EU sanctions: Exemption allows EU firms to ship Russian LNG eastwards

The EU’s 21st package of sanctions against Russia included a one-year exemption for the purchase and transfer of Russian LNG to third countries, which looks set to benefit both European shipping companies, notably Greek firm Dynagas, as well as traders and other intermediaries.

The exemption applies to long-term supply contracts concluded before February 24th, 2022. Although the new round of sanctions represent another setback for Russian firms Novatek and Gazprom, notably in terms of increased costs, the exemption for transfers to Asia and other non-EU jurisdictions represents an important loophole, said Tsvetomir Nikolov, an analyst and sanctions expert at the Centre for the Study of Democracy in Sofia, Bulgaria.

“The EU is closing its market to Russian LNG, but it is not necessarily removing the opportunity for European companies to sell Russian gas in other jurisdictions,” Nikolov told Gas Outlook.

“A European company with a stake in Yamal LNG [TotalEnergies], for example, can no longer sell Russian LNG to European customers after January 2027, but according to the exemption in the latest sanctions package it can continue buying the LNG and redirect it to other markets, for example India or other Asian buyers.”

“So Russia loses the European customer, but it does not necessarily lose the European trader or contractual infrastructure that helps reach other customers.”

That is where the real significance lies, Nikolov said, because without those exemptions, Russia would have faced two problems at the same time: it would have had to replace European demand and also replace European shipping infrastructure.

“Russia will still have to pay a price because sending LNG further into Asia means longer voyages, higher transport costs and possibly price discounts, but at the same time redirecting the cargo becomes considerably easier with the help of European companies,” Nikolov said. “If most of the LNG that would have gone to Europe is simply redirected, Russia can continue monetising its gas production.”

Russia faces higher costs

The EU cannot stop Russian oil and gas from criss-crossing the globe. However, that is not to say the sanctions are not working.

“The more steps Russia has to take to circumvent the sanctions, the more countries and players involved in the circumvention, the less revenue the Kremlin receives,” Nikolov said. “The problem is that in Europe the intermediaries are capturing the profits and this gives Moscow political influence.”

Valerijus Ostrovskis, a Brussels-based EU regulatory, trade and sanctions lawyer at law firm Acquis, pointed out that the exemption for European shipping companies will apply until July 25th, 2027 and is automatically renewable unless cancelled by the Council of the EU.

However, the latter would require anonymity among the 27 Member States.

“At this moment, it looks like the exemption for shipping LNG to third countries will be extended beyond one year. But if there is an escalation of the war in Ukraine, the EU Council might abolish it,” Ostrovskis said.

He nevertheless agreed that the sanctions were making an impact on Russia’s revenue stream.

“The sanctions have created market conditions where all transactions involving the Russian energy sector have become significantly more costly,” said Ostrovskis.

Bruno Lebrun, a Brussels-based sanctions expert at law firm Janson, said the fact that the EU introduces an exemption for shipping Russian LNG is a significant difference in approach at a time when, generally speaking, Europe is seeing a strengthening of the restrictive measures.

Lebrun told Gas Outlook:

“In my view this decision will not have been taken lightly in the EU Council. But I assume, unless it has an adverse impact, they will keep this exemption after one year,” Lebrun told Gas Outlook. “We have seen before that exemptions are limited in time but then renewed. Having said that, the impact of the exemption will be assessed and if it causes disturbances beyond what is acceptable then it will not be renewed.”

Not a huge impact on the global LNG balance – yet

As for the broader impact, Pratiksha Negi, an independent consultant based in New Delhi, said the EU’s decision to allow European companies to continue transporting Russian LNG to non-EU destinations for 12 months, with the possibility of renewal, is unlikely to materially alter the global LNG supply balance in the near term.

Its significance, however, extends well beyond the headline duration of the exemption, she said.

“The measure gives Russia and European participants additional flexibility to redirect Russian LNG flows towards Asia, while avoiding an abrupt disruption to a market that is already facing supply uncertainty/loss from the Middle East conflict,” Negi said.

Negi pointed out that the EU remains the largest buyer of Russian LNG, accounting for around 49% of Russia’s LNG exports, followed by China at 23%, Japan at 18% and South Korea at 6%, according to the Centre for Research on Energy and Clean Air (CREA).

As for Yamal LNG, more than 97% of LNG deliveries went to EU ports during the first half of 2026, with almost 10 million tonnes imported by EU.

“The scale of this dependence illustrates why an immediate prohibition on European participation in the transport and redistribution of Russian LNG could have caused a substantial logistical adjustment,” Negi said. “The new exemption effectively provides a transition period for restructuring those flows rather than forcing an immediate eastward rerouting of a large share of Yamal’s cargoes.”

If the exemption is renewed, Negi said, Russian LNG could gradually undergo a structural shift from westward to eastward trade.

“China, Japan and South Korea already account for a significant share of Russian LNG purchases, providing an established Asian market for additional volumes. The extent of that shift, however, will depend on the duration of the exemption, the willingness of Asian buyers to absorb additional Russian cargoes and, critically, developments in competing LNG supply from the Middle East and the US.”

She added: “Under such a scenario, other potential incremental buyers like India, Turkey and other Southeast Asian countries could also increase their LNG purchases from Russia.”