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Qatar has threatened to suspend vital gas supplies to the EU if member states strictly enforce new laws that will penalize companies that fail to meet set criteria on carbon emissions, human and labor rights.
Qatari Energy Minister Saad al-Kaabi told the Financial Times that Doha would stop exporting its liquefied natural gas to the Union if any EU country imposed fines for non-compliance on the scale set out in the corporate due diligence directive.
The law requires EU countries to introduce powers to impose fines for non-compliance with a ceiling of at least 5 percent of a company’s annual global revenue.
“If it is the case that I lose 5 percent of my generated income by going to Europe, I will not go to Europe. . . I’m not bluffing,” Kaabi said. “Five percent of the realized income of QatarEnergy means 5 percent of the realized income of the State of Qatar. This is the people’s money. . . so I can’t lose that much money—and no one would accept losing that much money.”
In May of this year, the EU adopted the rules of company due diligence. They are part of a wider set of reporting requirements aimed at bringing companies into line with the EU’s ambitious goal of achieving net zero emissions by 2050.
But the directive caused a wide reaction from companies, both inside and outside the EU, who complained that the rules were too onerous and put them at a competitive disadvantage.
Cefic, the chemicals industry body, said the due diligence rules “will create significant litigation risks” and should be thoroughly assessed “to identify and address areas for simplification and burden reduction to . . . limit liability exposure.”
Non-EU companies will be liable for fines under the directive if they generate more than EUR 450 million in net turnover in the bloc.
Qatar is one of the world’s largest exporters of LNG and has become an increasingly important supplier of gas to Europe following the turmoil in energy markets caused by Russia’s invasion of Ukraine.
As European countries sought to wean themselves off Russian gas, QatarEnergy signed long-term contracts to supply LNG to Germany, France, Italy and the Netherlands.
Kaabi suggested that in its current form the legislation — which is due to come into effect in 2027 — would be unenforceable for companies like state-owned QatarEnergy, of which he is also chief executive.
He said it would require the company to conduct an in-depth analysis of the working practices of all the group’s suppliers, with a global supply chain that includes “100,000” companies.
“I probably need a thousand people with the size I have and the billions we’re spending, or (I should) pour millions into the service. . . to go and audit every supplier,” he added.
Kaabi said it would also be impossible for an energy producer such as QatarEnergy to comply with the EU’s net-zero target, as stipulated by the directive, because of the amount of hydrocarbons it produces.
The EU directive includes an obligation for large companies to adopt a transition plan to mitigate climate change aligned with the 2050 climate neutrality goal of the Paris Agreement, as well as intermediate targets under the European Climate Law.
Kaabi said the law would affect all of Qatar’s exports to Europe, including fertilizers and petrochemicals, and could also affect investment decisions by the Qatar Investment Authority, the sovereign wealth fund.
He said QatarEnergy would not terminate its LNG contracts but would seek legal recourse if it faced heavy fines.
“I will not accept that we are punished,” he said. “I will stop sending gas to Europe.”
However, Kaabi suggested that there could be room for compromise if the fines were only targeted at income generated in Europe, rather than total global income.
“If they said the penalty is 5 percent of your generated revenue from that contract that you sell to Europe, I say, ‘OK, I have to evaluate that. Does that make sense?’” he said. “But if you want to come up with my total generated revenue, come on, that doesn’t make sense.”
European Commission President Ursula von der Leyen last month promised to propose “omnibus” legislation to reduce reporting requirements from several of the bloc’s green finance laws, including the due diligence directive.
