EU Weighs Sanctions on Russian LNG Projects, Transshipments

(Bloomberg) -- The European Union is discussing with member states proposals to sanction key Russian liquefied natural gas projects and a ban on using EU ports to re-export supplies destined for third countries, as part of an effort to limit Moscow’s ability to generate revenues from the fossil fuel.

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The potential measures are being explored as part of the latest round of sanctions on Russia following its invasion of Ukraine. The goal would be to further hit Russia’s LNG supply supply chain and future revenues at projects like Arctic LNG 2, the UST Luga LNG terminal and the Murmansk plant, according to people familiar with the matter. The US has previously sanctioned some of those projects.

Under the plan, ports in EU member states would also be prohibited from importing Russian supplies that are then re-exported to third countries. But there wouldn’t be a ban on purchasing the fuel for use within the bloc.

The discussions are still at an early stage and some member states are skeptical of the proposals, according to the people, who declined to be named due to its sensitive nature. EU sanctions need the backing of all member states to be adopted.

Other measures under discussion, in what would be the bloc’s 14th package of restrictions, are sanctions on more than a dozen companies that have continued to buy restricted goods from the bloc and supply them to Russia, according to a document seen by Bloomberg, as well as restrictions on Russian shadow fleet vessels as part of efforts to enforce the price cap on Russian oil.

Read more: EU Weighs Sanctions on Firms Shipping Weapons Tech to Russia

Some of Russia’s LNG projects that would be targeted by the measures already face some restrictions on equipment used for liquefaction, for example, and other technologies and services. The EU has also put in place measures that would allow individual countries to block gas supplies coming from Russia on a voluntary basis, although much of the remaining flows are bound up in long-term contracts.

Read more: Europe’s Demand for LNG Set to Peak in 2024 as Crisis Fades

The EU, particularly countries in central Europe, remains dependent on Russia for gas supplies, with imports from Moscow accounting for around 40% of EU demand before the Ukraine invasion. While pipeline gas has fallen significantly since then, Russia supplies around 18 billion cubic meters of LNG to European ports — chiefly in France, Spain and Belgium — with around 1 billion cubic meters of that then being re-exported, according to data from the bloc’s energy regulator.

While Europe weathered last winter with relative ease, thanks to high levels of storage and mild temperatures, the energy crisis showed how sensitive the market was to any disruptions, with prices soaring to over 10 times what they are currently. That left citizens battling record high energy bills and forced some industries to shut.

Separately, EU member states are hoping to reach an agreement next month to tap the profits generated by frozen Russian sovereign assets to support Ukraine.

Read more: EU Drafts Law to Send Russian Central Bank Profits to Ukraine

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