EU approves 14th Russia sanctions package, includes first-ever LNG sector measures

5 months ago 11

EU member states on Thursday (20 June) approved a 14th package of sanctions against Russia over its war in Ukraine, which for the first time included a ban on re-exports of Russian liquefied natural gas (LNG) in the EU.

“This package provides new targeted measures and maximises the impact of existing sanctions by closing loopholes,” the Belgian EU presidency said about the agreement, which came after member states had debated the new measures for over a month.

“This hard-hitting package will further deny Russia access to key technologies,” European Commission President Ursula von der Leyen said.

“It will strip Russia of further energy revenues and tackle Putin’s shadow fleet and shadow banking network abroad,” she said.

European ports in Belgium, France, The Netherlands and Spain are currently the main entry points for LNG deliveries from Russia’s Siberian Yamal Peninsula, with some of them being key hubs for re-exports to countries such as Turkey, China or further Southeast Asia.

While Hungary had threatened to veto the package on principle over its general opposition to Russian energy sanctions, Germany was the last hold-out over the inclusion of a so-called ‘no Russia-clause’, which it feared would hurt their businesses.

One of the impacted companies would be the Securing Energy for Europe GmbH (SEFE), registered in Germany, which was formerly Gazprom Germania. It acts as a conglomerate for 40 entities operating in more than 20 countries in Europe, Asia and North America.

It requires Yamal LNG volumes trans-shipped in Zeebrugge to serve its long-term contract with India’s GAIL Ltd and other buyers.

The company said it is monitoring the developments and declined to comment in detail on the potential impact of the sanctions package.

Eventually, Thursday’s agreed text watered down an initial European Commission proposal by dropping the measure that would have forced subsidiaries of EU companies in third countries to contractually prohibit the re-exports of their goods to Russia.

The new restrictions under the package will not hit the majority of Russia’s liquid natural gas (LNG) exports to the EU.

However, the ban on trans-shipments is the first restriction the bloc has applied to LNG, a first-ever far-reaching measure that would have once seemed unthinkable in terms of reaching unanimity at the EU level.

Now, ports in the EU will not be allowed to resell Russian LNG and financing for Russia’s planned Arctic and Baltic LNG terminals will be blocked.

However, some experts in the gas market have questioned whether the measures will have any tangible impact as Europe is still purchasing Russian gas. Meanwhile, trans-shipments from EU ports to Asia equate to just 10% of all Russia’s LNG exports.

With Germany having asked for an impact assessment, many EU diplomats are hopeful that the initial proposal could potentially be re-included in a future sanctions package proposal negotiations.

“Germany was fearful of some clauses hurting their industry – well, aren’t we all? But there is a limit to that if we have a common objective, and thankfully they didn’t want to end up as the next Hungary,” one EU diplomat, speaking on the condition of anonimity, said.

“There is room for more in the long-term,” a second EU diplomat, said.

**Nikolaus Kurmayer contributed reporting.

[Edited by ]