EU seeks to cut off Russia from Asian LNG buyers with new sanctions

European Union leaders on Thursday approved punishing new sanctions on Russia’s gas sector for the first time, in a move that could starve Vladimir Putin hundreds of millions annually in fossil fuel revenue.

The measures are intended in part to prevent Russia from routing liquefied natural gas shipments through Europe to Asia, where some of its biggest customers are.

The new sanctions package bans EU countries from importing and re-exporting Russian LNG at their ports, a process known as transshipments. Once approved, it will be the fourteenth Russian sanctions package passed by the bloc since the start of Russia’s war in Ukraine.

The new sanctions also cracks down on the “shadow fleet” of off-book tankers that continue to export Russian crude oil to buyers at prices above the $60 price cap set by the Group of Seven nations, and blocks financing for Russia’s Arctic and Baltic LNG terminals.

“This hard-hitting package will further deny Russia access to key technologies. It will strip Russia of further energy revenues,” European Commission President Ursula von der Leyen said in a post on X.

It will also “tackle [Russian President Vladimir] Putin’s shadow fleet and shadow banking network abroad,” she added.

EU foreign ministers are slated to vote to approve the sanctions package during their meeting on Monday.

The new sanctions come after weeks of protracted negotiations within the bloc, including opposition from Germany and from Hungary, whose government has been staunchly opposed to most Russian energy sanctions.

Germany had balked at a circumvention measure that leaders had agreed to water down in the final text.

The EU has scrambled to reduce its dependence on Russian gas in the two years since its invasion of Ukraine and subsequent throttling of most piped gas supplies. However, Russian LNG still made up 5% of the bloc’s gas consumption in 2023, according to an estimate from the Centre for Research on Energy and Clean Air, a European think tank.

The group estimates that the EU paid Russia roughly $8.9 billion in 2023 for LNG imports.

Perhaps most significantly, the re-export ban will force Russia to upend its current shipping model to send LNG to its biggest buyers in Asia.

Russia currently routes many of its shipments to Asian buyers through ports in the EU countries of Spain, Belgium, and France, according to data compiled by CREA.

Without the ability to ferry these supplies through Europe, Russia will be forced to send a majority of its supplies to Asia via the Arctic Sea, a lengthy trip that requires the use of ice-class tanker ships needed to ship LNG through the Arctic.

Unlike crude oil tankers, these ships are highly specialized and much more limited in number, making them easier to track and regulate. They were also included in the U.S.’s latest tranche of Russian sanctions announced earlier this year.

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The Belgian government, which currently has the rotating presidency of the European Council, said in a post on X that the sanctions “provides new targeted measures and maximizes the impact of existing sanctions by closing loopholes.”

Russian oil and gas revenue climbed to $126 billion in April, more than doubling the earnings from the same period last year and underscoring the sense of urgency for Western leaders to act.