Qatar has warned that it will halt liquefied natural gas (LNG) exports to the European Union if new sustainability legislation penalising companies for non-compliance with human rights and environmental standards is strictly enforced. This statement from Qatar’s Energy Minister, Saad Sherida al-Kaabi, highlights the potential consequences of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), set to be implemented from 2027.
The EU’s Sustainability Directive
The CSDDD, adopted in May 2024, is part of the EU’s broader strategy to align corporate practices with its ambitious climate goals, including achieving net-zero emissions by 2050. The directive requires companies to conduct comprehensive due diligence to identify and address adverse impacts on human rights and the environment across their supply chains. Non-compliance can result in fines of up to 5% of a company’s annual global revenue.
“If the case is that I lose 5% of my generated revenue by going to Europe, I will not go to Europe. I’m not bluffing,” al-Kaabi told the Financial Times.
QatarEnergy, the state-owned energy conglomerate, contributes significantly to the country’s economy. Al-Kaabi noted that losing 5% of its global revenue would directly impact the Qatari state and the welfare of its citizens.
Implications for Energy Supplies
Qatar is one of the world’s largest LNG exporters and has become a critical supplier for Europe since the Russian invasion of Ukraine disrupted global energy markets. Long-term contracts with Germany, France, Italy, and the Netherlands have positioned Qatar as a cornerstone of Europe’s energy diversification strategy.
However, al-Kaabi criticised the directive’s provisions, arguing they are unworkable for companies like QatarEnergy, which has a vast global supply chain involving approximately 100,000 suppliers. He stated that compliance would require significant resources, including hiring “a thousand people” to conduct audits or spending millions on external services.
Additionally, QatarEnergy’s hydrocarbon production conflicts with the EU directive’s requirement for companies to adopt a climate transition plan aligned with the Paris Agreement’s 2050 climate neutrality objectives.
Broader Concerns and Possible Repercussions
Al-Kaabi warned that the legislation would not only affect LNG exports but could also extend to Qatari fertilisers, petrochemicals, and investments made by the Qatar Investment Authority. He suggested that penalties calculated on total global revenue are disproportionate and that more reasonable measures, such as targeting income generated within Europe, might be acceptable.
“If they said the penalty is 5% of your generated revenue from that contract that you sell to Europe, I say, ‘OK, I need to assess that. Does that make sense?’” he said. “But if you want to come to my total generated revenue, come on, it doesn’t make any sense.”
The minister emphasised that while QatarEnergy would honour existing contracts, it would explore legal options if subjected to hefty penalties.
EU Response and Potential for Compromise
The European Commission has acknowledged concerns over the CSDDD. Last month, Commission President Ursula von der Leyen proposed an “omnibus” legislative package to streamline reporting requirements across several green finance laws, including the due diligence directive.
The directive has already faced backlash from industries both within and outside the EU, with critics describing it as overly burdensome. The European Chemical Industry Council (Cefic) warned that the rules could create “significant litigation risks” and urged policymakers to simplify the framework to minimise liability exposure.
Non-EU companies, including QatarEnergy, will be subject to the directive if they generate more than €450 million in net turnover within the EU.
A Delicate Balance
Qatar’s warning highlights the challenges of balancing sustainability goals with economic and geopolitical realities. The EU must weigh the risk of disrupting critical energy supplies against the imperative of enforcing its climate and human rights standards.
As negotiations continue, both sides may seek compromises to prevent a breakdown in their energy partnership. Qatar’s suggestion of penalties based solely on European revenue offers a potential avenue for dialogue.
