Questions remain whilst the Commission’s legislative proposal (which is expected to be published in June 2025) is awaited. In this article, we set out the details announced thus far and a number of issues and uncertainties that have immediately arisen, and contrast the anticipated position with those currently adopted by the U.K. and U.S.
The current position under EU sanctions
The Commission’s proposal would represent a material expansion in the scope and reach of the EU’s sanctions on Russian gas. At present, these consist of a range of investment and export control-related restrictions. These include prohibitions on:
a. The purchase, import, or transfer of propane and butane, which originate in Russia or are exported from Russia.
b. The purchase, import, or transfer of liquefied natural gas (LNG) falling under CN code 2711 11 00, which originates in Russia or is exported from Russia, through LNG terminals in the EU that are not connected to the interconnected natural gas system.
c. The acquisition of any new, or extension of any existing, participation in any Russian or third country entity that is operating in the energy sector in Russia (including projects under construction for the production of LNG).
d. The grant of any new loan or credit or otherwise providing financing (including equity capital), to any Russian or third country entity that is operating in the energy sector in Russia.
e. The creation of a new joint venture with any Russian or third country entity that is operating in the energy sector in Russia.
f. The sale, supply, transfer, or export of goods and technology suited for use in oil refining and liquefaction of natural gas to, or for use in, Russia.
The EU has also increasingly designated as asset freeze targets persons and entities connected with Russia’s so-called “shadow fleet”, in its ongoing effort to clamp down on circumvention of the aforementioned restrictions and of the Russian oil-related prohibitions.
The Commission’s proposal
The Commission’s proposal comes amidst national security concerns, as well as public perception, that the EU remains overly dependent on Russian gas, notwithstanding the fact that gas imports from Russia have decreased from 45% in 2021 to 19% in 2024.2 In this regard, the Commission’s proposal expressly recognizes that “the [EU’s] dependency on Russian energy imports leads to serious security and economic risks for the Union and its Member States”. Despite the EU’s REPowerEU Plan of May 2022, which was designed to end Europe’s dependency on Russian energy, a downward trend in imports of Russian gas ended in 2024, with LNG imports having grown by 12% since.3
The Commission’s proposal includes a phased approach designed to “allow markets to better adjust and minimize market impact and potential implications for security of supply”. The first phase would include a prohibition on entering into new contracts with suppliers of Russian gas (including both pipeline gas and LNG), as well as a ban on imports under existing spot contracts, to take effect by the end of 2025. The second phase would, in turn, prohibit all remaining imports of Russian gas by the end of 2027.
These prohibitions are contemplated to include Russian gas currently being imported into the EU under existing long-term contracts. They would, therefore, affect EU-based energy companies that had entered into agreements with Russian producers prior to Russia’s invasion of Ukraine in February 2022.
To bolster enforcement of these new proposed prohibitions, the Commission has also noted that it intends to propose more effective monitoring and traceability with regard to contracts for supplies of Russian gas. This could, for example, include requiring importers to provide more detailed information to regulators in the relevant member states, as well as the Commission itself.
Questions remain
A number of uncertainties would appear to arise from the details disclosed thus far.
First, it is unclear how these new restrictions could be implemented. The EU’s sanctions are enacted under the EU’s Common Foreign and Security Policy, which requires unanimity across member states. In light of contemplated resistance from certain member states such as Hungary and Slovakia, however, EU energy chief Dan Jorgensen has noted that the bans “will be adopted with a qualified majority. So contrary to sanctions, where you need unanimity”.4 It is not immediately clear how the EU plans to implement these measures, nor is it clear what broader impacts adopting these measures by a qualified majority (rather than unanimity) may have on future sanctions packages.
Second, various uncertainties come to mind as regards the content and extent of these restrictions. The Commission’s proposal has not made clear, for example, whether “Russian” gas would include only gas physically extracted in Russia, or if the contemplated restrictions would also cover gas extracted outside Russia by Russian energy companies. If the broader scope is proposed, an immediate question would then arise as to whether gas extracted in joint ventures with Russian companies would be captured.
Similarly, questions arise as to precisely when gas can properly no longer be regarded as “Russian” for the purpose of these restrictions. It is unclear, for example, whether gas that has transited through multiple countries or been stored in a third country by a non-Russian company would be captured.
It will also be important to closely monitor how the Commission intends to shield EU gas customers from penalties if long-term contracts contain take-or-pay clauses or otherwise include hardwired contractual penalties for earlier termination.
Further clarity from the Commission on these points would be welcome.
Additionally, it remains to be seen whether other jurisdictions will follow in the EU’s steps. In 2022, the G7 agreed an oil price cap, which set a fixed price on barrels of Russian crude oil in order to reduce Russia’s revenues from its energy sector. Will the G7 follow the EU’s steps in prohibiting imports of Russian gas entirely? As we explore below, the U.K and U.S. already have extensive restrictions on Russian gas.
How do the U.K. and U.S. positions differ?
The U.K. currently has more extensive sanctions on Russian gas than the EU. The import of LNG consigned from, or originating in, Russia is prohibited, and persons must not acquire LNG that originates in or is located in Russia with the intention of it entering the U.K. Ancillary restrictions have also been imposed on the provision of technical assistance, financial services and funds, and brokering services relating to LNG.
The U.S. currently also maintains more extensive import sanctions with respect to Russian LNG than the EU. For example, U.S. sanctions prohibit the: (a) importation into the United States of various energy-related products of Russian Federation origin including, among other things, LNG; and (b) approval, financing, facilitation, or guarantee by U.S. persons (i.e., U.S. citizens or permanent residents, entities organized under the laws of the United States and their non-U.S. branches, and persons located in the United States), wherever located, of a transaction by a non-U.S. person involving the import of LNG into the United States.5
Should you have any questions on the matters discussed in this article, please contact any of the contacts listed below or your usual contact at A&O Shearman.
Footnotes
1. European Commission, ‘Roadmap towards ending Russian energy imports’ (May 12, 2025).
2. European Commission, ‘Roadmap towards ending Russian energy imports’ (May 12, 2025).
3. European Commission, ‘Roadmap towards ending Russian energy imports’ (May 12, 2025).
4. Euronews, ‘EU sets 2027 as deadline to phase out all Russian energy, including LNG’ (May 6, 2025).
5. See Executive Order 14066.