The European Union may have to rely on sanctions to deal with rising imports of Russian liquefied natural gas to comply with its ban on all fossil fuel shipments from Moscow by 2027, according to a leading think tank.
An outright embargo on flows from Russia’s Yamal LNG plant has so far been politically unpalatable in Brussels, but the EU has several avenues to curb imports, including using its new mechanism to coordinate purchases fuel sets, Brussels-based Bruegel analysts said in a report. report Other options include soft sanctions that discourage new purchases but do not break existing supply contracts, or even do nothing.
LNG has become a stumbling block in the bloc’s efforts to wean itself off Russian energy, with Belgium, Spain and France receiving record volumes of the fuel in 2022 and deliveries remaining strong this year. Unlike coal and oil, the EU has not yet applied any sanctions to gas. Kadri Simson, the bloc’s energy commissioner, has called for companies not to renew expiring fuel contracts.
Bruegel says the EU could adapt its newly created energy platform to manage limited Russian LNG supplies. It would do so by penalizing imports, forcing the termination of long-term contracts and allowing the EU to offer to buy LNG at a below-market price through the platform, the analysts wrote.
Implementing such a move would also likely require the unanimity of member states, some of which may not want to stop imports. Bruegel estimates that Spain and Portugal would be most affected by such an embargo, which have the highest share of Russian LNG in their total gas supply.
Also, “there is no guarantee that Russia will want to engage with this strategy, and Russia might prefer to reject any LNG exports to the EU,” Bruegel said.
Even so, the embargo and offer to buy Russian LNG would only partially risk tightening the global market. And the EU could manage without this source of supply, the analysts wrote.
“The EU has a toxic addiction to Russian LNG, which needs to be addressed quickly,” said Simone Tagliapietra, co-author of the report. “The good news is that, with the necessary preparations, the EU can live without it.”
In March, EU energy ministers approved a proposal that would allow member governments to temporarily block Russian exporters from reserving facilities needed for shipments. The approach also calls for a price cap on Russian LNG cargoes used by the EU or Group of Seven countries for transhipment, insurance or shipping services. The position has yet to be negotiated with the bloc’s parliament.
–With the assistance of Ewa Krukowska.
