Since the start of Russia’s invasion of Ukraine, Europe and its allies have looked for ways to curb Moscow’s fossil fuel revenues without inflicting higher energy costs on their own citizens. The latest plan: ban use of European Union ports for re-exporting liquefied natural gas.
Russian producer Novatek PJSC relies on stopovers in the EU to move Arctic fuel from ice-class ships onto conventional tankers. While choking off its access won’t prevent cargoes from reaching Europe — where LNG imports from Russia have actually increased in the aftermath of the war — it will make it harder to send them onward to third countries in Asia, potentially angering key buyers such as China or India.
EU policymakers are discussing the move as part of their 14th package of sanctions against Russia. While it isn’t an outright ban, it would mark the first time Europe enforces concrete measures against Russian LNG.
If approved, the measure may lead to even more Russian fuel circulating in Europe. It would also likely trigger contractual challenges for European logistics firms and political backlash from other gas-buying nations.
What exactly will be sanctioned?
To optimize shipping costs, the Arctic-based Yamal LNG project — led by Novatek — relies on the ports of Zeebrugge in Belgium and Montoir in France to transfer cargoes from its 15 ice-class vessels onto conventional tankers. Typically, an arriving ship discharges at the terminal and a standard LNG carrier loads at about the same time. That will no longer be possible under the ban.
For Yamal LNG, the stopovers are necessary to allow highly-specialized vessels to return to the Arctic plant, where conditions are too harsh for regular ones. Ship-tracking data indicate that up to eight Russian cargoes are transshipped in Europe in some months, although the number varies and drops significantly during summer and autumn, when the Northern Sea Route across the Arctic has less ice and provides faster access to China.
What will it mean for European LNG purchases?
EU imports of Russian LNG totaled 14.4 million tons last year, according to consultant Energy Aspects Ltd. Transshipments, where the fuel is transferred, made up 2 million tons. A likely scenario is that a ban will lead to those extra volumes remaining in the bloc, where Russian LNG already holds a share of about 13%.
For example, Novatek could unload cargoes meant for Asia in Europe and use locational swaps, said James Waddel, head of European gas and global LNG at Energy Aspects. This means it would source gas elsewhere to supply Asian customers.
As a result, that “would open up European governments to accusations that they are turning up their Russian LNG supply while claiming they are trying to minimize it,” Waddel said.
Will Russian LNG production suffer?
The sanctions would further complicate shipping logistics for Russia and force specialized vessels to travel over longer routes. Global fleets are already avoiding the Red Sea after attacks by Yemen’s Houthis, forcing journeys to reroute around Africa. Taking Yamal LNG cargoes directly to Asia would raise freight and logistics costs, according to Energy Aspects, and also tie up the icebreakers for longer.
Russia does have some alternatives: it conducts ship-to-ship transfers near its northern city of Murmansk, which it could use to free up vessels. It can also make use of its Northern Sea Route during summer when ice melts and a variety of ships can access the plant.
If alternative shipping arrangements fail, Russian LNG exports may be reduced. But the country has been pretty resourceful in getting around Western sanctions on oil.
What will the ban mean for Asian customers?
Russian LNG exports to Asian buyers could decline or become more expensive to account for higher freight costs, according to Energy Aspects.
In an extreme scenario, “if Novatek were unable to reconfigure its logistics and Russian LNG exports were shut in, Europe would be disrupting a Russian supply contract with China for 3 million tons per year, which may generate a political backlash from China,” Waddel said.
Relying on the Northern Sea Route or Murmansk transshipment would also depend on ice conditions, shifting supplies to Asia to the second half of each calendar year, he added.
How would European companies be impacted?
European companies such as Germany’s state-owned Securing Energy for Europe GmbH, Shell Plc and TotalEnergies SE rely on transshipments in Zeebrugge and Montoir for Yamal cargoes, according to a contract base published by the global importers’ group.
Those contracts won’t expire until 2038 and 2041, potentially opening the door to force majeure notices or contractual disputes if transshipments are banned.
SEFE, for example, needs Yamal LNG volumes transshipped in Zeebrugge to serve its long-term contract with India’s GAIL Ltd. The chief of the German company told Bloomberg earlier this year that Yamal supplies could stay on the continent if it’s cheaper logistically, while supplying GAIL from other sources. SEFE said it’s monitoring the developments and declined to comment in detail on the potential impact of the sanctions package.
Will there be other losers?
One of the biggest losers might be Fluxys SA, which operates the Zeebrugge LNG terminal. The company built a dedicated storage tank at the terminal to service a 20-year contract with Yamal Trade, a trading arm for Yamal LNG.
The terminal may announce a force majeure in case of sanctions on transshipments, or face penalties as high as €1 billion ($1.1 billion) if it cannot provide Yamal Trade the service for the remainder of the contract’s duration, according to one market estimate. A Fluxys spokesperson said it’s unclear what exactly will be covered by the sanctions, and therefore impossible to estimate the exact impact.
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