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Qatar has threatened to cut off vital gas supplies to the EU if member states strictly enforce new laws that penalize companies that fail to meet set criteria on carbon emissions and 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 bloc if an EU state imposed non-compliance penalties of the magnitude set out in the corporate due diligence directive.
The law requires EU countries to introduce powers to impose fines for failure to comply with a cap of at least 5 percent of the company’s annual global turnover.
“If I lose 5 percent of my sales by traveling to Europe, I will not go to Europe.” . . “I’m not bluffing,” Kaabi said. “Five percent of QatarEnergy’s generated revenue represents 5 percent of the State of Qatar’s generated revenue. This is the people’s money. . . So I can’t lose that much money – and no one would accept losing that much money.”
The EU adopted the rules on corporate due diligence in May this year. They are part of a broader set of reporting requirements aimed at aligning companies with the EU’s ambitious goal of achieving net zero emissions by 2050.
But the directive sparked a widespread backlash from companies inside and outside the EU who complained that the rules were too strict and put them at a competitive disadvantage.
Cefic, the chemical industry association, said the due diligence rules would “create significant litigation risks” and should be thoroughly examined “to identify and address areas for simplification and burden reduction in order to….” . limit the liability risk.”
Non-EU companies face penalties under the directive if they generate net sales of more than 450 million euros in the Union.
Qatar is one of the world’s largest LNG exporters and has become an increasingly important gas supplier to Europe in the wake of turmoil in energy markets triggered by Russia’s invasion of Ukraine.
As European nations seek to wean themselves off Russian gas, QatarEnergy has signed long-term deals to supply LNG to Germany, France, Italy and the Netherlands.
Kaabi suggested that the law in its current form – set to come into effect from 2027 – would not be feasible for companies such as state-owned QatarEnergy, of which he is also chief executive.
He said the company needed to conduct due diligence on the labor practices of all of the group’s suppliers, with a global supply chain comprising “100,000” companies.
“I probably need a thousand people with the size I have and the billions we spend, or (have to) spend millions on a service.” . “We have to carry out audits on every supplier,” he added.
Kaabi said it was also impossible for an energy producer like QatarEnergy to adhere to the EU’s net zero target set out in the directive due to the amount of hydrocarbons it produces.
The EU directive includes an obligation for large companies to adopt a transition plan to curb climate change that is aligned with the Paris Agreement’s goal of climate neutrality by 2050 and intermediate targets in the European Climate Law.
Kaabi said the legislation would impact all Qatari exports to Europe, including fertilizers and petrochemicals, and could also impact the investment decisions of the Qatar Investment Authority, the sovereign wealth fund.
He said QatarEnergy would not breach its LNG contracts, but it would explore legal options if it faces large penalties.
“I will not accept that we are punished,” he said. “I will stop sending gas to Europe.”
However, Kaabi pointed out that there would be room for compromise if the penalties targeted only revenue generated in Europe and not total global revenue.
“If they say the penalty is 5 percent of your revenue from the contract that you sell to Europe, then I say, ‘Okay, I have to assess that.’ Does that make sense?’” he said. “But if you want to get to my total revenue generated, then that doesn’t make sense.”
European Commission President Ursula von der Leyen promised last month to propose an “omnibus” law that would reduce reporting requirements under several green bloc financial laws, including the due diligence directive.
