Qatar Threatens to Cut EU Gas Flows Over Due Diligence Law

Qatar has issued a stark warning to the European Union, threatening to halt vital gas shipments if member states strictly enforce new legislation penalizing companies for failing to meet stringent environmental, human rights, and labor standards.

Qatari Energy Minister Saad al-Kaabi told Financial Times in an interview published Sunday that Doha would cease liquefied natural gas (LNG) exports to the bloc if any EU state levied substantial fines based on the corporate due diligence directive. This legislation mandates EU countries to implement penalties for non-compliance, with a maximum threshold set at 5% of a company's annual global revenue.

"If the case is that I lose 5 per cent of my generated revenue by going to Europe, I will not go to Europe . . . . I’m not bluffing," Kaabi said to the Financial Times. "Five per cent of generated revenue of QatarEnergy means 5 per cent of generated revenue of the Qatar state. This is the people’s money . . . so I cannot lose that kind of money — and nobody would accept losing that kind of money."

The EU adopted the due diligence rules in May as part of broader reporting requirements aligned with its ambitious net-zero emissions goals by 2050. However, the directive has sparked significant backlash from companies, both within and outside the EU, who argue that the regulations are overly burdensome and create a competitive disadvantage.

Cefic, the chemical industry body, described the due diligence rules as potentially creating "significant litigation risks" and called for a comprehensive assessment "to identify and address areas for simplification and burden reduction."

Non-EU companies face penalties under the directive if their net turnover within the bloc exceeds €450 million.

Qatar, a leading global LNG exporter, has become increasingly crucial for European gas supplies following the energy market upheaval triggered by Russia's invasion of Ukraine. QatarEnergy has established long-term LNG supply agreements with major European economies, including Germany, France, Italy, and the Netherlands.

Kaabi argued that the legislation, set to take effect in 2027, would be unworkable for companies like state-owned QatarEnergy, citing the extensive due diligence required across its vast global supply chain involving "100,000" companies.

"I probably need a thousand people with the size that I have and the billions we spend, or [would need to] shed millions on a service . . . to go and do audits on every supplier," he stated.

Kaabi further asserted that aligning with the EU's net-zero target would be impossible for an energy producer like QatarEnergy given its significant hydrocarbon output. He clarified that while QatarEnergy would honor existing LNG contracts, it would pursue legal options if faced with substantial penalties.

"I will not accept that we get penalized," Kaabi stressed. "I will stop sending gas to Europe."

However, Kaabi indicated some flexibility, suggesting that penalties based solely on European revenue generated from gas sales, rather than total global revenue, might warrant further consideration.

"If they said that the penalty is 5 per cent 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."

European Commission President Ursula von der Leyen recently announced plans to introduce "omnibus" legislation aiming to streamline reporting requirements under several of the bloc's green finance laws, including the due diligence directive.