Qatar’s Energy Minister Saad al-Kaabi has declared the country might halt its liquefied natural gas (LNG) exports to the European Union if the bloc rigorously enforces its new corporate sustainability directive. This move signifies Qatar's response to EU legislation aiming to curb environmental damage and forced labor within supply chains. The directive, which the EU adopted earlier this year, mandates significant checks and corrective measures for large companies, with hefty fines for non-compliance.
During recent discussions with the Financial Times, al-Kaabi did not mince words, stating, "If I were to lose 5% of my revenue by going to Europe, I won’t go to Europe. I’m not bluffing." These comments reflect the gravity of the situation for Qatar, where such losses directly translate to national revenue, as he noted, "Five percent of generated revenue of QatarEnergy means 5 percent of generated revenue of the Qatar state. This is the people’s money, so I cannot lose such an amount – and no one would accept losing such much money."
The EU’s Corporate Sustainability Due Diligence Directive imposes fines of up to 5% of global turnover for breaching environmental and human rights obligations. This has spurred backlash from various corporations and has put Qatar, one of the world's largest LNG exporters, at odds with EU regulations. Qatar’s current supply accounts for around 12%-14% of the EU’s LNG needs, with shipments continuing amid the backdrop of dwindling supplies from Russia.
QatarEnergy, the state-owned oil and gas company, has been proactive, negotiating long-term contracts with European giants like Shell, Eni, and TotalEnergies. These contracts align with Qatar’s expansion plans for its LNG production capacity, which is set to increase from 77 million tons to 142 million tons annually by 2027. This significant expansion reflects Qatar's ambition to solidify its place as a leading player not just for Europe but also for Asian markets.
Al-Kaabi was clear about the potential consequences of stringent EU regulations, insisting, "I will stop sending gas to Europe." These reflections come at a time when the geopolitical dynamics around energy supply are particularly tense, following the Russian invasion of Ukraine. Since then, Qatar has delivered 37.1 million tons of LNG to the EU out of total imports reaching approximately 281.19 million tons, illustrating Qatar’s importance as a supplier during the crisis.
While Qatar has signaled its intention to comply with existing contracts, al-Kaabi has indicated the country is willing to explore legal avenues should they face penalties under the new EU law. "We will not break our existing LNG contracts... but I will look at legal avenues if we are penalized," he stated, highlighting Qatar’s position against what could be deemed unjust financial impositions.
Looking beyond the current situation, Qatar is repositioning itself amid growing competition from top suppliers like the United States. The U.S. has ramped up its LNG exports and is seen as the biggest supplier, creating pressure on Qatar. Nevertheless, al-Kaabi reassured stakeholders of Qatar's commitment to remain competitive regardless of external pressures, particularly from anticipated U.S. policy shifts under President Donald Trump.
Business groups across Europe have voiced concerns about the directive’s potential impact, arguing it adds layers of regulatory burden and could deter investment, which already poses challenges for businesses at large. This adds another layer of complexity to the relationships between Qatar and the EU.
The future of Qatar's relationship with the EU will largely depend on the bloc's ability to negotiate and review its directive without compromising its sustainability goals. With energy demands high and geopolitical tensions rising, Qatar’s LNG exports appear to be at a crossroads, balancing profitability with regulatory compliance. Visitors to Qatar can now observe first-hand the decisions being made within its government as it alters its approach to international energy relations and sustainability.
Time will tell whether the EU can maintain its steady flow of LNG from Qatar, or whether the threat of halted shipments will force alterations to its regulatory framework. Al-Kaabi's resolve indicates Qatar will not easily cave to regulatory pressures, showcasing the delicate balance of energy diplomacy at play.
