‘Not bluffing’: Qatar joins Russia to strike at Europe’s weak spot as it stares at energy crisis

As harsh winter takes over Europe, the continent may expect an energy shortage for a host of reasons. On Sunday, Qatar warned that it will cease gas exports to the European Union if the bloc’s countries impose penalties under recently adopted legislation on sustainability due diligence. The warning came from Qatari Energy Minister Saad Sherida al-Kaabi during his conversation with The Financial Times.

In July, the EU passed a Corporate Sustainability Due Diligence Directive, which entered into force in July this year. This allows the regional body to fine up to 5 per cent of a company’s annual global revenue if the management fails to address adverse human rights or environmental impacts. “If I lose 5 per cent of my revenue by supplying Europe, I won’t supply Europe,” al-Kaabi told the Financial Times. “I’m not bluffing,” he added.

The warning can be concerning since Europe is losing out on its key suppliers. Qatar became a critical supplier of liquefied natural gas to Europe as countries reduced their over-reliance on Russian energy. Europe imposed several sanctions, soon after the Russia-Ukraine war jolted the world. In response to the sanctions, Russia reduced its energy supplies significantly, forcing the countries to tap into their reserves.

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In the Financial Times interview, Al-Kaabi, who is also the chief executive of QatarEnergy, said the EU legislation would be unworkable for companies like QatarEnergy. Here’s a look at how Europe might be more vulnerable this winter.

What is the EU’s Corporate Sustainability Due Diligence Directive? The new headache

The directive came into force in July which allows the European Union to impose fines of up to 5 per cent of a company’s annual global revenue if the management fails to address adverse human rights or environmental impacts. The move has drawn out criticism from both within and outside the European Union.

With the law being passed in the EU parliament. the member nations are now required to make it their national law by 2026 and one year later, in 2027, the rules will start to apply to companies, with a gradual phase-in between three and five years after entry into force. The directive was seen as a border strategy to align corporate practices with the motive to achieve net-zero emissions by 2050.

Europe is running out of options

Rapidly depleting gas reserves and looming supply cuts from Moscow are making the continent plunge into a new energy crisis. While Qatar has issued a warning, the prolongation of the Russia-Ukraine war is coming with its own share of challenges.

Earlier this month, Ukrainian President Volodymyr Zelenskyy and his Russian counterpart Vladimir Putin made it clear that the two nations would not renew a key gas transit deal. The five-year deal to ship Russian gas across Ukraine is scheduled to expire at the end of this month.

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“There will be no such contract, it’s clear now,” Putin said during his annual press conference. “There is a question of what to do with it now — but that’s not our problem” and Russia’s gas giant Gazprom PJSC “will survive,” he added.

With the threat of losing its too key energy suppliers, the continent is running out of alternatives. With the comeback of US President-elect Donald Trump, it is quite less likely that Washington would be of any help to resolve the crisis.

On Friday, Trump warned the EU to buy more US oil and gas or they will have to deal with high tariffs. “There will be no such contract, it’s clear now,” Putin said during his annual press conference. “There is a question of what to do with it now — but that’s not our problem” and Russia’s gas giant Gazprom PJSC “will survive,” Putin said.

The US is the world’s largest producer of oil and has also emerged as the biggest supplier of liquefied natural gas (LNG) to the bloc since Russian supplies of pipeline gas to its European customers petered out. With winters sending shivers across the continent, the bloc does not have a lot of options.

The repercussions

Gas storage is seen as the only lifeline to Europe during its colder period. However, the inventories this year are rapidly declining after frosty temperatures increased the demand for heating. According to Bloomberg, the ongoing war in Ukraine has contributed to about a 45 per cent surge in gas prices this year.

While the levels are still below the 2022 records, they are still high enough to deepen the cost of living in households and intensify competitive pressure among struggling manufacturers. Hence, an energy crisis would affect every aspect of life.

Europe in scrambling

In a major turn of events, Slovak Prime Minister Robert Fico held one-on-one talks with Russian President Vladimir Putin in a bid to secure continued access to Russian oil. Fico made a surprise visit to Russia, defying the bloc’s public commitments to end its reliance on Moscow for gas imports.

The visit came after both Ukraine and Russia announced that they would not renew the key transit deal. Since Russia’s full-scale invasion of Ukraine almost three years ago, only two other EU heads of government have visited Putin — Austrian Chancellor Karl Nehammer and Hungarian Prime Minister Viktor Orbán.

While Fico’s visit was kept hidden from the public, the EU confirmed that European Council President António Costa had been notified in advance, but declined to comment further on Fico’s visit. Fico and Orban have consistently been Russia-friendly leaders even after the start of the war.

Hence, the energy crisis in Europe is also bringing out cracks in the EU.

With inputs from agencies.