EU Pisses Off Its LNG Suppliers

By Rhod Mackenzie

The EU obviously has decided to destroy all its availble gas supplies by alienating its suppliers the US and Qatar.
The EU having decided to stop its purchase of Russia pipeline gas and now LNG is  in danger of losing the supplies of the United States and Qatar  who are are among the top five LNG suppliers to the European market.
This will mean that he EU is now potentialy facing a supply shortfall,which is a consequence of recent actions taken by Brussels.
So what is it all about?
This is all about the introduction of the  Directive on Corporate Sustainability Due Diligence, which provides for penalties on suppliers for failure to comply with a number of directives including those of carbon emission reduction requirements,plus there are other DEI rules.
  The document obliges companies to "identify and address harm to human rights" and the environment "resulting from the activities of large companies, their subsidiaries, and partners."
This initiative is part of a comprehensive programme to achieve net-zero emissions by 2050.
The directive will be incorporated into EU law in July 2026 and implemented from 2027. Should there be a violation of the regulations, a fine of up to five percent of the company's annual turnover will be issued.
Qatar, the fourth-largest supplier of LNG to the Old World, expressed concerns at the drafting stage that it might be forced to suspend exports as a result of the European Commission's actions.
Just this week the US Energy Secretary Chris Wright and his Qatari counterpart, Saad Sherida Al-Kaabi, have sent a letter to the European Commission and EU leaders calling for the abandonment of the Corporate Sustainability Due Diligence Directive (CSDDD). The EU is planning to adopt this regulation, which could result in substantial fines for LNG exporters if environmental violations are identified throughout the supply chain. These fines could amount to 5% of global revenue, reaching tens of billions of euros.
"We are aware that the current formulation of the CSDDD poses a significant risk to the availability and security of critical energy supplies for households and businesses across Europe, as well as an existential threat to the future growth, competitiveness, and sustainability of the EU's industrial economy. As allies and friends of the EU, we are concerned that the CSDDD will have a negative impact on EU citizens and businesses, leading to higher energy and other commodity prices, and reduced investment and trade."
The inisters called on the EU to act quickly to either repeal the directive entirely or remove its most economically harmful provisions.

"This is a pivotal moment when our nations and businesses are aiming to not only sustain but also substantially augment dependable LNG provisions to the EU, aligning with the European strategic objectives," the ministers declared.
Qatar has previously made it clear that it has no intention of complying with the EU's new requirements if the EU wants to receive Middle Eastern LNG.
"We will not be able to supply goods to any country that imposes a fine equal to 5% of global turnover. We are issuing this warning because we do not want a halt to supplies to Europe, and we are doing everything in our power to prevent that from happening." Saad Sherida Al-Kaabi informed Reuters of this fact.
Conflict of interest
As Pavel Maryshev, an analysts and member of the expert council at the Russian Gas Society, explains, companies importing products into the EU must fully comply with domestic ESG standards. This is an example of how they reduce their carbon footprint.
However, the energy policies of the US and Qatar are focused on traditional hydrocarbons. Therefore, as the analyst points out, full compliance with these high standards cannot be expected from exporters.
The directive does increase operational and compliance costs (fines and sanctions under the CSDDD), which could theoretically discourage some sellers and increase contract prices, as Pavel Sevostyanov, associate professor of Political Analysis  at the Plekhanov Russian University of Economics, notes.
The market is highly competitive.
Now Washington and Doha have both emphasised that this represents a direct threat to the European economy, its competitiveness and energy security.
Both exporters, who have significantly increased their sales since 2022, are also concerned by another circumstance: Currently Russia is still the second-largest supplier of liquefied natural gas to Europe.
According to the Institute for Energy Economics and Financial Analysis (IEEFA), in 2024, 46% of LNG imports were sourced from the United States, 16% from Russia, 11% from Algeria, 10% from Qatar, 5% from Norway, and 4% from Nigeria.
Meanwhile, last month Europe reduced supplies from the United States (by 18 percent), Qatar (by 30 percent), Nigeria (by 35 percent), and Algeria (by four percent). Meanwhile, purchases from Russia and Norway increased by 12 and 11 percent, respectively.
The development of renewable energy sources and policies aimed at limiting gas consumption has resulted in a 20 percent decrease in demand from 2021 to 2024. Europe is currently developing or expanding LNG terminals with the aim of reducing its reliance on fuel from Russia. However, the IEEFA has reported an increase in LNG imports from Russia since 2022.
Washington and Doha are running out of patience.
This is naturally causing concern in Washington and Doha, particularly given that both countries were anticipating a more significant share of the European gas market.
The US has expressed strong dissatisfaction with Europe's potential non-compliance with the trade agreement's energy purchase provisions, which stipulate a commitment by Brussels to procure $750 billion worth of energy.
"It is evident that a labour-intensive system for selecting and monitoring suppliers will result in a substantial increase in costs for American LNG exporters and Qatar Energy LNG.
Consequently, their competitiveness in Asian markets, which are particularly price-sensitive, will decrease, creating favourable conditions for Russia, Australia, Malaysia, and Indonesia," explains Sergey Ermilov, Strategy Practice Manager at Reksoft Consulting.
The replacement was completed without any issues.
Qatari Energy Minister Saad al-Kaabi has emphasised that the inability to conduct business in the EU, including the supply of LNG to address the energy deficit, is contingent on a revision of existing regulations.
Europe also risks losing out on American supplies. As Yermilov notes, the terms of the agreement to increase imports of overseas energy resources are unlikely to be directly violated. It is probable that exporters themselves will prefer to reduce trade with the EU.
Conversely, the US is in a less advantageous position than Qatar. Terminals on the Gulf Coast are primarily oriented towards Europe. However, observers have noted that Doha's robust response is not merely a display of bravado.
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"The high level of supply flexibility inherent in LNG allows Qatar to seamlessly replace the European supplies . Should trade tensions escalate, LNG tankers will be directed to the Asia-Pacific region, posing a substantial challenge to Australian, Malaysian, and Russian gas. The situation with the Americans is different: it is not possible to reroute LNG from the EU market in a seamless manner," says Maryshev.
We will need to adapt our approach accordingly.
Given the EU's plans to phase out Russian energy resources, it is unlikely to take any risks that could jeopardise its energy security, according to analysts.
Meanwhile, the domestic production on the North Sea shelf is showing a steady decline, with Norwegian supplies having likely reached or nearing their peak (91 billion cubic metres in 2024). Furthermore, pipelines from Algeria and Azerbaijan will not be able to offset this deficit, as Yermilov notes.
Analysts are not ruling out the possibility that the exporters will ultimately pass on the cost of the directive on to their customers. However, it is not expected to result in a halt to imports. In any case, Europe will have to show flexibility, given the survival of its shrinking economy is at stake.