EU Imposes Small-Scale Sanctions on Russian LNG Exports

A Novatek-chartered icebreaking LNG carrier (foreground) transships cargo to a foreign-flag conventional LNG carrier at Zeebrugge (Fluxys file image) — A Russian LNG carrier (foreground) transships Russian cargo to a foreign-flag LNG carrier (background) for re-export at Zeebrugge (Fluxys file image)

The EU's member states have agreed to roll out the bloc's first-ever sanctions on Russian LNG, though the impact on trade volume is expected to be minimal.

Diplomats with inside knowledge of the talks say that the 14th package of EU sanctions will ban Russian LNG re-exports from European ports. Novatek uses ports in France and Belgium to transload and re-export LNG from its Yamal project to markets overseas, like China. The use of EU infrastructure allows Novatek to shorten the voyages of its unique icebreaking LNG carriers, freeing them up for more trips to and from Yamal.

However, EU-based transloading and re-export activity represents a small fraction of Russian LNG shipping, according to analysts at Atlas Network. European utilities will still be able to purchase and import Novatek's Russian LNG for local consumption, continuing a trend that began when Russian pipeline gas was cut off in 2022. The likely outcome, according to Atlas, is that the small fraction of Russian LNG that used to be re-exported will now remain in Europe. In this scenario, Novatek and its trading partners would likely use locational swap agreements with non-Russian LNG producers in order to fulfill contractual obligations for re-export cargoes.

The package also bans European financing for three Russian LNG export terminal projects, diplomats told Reuters. It also adds more Russian "dark fleet"s tankers to the list of EU-sanctioned vessels.

The details of the sanctions agreement have not yet been released, but EU leaders said that the overall package would have a substantial impact. It is the EU's 14th set of Russian sanctions measures since the invasion of Ukraine in 2022.

"This hard-hitting package will further deny Russia access to key technologies," European Commission President Ursula von der Leyen said in a statement. "It will strip Russia of further energy revenues and tackle Putin’s shadow fleet and shadow banking network abroad."

"This package provides new targeted measures and maximizes the impact of existing sanctions by closing loopholes," the Belgian presidency of the European Council said in a brief statement.

The package omits a long-discussed element that would have required the overseas subsidiaries of EU companies to stop re-exports of their goods to Russia. Moscow's weapons developers have had few problems gaining access to Western high-tech components for missile guidance systems, navigation equipment and other key defense technology, in part because sanctions can be easily evaded by routing shipments through third countries like Kazakhstan or China. The proposed limit on European-owned subsidiaries would have closed a loophole, but the German government objected, fearing that it would damage small German businesses. Ultimately this measure was dropped, diplomats told Euractiv and Politico.