- The European Union’s strict emission reduction policies, particularly the Corporate Sustainability Due Diligence Directive, are creating a conflict with major LNG suppliers like Qatar.
- Qatar’s energy minister has repeatedly warned that QatarEnergy will consider alternative markets outside the EU if the bloc continues to demand net-zero plans, potentially leading to a significant loss of LNG supply for Europe.
- The EU is at a crossroads, needing Qatari LNG for energy security while also prioritizing net-zero transition, forcing a difficult choice between its industrial sector and its green economy goals.
The European Union this year saw record-breaking LNG imports over the first half of the year. In a couple of years, however, this might change. Because the EU wants both LNG and strict emission reduction commitments from its producers. And they are not happy about it.
Qatar is one of the biggest suppliers of liquefied to the European Union. Last year, the EU adopted something called the Corporate Sustainability Due Diligence Directive with the purpose of ensuring that “companies in scope identify and address adverse human rights and environmental impacts of their actions inside and outside Europe.”
The second part of that statement refers to the EU requirement that companies above a certain size that do business with members of the bloc must put in place a net-zero plan and follow it strictly. If they do not, the EU could fine them with a sum equal to 5% of their annual global turnover. Given that the directive concerns companies with an annual turnover of over 450 million euros, or $350 million, the sum could be quite hefty.
In December last year, after the passing of the directive, Qatar’s energy minister Saad al-Kaabi put things plainly, speaking to the Financial Times. “If the case is that I lose 5 per cent of my generated revenue by going to Europe, I will not go to Europe . . . I’m not bluffing,” al-Kaabi said. “Five per cent of generated revenue of QatarEnergy means 5 per cent of the generated revenue of the Qatar state. This is the people’s money . . . so I cannot lose that kind of money — and nobody would accept losing that kind of money.”
Qatar has accounted for between 12 and 14% of the European Union’s LNG imports annually since 2022, when Russian pipeline gas flows were slashed. These are not volumes that the EU could lose without any dire consequences, especially after its 18th package of anti-Russia sanctions that specifically target natural gas, aiming to completely cut off supply from the country.
The decision-makers in Brussels appear to realize this, which is why, following al-Kaabi’s warning, discussions began of making changes to the Corporate Sustainability Due Diligence Directive. The discussions quickly resulted in amendments to the original directive that simplified the reporting requirements and reduced their scope—including emission-related requirements—and a delay to the entry into effect of the directive, from 2027 to 2028.
This, however, was not enough for the world’s third-largest exporter of liquefied natural gas. In May this year, the Qatari energy minister wrote a letter to the Belgian government, in which he essentially repeated his earlier warning, saying Qatar will stop doing LNG business with the EU if it continues demanding a net-zero plan from QatarEnergy.
“Put simply, if further changes are not made to CSDDD, the State of Qatar and QatarEnergy will have no choice but to seriously consider alternative markets outside of the EU for our LNG and other products, which offer a more stable and welcoming business environment,” al-Kaabi wrote, as quoted by Reuters, which reported about the existence of the letter earlier this month.
“Neither the State of Qatar nor QatarEnergy has any plans to achieve net zero in the near future,” al-Kaabi also wrote, going on to add, in an annex to the letter, a suggestion that the EU remove the whole net-zero section from the due diligence directive.
This puts the EU at a major crossroads. On the one hand, it really needs Qatari LNG—unless it wants to become almost entirely dependent on the United States for its gas supply, which some would consider unwise. On the other, the current EU leadership has made it clear that a transition to net zero is its top priority, with the possible exception of funding the Ukrainian government. However, it can’t have both Qatari LNG and net zero, so it will be forced to compromise one of these.
The EU imported 75 billion cu m of natural gas as LNG over the first half of the year. This was an increase of a substantial 40% on the first half of 2024, European Gas Hub reported earlier this month. The reasons: higher demand, higher gas exports to Ukraine, and an urgent need to refill depleted winter storage facilities.
Almost all of this additional import volume—90%—came from the United States. However, deepening its dependence on U.S. producers of liquefied natural gas means permanently high energy bills for all businesses depending on gas-generated electricity in any way. The EU has been trying to reduce these bills to avoid a complete industrial meltdown across the bloc.
Ultimately, it comes down to a choice of having an industrial sector at all or having a net-zero economy. This is the choice that the EU is facing at a time when it vitally needs its industrial sector, or at least that part of it that makes steel and turns this steel into weapons.