EU Likely to Propose Quota to Ban Russia Gas Imports by End 2027

Pipework stands at the second train liquefaction and purification facility during its official opening at the Yamal LNG plant, operated by Novatek PJSC, in Sabetta, Russia, on Thursday, Aug. 9, 2018. Novatek is one of the largest independent natural gas producers in Russia. Photo by Andrey Rudakov /Bloomberg

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(Bloomberg) — The European Union is likely to propose a quota as the mechanism to enforce a bloc-wide import ban on Russian gas by the end of 2027, which officials say should provide companies with a legal basis to terminate long-term purchase contracts.

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The European Commission is discussing the introduction of an import quota of zero for Russian gas, according to people with knowledge of the matter. That will allow European buyers to invoke force majeure to terminate agreements with Russian suppliers, said the people, who asked not to be identified commenting on internal talks.

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The plan provides the clearest signal yet as to how enforceable and effective the ban will be after the EU earlier this month unveiled a broad road map to gradually phase out Russian fossil fuels. The quota would be directly applicable in all member states, and officials expect that its effectiveness would be comparable to that of a sanctions regime, the people said. 

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While no longer the bloc’s biggest supplier, Russia still accounts for almost a fifth of European demand and the Kremlin uses those revenues to fund its war in Ukraine. 

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The quota — to be proposed in mid-June — would need qualified majority support from national governments and a majority backing from the European Parliament to take effect across the bloc, the people said. 

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The plan may still change as talks in the commission continue. The EU’s regulatory arm has a policy of not commenting on ongoing work. 

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Under its two-step roadmap announced earlier this month, the commission wants to initially ban all new contracts and halt existing deals on the spot market — a third of Russian gas flows to the bloc — by the end of 2025. Long-term contracts will be phased out by the end of 2027. 

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The cut in reliance on Moscow will open the way for US suppliers to send more LNG to Europe, something that President Donald Trump has repeatedly called for. 

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For now, the bloc remains an attractive destination for cargoes from Russia’s Yamal LNG plant in the Arctic, with long-term contracts signed by companies such as TotalEnergies SE, Naturgy Energy Group SA and Germany’s Securing Energy for Europe GmbH.

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One of the key questions for the industry has been what measures the commission would propose to enable companies to walk away from purchasing obligations under existing contracts. 

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The EU has avoided proposing sanctions in relation to gas imports because opposition from Hungary and Slovakia — which continue to import by pipelines — would deny it the necessary unanimous support. Instead, the commission plans to rely on various provisions in the EU laws that enable the use of tools requiring qualified-majority backing.

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Such instruments are commonly used in trade policy and can be used in energy policy to ensure the security of supply. The EU also relied on qualified-majority-support measures to contain a crisis that three years ago pushed energy prices to records following a cut in Russian gas supplies.