EU proposes first sanctions on Russia’s LNG sector

Energy News Beat

BRUSSELS — For the first time, the European Commission has proposed sanctions on Russia’s powerful liquefied natural gas industry, according to documents seen by POLITICO.

The measures wouldn’t directly bar Russian LNG imports to the EU. Instead, they would prevent EU countries from re-exporting Russian LNG after receiving it — confirming POLITICO’s previous reporting.

“This provision does not affect imports into the EU,” the proposal stresses.

The sanctions would also ban EU involvement in upcoming LNG projects in Russia. “Such a measure limits the expansion of Russia’s LNG capacity and thereby limits Russia’s revenues,” the proposal argues.

Additionally, the Commission, the EU’s executive, wants firms to share information on Moscow’s LNG imports more widely.

The move marks the first time the bloc has targeted Moscow’s lucrative gas sector, part of Brussels’ 14th sanctions package against Russia more than two years after it invaded Ukraine. And it comes as evidence mounts that Western efforts to drain Moscow’s fossil fuel revenues are falling woefully short, with an oil price cap largely failing and sanctions evasion rampant.

Still, while going after LNG marks a significant shift in EU strategy, the proposed penalties would only touch a fraction of Russia’s fossil fuel revenues. Last year, EU resales of Moscow’s LNG made up just a quarter of Russia’s total revenues from trading the highly-cooled gas. And the sanctions on upcoming LNG projects would be mostly preventative, experts say, as none of them currently send cargo to Europe.

EU ambassadors are set to discuss the measures on Wednesday. There is growing political support from EU bigwigs like Germany and Italy to hit Russian LNG, but Hungary — highly reliant on Russian energy — has historically blocked all gas sanctions.

The untouched gas

In the last two years, the EU has taken extraordinary steps to shun Russian energy, enacting bans on its coal and seaborne crude oil.

Yet Moscow has increasingly exploited loopholes and tapped black markets to keep the profits flowing. Meanwhile, a Western alliance attempt to cap Russian oil sales at $60 per barrel has largely fallen apart, with the product consistently selling above the desired limit.

That has increased pressure on the EU to clamp down on Russian gas.

Until now, the EU has stayed away from penalizing the vital energy source, with Hungary considering it a red line and several EU countries using it to keep the lights on.

Penalties or not, the EU has dropped its Russian gas imports by around two-thirds since the war began as Moscow slashed supplies and countries turned to alternatives in Norway and the U.S. By last year, Russian LNG made up just 5 percent of the EU’s energy consumption. Still, that amounted to an estimated €8 billion for the Kremlin.

The proposal cites this cash influx, noting that “Russia derives significant revenues” from its LNG sales. It specifically suggests prohibiting the use of EU ports, finance and services to re-export Russian LNG.

The proposed sanctions would force Moscow to overhaul its LNG business model — particularly for supplies it sends to Asia through Europe, where Spain, Belgium and France are major hubs. Without these countries as a pit stop, Russia would have to ship LNG through the Arctic Sea to Asia, requiring specially equipped icebreakers that are in short supply.

“If they can’t transship in Europe, they might have to take their ice-class tankers on longer journeys,” said Laura Page, a gas expert at the Kpler data analytics firm, during an interview last week while the sanctions were still being discussed. Russia, Page added, “may not be able to get out as many loadings from Yamal because their vessels can’t get back as quickly.”

The change would drain €2 billion from Russia’s LNG revenues, based on last year’s figures, Petras Katinas, an energy analyst at the Centre for Research on Energy and Clean Air think tank, estimated last week. That’s a lot of money but represents only 28 percent of Russia’s LNG profits and just over a fifth of its exports to the EU last year.

Meanwhile, the suggested sanctions on Russian LNG projects are a “paper tiger,” Katinas said, given these firms aren’t shipping anything to Europe.

Shadows, propaganda and history

The EU is also going after a critical component of Russia’s sanctions evasion strategy: Its “shadow fleet” — old vessels with murky ownership and insurance Moscow has purchased in large numbers to escape Western oil sanctions.

The Commission wants to ban EU ports from assisting vessels participating in “energy transport contrary to the objective of reducing Russia’s revenue in this sector.” It also suggests barring these ships from receiving EU services or financial assistance.

The energy measures are not the only new penalties Brussels is pushing.

It wants to sanction Voice of Europe, days after startling allegations that the pro-Kremlin website was spreading propaganda through “paid” European politicians. The proposal suggests banning the outlet.

There is also a prohibition on exports of Ukrainian cultural heritage items if there are suspicions the “goods have been unlawfully removed from Ukraine.” The measure aims to stop the wartime theft of historic items like paintings, religious artifacts and archeological treasures.

Separately, the package includes a recommended ban on helium imports — an attempt to cripple a small-but-growing Russian sector targeting high-tech customers in the semiconductor and medical equipment business.

Another item in the package is a proposal to mirror all of the EU’s Russia sanctions on neighboring Belarus, which has been effectively wrapped in Moscow’s embrace. Belarus’ customs union with Russia means the country serves as a major route for circumventing EU sanctions.


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The post EU proposes first sanctions on Russia’s LNG sector appeared first on Energy News Beat.




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