EU to set 2027 deadline for severing energy contracts with Russia

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The European Commission will set a 2027 deadline for EU companies to sever any remaining energy contracts with Russia and shift to other sources including the US, according to officials.

The plan, to be announced on Tuesday, has been closely guarded ahead of publication by senior EU officials wary of its likely impact on the energy market. It marks an intensification of the bloc’s efforts to wean itself off Russian fossil fuels since Moscow’s full-scale invasion of Ukraine in 2022.

While Russian oil and coal are subject to strict sanctions, the EU has struggled to ban gas imports because of opposition from pro-Russian governments such as Hungary and Slovakia that argue doing so would increase energy prices.

Four officials briefed on the commission document said it would require companies to end all spot market gas contracts with Russian suppliers by the end of this year and to end all long-term contracts by 2027.

The measures, which once announced must still be approved by a majority of EU member states and the European parliament, are intended to get around the bloc’s need for unanimous approval from member states for imposing gas sanctions. Hungary and Slovakia have said they would block any sanctions move.

Three of the officials said Brussels would also push for authorities to be given greater oversight of commercial contracts in order to trace buyers of Russian fuels.

Before 2022, the EU sourced more than two-fifths of its pipeline gas imports and around 28 per cent of imported crude oil from Russia. Russia’s share has since dropped to around 13 per cent of gas imports, including liquefied natural gas, and less than 3 per cent of oil imports.

Despite a significant decrease in pipeline gas, the EU has increased its imports of LNG from Russia, with shipments hitting record levels last year.

According to Kpler, a data and analytics company, there were 17 shipments from the Yamal LNG plant in Russia to EU destinations in April. The vessels transported 1.2mn tonnes of LNG into the bloc, with around 59 per cent of the cargo delivered to France and 23 per cent to Belgium. The remainder went to the Netherlands, Portugal and Spain.

Unlike Hungary and Slovakia, other member countries including Netherlands and Belgium have said they would support sanctions on Russian gas as a way to force companies to cut their Russian contracts.

“This push to get to zero will not be easy,” said one senior EU diplomat, adding that companies would have to pay more for gas if barred from buying from Russia. “If you want to lift all secrecy on commercial contracts there is going to be a price for that.”

The diplomat said it would be difficult to prevent circumvention of the proposed rules, such as gas being sent through the TurkStream pipeline ostensibly from Azerbaijan but potentially including supply from Russia.

The commission document is intended in part to signal to Washington that the EU is ready to buy more US LNG as part of a deal to reduce its trade deficit, officials have said.

The phaseout plan will also cover nuclear fuel and spare parts. Finland, Bulgaria, Czech Republic, Slovakia and Hungary are all reliant to different extents on Russian nuclear technology.

All of these except Hungary have signed contracts with the US nuclear company Westinghouse to replace their Russian fuel rods, but parts remain difficult to replace as few non-Russian manufacturers make spares for old Soviet-style reactors.

One EU official said the road map was intended to ensure member states would “run into difficulties” if they maintained their Russian contracts.

Bloomberg first reported the 2027 phaseout date.

Additional reporting by Paola Tamma in Brussels and Chris Cook in London