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Qatar has threatened to stop exporting vital gas to the EU if member states strictly enforce a new law that will penalize companies that fail to meet standards regarding carbon emissions, human rights and workers.
Qatari energy minister Saad al-Kaabi told the Financial Times that if any EU country imposes non-compliance sanctions on the scale outlined in the company's due diligence order Doha will stop exporting liquefied natural gas to the bloc.
The law requires EU countries to introduce powers to impose fines for non-compliance with an upper limit of at least 5 percent of a company's global annual revenue.
“If the situation is that I lose 5 percent of my income to go to Europe, I will not go to Europe.” . . I am not doing anything wrong,” said Kaabi. “Five percent of the revenue earned by QatarEnergy means 5 percent of the revenue from the government of Qatar. This is people's money . . . so I can't lose that kind of money – and nobody is willing to lose that kind of money.”
The EU adopted prudential rules in May this year. They are part of a wider set of reporting requirements aimed at aligning companies with the EU's ambitious goal of reaching net zero emissions by 2050.
But the order has caused widespread backlash from companies, both inside and outside the EU, who have complained that the rules are too onerous and put them at competitive risk.
Cefic, the chemical industry body, said that the precautionary rules will “create a high risk of litigation” and should be carefully examined “to identify and address areas of simplification and to reduce the burden in order to . . . reduce the exposure of the case.”
Non-EU companies will be liable for fines under the directive if they receive more than €450mn in net returns from the bloc.
Qatar is one of the world's top LNG exporters and has become the most important supplier of gas to Europe after the turmoil in energy markets caused by Russia's invasion of Ukraine.
As European countries 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 in its current form the law – which should come into force from 2027 – would not apply to companies such as the state-owned QatarEnergy, of which he is the chief executive.
He said it would require the company to conduct due diligence on the working practices of all the group's suppliers, with a global network of “100,000” companies.
“Maybe I need a thousand people the size I have and the billions we spend, or (they would have to) spend millions on service.” . . to audit every service provider,” he added.
Kaabi said it would be impossible for an energy producer like QatarEnergy to meet the EU's net zero target as stipulated by the regulation due to the amount of hydrocarbons it produces.
The EU directive includes the obligation of large companies to adopt a climate change mitigation plan aligned with the 2050 climate neutrality goal of the Paris Agreement, as well as the medium-term target under the European Climate Law.
Kaabi said the law would affect all of Qatar's exports to Europe, including fertilizers and petrochemicals, and could affect the investment decisions of the Qatar Investment Authority, the sovereign wealth fund.
He said QatarEnergy will not break its LNG contracts, but will consider legal options if it faces heavy penalties.
“I will not agree to be punished,” he said. “I will stop sending gas to Europe.”
However, Kaabi suggested that there may be room for compromise if the sanctions target income generated in Europe instead of global income.
If they say the penalty is 5 percent of the revenue you get from the contract you sell in Europe, I say, 'Okay, I have to check that. Does that make sense?'” he said. “But if you want to come to my full income, come, it makes no sense.”
European Commission President Ursula von der Leyen promised last month that she would propose an “omnibus” law that would ease the reporting requirements of many of the bloc's financial laws, including the due diligence directive.