Qatar will ‘stop’ EU gas sales if fined under due diligence law

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Qatar has threatened to halt vital gas shipments to the European Union if member states strictly implement new legislation that would punish companies that fail to meet set standards on carbon emissions, human and labor rights.

Qatari Energy Minister Saad Al-Kaabi told the Financial Times that if any EU country imposes sanctions for non-compliance on the scale indicated in the corporate due diligence directive, Doha will stop exporting its liquefied natural gas to the bloc.

The law requires EU countries to introduce powers to impose fines for non-compliance with a maximum of at least 5 percent of a company’s annual global revenue.

“If it was the case that I lost 5 percent of my revenue generated by going to Europe, I would not go to Europe. . . . I am not bluffing,” Al-Kaabi said. “Five percent of the revenue generated for Qatar Energy means 5 percent of revenue Generated by the State of Qatar. This is the people’s money. . . So I cannot lose this kind of money, and no one will accept losing this kind of money.”

The European Union adopted corporate due diligence rules in May this year. It is part of a wider set of reporting requirements aimed at aligning companies with the EU’s ambitious target of reaching net-zero emissions by 2050.

But the directive sparked widespread backlash from companies, both inside and outside the EU, who complained that the rules were too burdensome and put them at a competitive disadvantage.

Cefic, the chemical industry body, said due diligence rules “will create significant litigation risks” and must be carefully evaluated “to identify and address areas of simplification and burden relief in order to . . . limit liability exposure.”

Non-EU companies will be liable for penalties under the directive if they make more than 450 million euros in net sales in the bloc.

Qatar is one of the world’s largest exporters of liquefied natural gas and has become an increasingly important supplier of gas to Europe in the wake of turmoil in energy markets caused by the Russian invasion of Ukraine.

As European countries sought to get rid of their dependence on Russian gas, Qatar Energy Company signed long-term agreements to supply liquefied natural gas to Germany, France, Italy and the Netherlands.

Al-Kaabi noted that the legislation in its current form – which is scheduled to come into effect from 2027 – would not be applicable for companies such as the state-owned Qatar Energy Company, of which he also serves as CEO.

He said it would require the company to conduct due diligence on the business practices of all the group’s suppliers, with a global supply chain of “100,000” companies.

“Maybe I need a thousand people my size and the billions we spend, or [would need to] Millions spent on the service. . . “To go and do audits on every supplier,” he added.

Al-Kaabi said it would also be impossible for an energy producer like Qatar Energy to comply with the EU net zero target as the directives stipulate due to the amount of hydrocarbons it produces.

The EU directive includes an obligation for major companies to adopt a transitional climate change mitigation plan in line with the 2050 climate neutrality target in the Paris Agreement, as well as intermediate targets under European climate law.

Al-Kaabi said the legislation would affect all Qatari exports to Europe, including fertilizers and petrochemicals, and could also affect the investment decisions of the Qatar Investment Authority, the sovereign wealth fund.

He said that Qatar Energy Company will not cancel its contracts for liquefied natural gas, but will seek legal means if it faces severe penalties.

He added: “I will not accept that we be punished.” “I will stop sending gas to Europe.”

However, Al Kaabi noted that there may be room for compromise if sanctions target only income generated in Europe rather than total global revenues.

“If they said the penalty is 5 percent of your revenue generated from this contract that you sell to Europe, I would say, ‘Okay, I need to evaluate that. Does that make sense?’” he said. “But if you want to get to the total revenue generated, This doesn’t make any sense.”

European Commission President Ursula von der Leyen promised last month to propose “comprehensive” legislation that would reduce reporting requirements for several of the bloc’s green finance laws, including the due diligence directive.