas production, outpacing Russia and Saudi Arabia. However, fossil fuel demand is expected to decline by 2030. The administration seeks to convert this risky market into a stable, long-term “subscription model” through new gas plants and import terminals.
- Maintaining Dominance: US global dominance has historically relied on controlling energy flows and providing the currency for oil trades. The rise of decentralized renewables and clean technologies threatens this control. By tying allies to US gas, Washington aims to retain leverage.
- Kneecapping China: China controls over 70% of global solar, wind, and battery manufacturing. The US has shifted from competing in clean tech to defending fossil fuels, rejecting the transition to renewables. Forcing allies to buy gas is a strategy to delay the green shift and limit China’s energy influence.
Economic and Environmental Consequences
The implications of these deals are profound. They could make US allies less competitive, as LNG is primarily used for electricity generation. For nearly a decade, solar and wind have been the cheapest power sources, consistently outperforming fossil fuels. As grid-scale battery costs plummet, renewables become even more competitive, allowing daytime solar to be stored for evening use. Gas-dependent economies may face higher, more volatile energy costs, undermining their competitiveness.
Moreover, these agreements pose national security risks by reducing energy sovereignty. Nations like Nepal are embracing electric vehicles to reduce reliance on unreliable fossil fuel suppliers.
The most critical concern is climate change. Any fossil fuel infrastructure built today will likely operate for decades, contradicting the urgent need to reduce fossil fuel use to limit global warming to under 2°C. The billions invested in new LNG facilities could otherwise support clean technology development.
The annual cost of climate-related disasters in Australia is projected to rise from $4.5 billion to $41 billion by 2050, approximately the value of current gas exports.
Alternative Paths and Regional Opportunities
Trump’s recent dismissal of climate change as a “con job” at the United Nations serves as a strategic distraction from his administration’s pressure on allies to prioritize US fossil fuel interests over their long-term economic and climate goals.
However, this outcome is not inevitable. Asian economies and Australia can accelerate their green transitions, securing cheaper power, greater energy independence, and a long-term economic advantage. Australia and Indonesia possess significant lithium and nickel resources, while China, Korea, and Vietnam have industrial capabilities. This could anchor a regional supply chain for batteries, electric vehicles, and renewables.
Australia’s vast solar and wind potential could support large-scale green hydrogen and ammonia production, essential for low-carbon iron and steel manufacturing. Cross-border electricity trade would further enhance regional energy security. Early initiatives, such as Laos increasing hydropower exports to Vietnam, demonstrate the potential of regional integration.
A Call for Strategic Realignment
The current US administration’s goals prioritize fossil fuel profits, slow the clean energy transition, and curb China’s influence, regardless of the cost to allies or the climate. The rational response for Asian and Australian policymakers is clear: reject the fossil fuel trap and invest in the future.
By decisively shifting towards renewables, the region can achieve cheaper power, greater energy independence, and increased resilience. This approach positions the region at the forefront of the next major industrial transformation.
