For the first time since Vladimir Putin's regime started a war in Ukraine, the European Union intends to impose sanctions on Russian gas. The 14th package of sanctions is expected to include a ban on the transshipment of Russian LNG in European ports and measures against three Novatek companies. This was reported by The Moscow Times.
The European Commission's draft proposals could be published in the coming days, Politico reports, citing three EU diplomats.
A significant portion of supplies, primarily from Novatek's Yamal LNG project, pass through European ports and are then shipped to other countries. So, last year, according to the Center for Energy and Clean Air Research (CREA), the EU received 20.2 billion cubic meters of LNG from Russia. Of these, 6 billion were transhipped in the bloc's ports, of which 4.4 billion cubic meters (22%) went to non-EU countries and 1.6 billion (8%) to other EU countries.
The price of Russian liquefied natural gas delivered to the EU (including for transshipment) amounts to EUR 8.2 billion, according to CREA estimates. Thus, Russia's losses from the ban on the use of gas transshipment ports for other countries will amount to 1.8 billion euros, and for all countries, including the bloc countries, 2.5 billion euros.
However, the embargo will force Novatek to radically change its business model, as Yamal LNG uses European ports to transfer gas from ice-breaking LNG tankers to conventional ones - and then ship it to other countries. “If they can't handle gas in Europe, they will have to send ice-breaking tankers on longer routes, which means the number of deliveries will be reduced because the ships won't be able to return as quickly as they are now.” ; says Laura Page, gas expert at Kpler.
The routes for transporting liquefied natural gas from the Arctic will become much longer and more expensive, and export volumes will decrease, adds Vladimir Slivyak, co-chairman of the environmental group Ecodefense!: “15 Arc7-class ice-breaking LNG tankers are built specifically for the export of LNG from Yamal... From December to June [the terminal] is exclusively served by these tankers. Although served by other vessels from July to November, the lion's share even during this period is carried by Arc7 tankers.“
Petras Katinas, an energy analyst at CREA, called the port ban a "good first step," but not enough to seriously hurt the Kremlin's revenue as it wages war in Ukraine. But Katinas considers the possible EU sanctions against the Arctic LNG 2 project and its terminals in Murmansk and Ust-Luga pointless, as they are not related to supplies to Europe.
Although pipeline gas imports from Russia fell by more than 80%, the EU increased its LNG purchases by 40% last year compared to pre-war 2021. This year, according to data from S&P Global as of April 9, LNG imports reached 4.89 million tons (6.85 billion cubic meters): this is more than 16% of total LNG supplies, while in the first four months of 2023, the share of Russian gas was 12.74%. The main buyers are countries with large capacities for receiving and regasifying LNG: Spain, France and Belgium. Russia's share of their total LNG imports this year is 32%, 49% and 27% respectively.
Depending on how the European Commission defines the term “transshipment“ in its ban document, in Europe the sanctions may have the biggest impact on Spain's Naturgy, France's Elengy and Belgium's Fluxys, which have long-term contracts related to the supply and transshipment of LNG from Yamal, Katinas told Politico. According to him, it is still unclear how the European Commission will formulate the ban and whether it will allow companies to unilaterally terminate contracts without fear of lawsuits and fines.