The case for a full set of sanctions against Russia’s LNG industry

Stricter sanctions and ending Europe’s LNG purchases from Russia can disable funding for the Kremlin’s war of aggression against Ukraine and halt its gas infrastructure expansion plans in the Arctic, writes Andrii Zhupanin.

Andrii Zhupanin is a member of Parliament of Ukraine and chairman of the subcommittee on Natural Gas Policy.

Banning Russian liquefied natural gas (LNG), imports must be a starting point for more strategic action by the EU and US to deliver durable peace and climate action.

Strict sanctions in the energy sector, the backbone of Russia’s economy, and their diligent enforcement are the key to disabling Russia from funding its war of aggression.

Yet, this is not the only reason why last week in the Verkhovna Rada, the Committee on Energy, Housing and Utilities appealed to the European Commission and the US government with an urge to put an end to Europe’s LNG purchases from Russia and enact secondary sanctions to halt Russia’s frenetic plans to expand its notoriously leaky gas infrastructure in the Arctic.

Russian gas will stay in the ground without access to international markets and will not drive climate change.

Last winter showed the EU is much more energy resilient without Russian energy supplies than earlier feared, and with the right policy tools, Europe is in a strong position to phase out Russian LNG supplies this year rapidly.

Spain, Belgium and France should follow the lead of the Netherlands, which is already working on ending all liquefied natural gas imports from Russia.

In the first quarter of 2023, the EU purchased Russian liquefied natural gas at the highest prices in three years, according to Bruegel data.

Though the bloc has sanctioned Russian crude oil and oil products, imports of Russian LNG to the EU are still free-flowing. The EU imported 19.2 billion cubic meters of Russian LNG last year, a 35% increase from 2021.

In the last six months, the EU was importing from 10 to 15 TWh (7-11 million tons) of Russian LNG per month, accounting for around a third of all Russian LNG trade.

Further expansion of Russian LNG trade could compensate for the loss of the pipeline gas market in the EU due to maritime supplies and increase Russia’s influence on pricing in global energy markets.

According to official statements released on March 9, Russia aims to nearly triple its LNG export capacity to 100 million metric tons per year (mtpa) by 2030 from the current 35 mtpa.

Industry sources show that Russia has 51 million tons per year of potential new export capacity currently under development.

Sales of Russian LNG to Europe on average over the past six months account for more than $40 million per day, according to the Centre for Research on Energy and Clean Air (CREA), with around half of this ($20 million) going to the federal budget in the form of taxes.

On the other hand, the cost of the Russian X-22 missile, which hit a multi-storey building in the city of Dnipro on January 14 and killed 45 civilians, is about $400 thousand. Thus, every day of available supplies of Russian LNG to Europe provides the aggressor state with funds for equipping its military with more than 50 such missiles.

A call for secondary sanctions to end the war and protect the climate Secondary sanctions are necessary to compensate for an obvious weakness of existing primary provisions that preclude U.S. and EU companies from participating in Russian LNG infrastructure buildout, which is implicitly inviting Chinese companies to take their place.

Secondary sanctions, such as secondary trade boycotts and divestment, involve additional economic restrictions to inhibit third-country companies from doing business with sanctioned entities.

The US government first significantly used secondary sanctions against Iran in 2010. Since then, both the White House and Congress have also demonstrated their effective use against North Korea and Syria.

Placing Russia’s gas infrastructure expansion on ice is essential for defuelling Russia’s military, ending the war in Ukraine, and protecting the climate and Arctic ecosystems.

Russia is host to a large number of ‘methane bombs’ – gas extraction projects that are expected to produce more than one billion tonnes of CO2 equivalent from methane leaks and burning of produced gas.

As Russia scrambles to get contractors and equipment suppliers, foreign contribution to the construction of the Arctic LNG-2 could unlock extraction at new gas fields – set fuse to ‘methane bombs’ and put the 1.5°C Paris Agreement climate target off reach.

As the world is inching towards catastrophic climate change, unlocking production from new gas fields in Russia and further gas exploration in the Arctic could push the world off the cliff.

Today Russia and its deranged plans for fossil fuel industry expansion are posing a deadly threat to the world. A 2019 US National Energy Technology Laboratory study found that Russian gas piped to Europe emits more greenhouse gasses than European coal, which has been mined domestically.

When the US and the EU launched the Global Methane Pledge in 2021, nine of the world’s top 20 emitters signed onto the effort to reduce methane emissions by a third until 2030. Russia did not.

Yet, there are even more dangers. Continued Russian gas exploration in the Arctic and increased production could also increase geopolitical tensions in the region and lead to militarisation and the deployment of new weapons in the most environmentally sensitive region of the planet, including new nuclear weapons.

The introduction of secondary sanctions on Russia’s LNG sector in full swing, in particular, to force a full stop of the Arctic LNG-2 project, is the obvious necessary step that the EU and the US must implement to uphold the stated security and climate policies.

Enacting a full set of sanctions to pull the plug on Russia’s LNG expansion plans immediately is an emergency lever that the US and the EU must pull together.