Turning Off the Tap – The Impact of EU Policy on LNG Traders

In the June edition of our LNG bulletin, we reported on the publication of the REPowerEU Roadmap, setting out the EU’s strategy gradually to remove Russian oil, gas and nuclear energy imports from EU markets altogether, whilst ensuring stable energy supplies and pricing. Since then, plans to ban Russian LNG imports have developed further and faster and sanctions have been imposed. In this article, we clarify the current position and assess the likely impact on LNG traders with contracts to import Russian gas into Europe.

What is the current position?

On 20 October 2025, the European Council agreed its negotiating position on the proposed regulation to phase out Russian gas under the Roadmap¹.

On 3 December 2025, the European Council and Parliament reached provisional agreement on the text of a regulation which both must now approve before its formal adoption². The key features are as follows:

• Imports of Russian pipeline gas and LNG will be prohibited from six weeks after entry into force of the regulation.
• There will be a transition period for existing contracts. In particular:
  • for short-term supply contracts concluded before 17 June 2025, imports will be banned from 25 April 2026 for LNG and 17 June 2026 for pipeline gas.
  • for long-term contracts, imports will be banned from 1 January 2027, in line with the 19th sanctions package (see below).
  • the ban on pipeline gas imports under long-term contracts will begin on 30 September 2027, provided that member states are on track to fulfil the storage filling targets foreseen in the gas storage regulation, and at the latest by 1 November 2027.
• Amendments to existing contracts will be permitted only for narrowly defined operational purposes and cannot lead to increased volumes.

In the meantime, the 19^th package of EU sanctions came into force on 24 October 2025. This affects the purchase, import or transfer of Russian LNG into the EU as follows:

• Short-term contracts must end within 6 months, by 25 April 2026.
• Long-term contracts must end by 1 January 2027.

What is the likely impact on the market?

The European Commission has been keen to ensure market stability, security of supply and energy independence and there is cause for optimism that even with the accelerated timeline, the impact on the market will be less dramatic than when the war began in 2022. EU dependency on Russian gas has fallen considerably since 2022: for pipeline gas and LNG combined, Russia accounted for less than 19% of total EU gas imports in 2024.³ The weather may have a role to play as regards demand too, both in terms of the winter and the conditions for renewables: if the winter is less severe, demand will be lower and if wind and solar power can meet a greater proportion of demand, then reliance may be further reduced.

What is the likely impact on LNG traders?

Even assuming the market remains relatively stable as intended, European buyers with current contracts to import Russian gas beyond the deadlines will be affected. Gas supply contracts have tended to be long term, often with limited flexibility on origin and destination and containing “take or pay” clauses, requiring buyers to take (and pay for) fixed annual quantities of gas or pay the seller liquidated damages if they do not take delivery. Under the new timetable, short term contracts will also be affected.

In July 2025, the Oxford Institute for Energy Studies published a report⁴ on the Roadmap, in which it noted that “For all affected supply contracts, the main practical challenge is determining how EU buyers can respond to Russian gas sellers in a way that complies with the import ban while minimising legal and financial risks.”

It is reasonable to assume that European buyers with force majeure (FM) clauses in their contracts will turn to these for help (as well as, potentially, to material adverse change and change of law clauses). However, relying on a FM event is not straightforward and will depend on the terms of the clause in question.

Given the sums at stake, counterparties are likely to resist any attempt to rely on a FM provision to excuse performance. For example, they may argue that the provision does not apply to the circumstances, that performance has not been prevented, that there has been a failure to comply with time limits, documentary requirements or notice provisions, or a failure to mitigate. Disputes appear inevitable.

FM is not always a permanent solution: depending on its terms, triggering a FM clause may give rise to a suspension of a party’s obligation to perform, rather than termination of the contract altogether. At the time of writing, a US peace proposal remains under discussion. Reports suggest that it includes a lifting of sanctions and economic reintegration for Russia. If a peace plan containing such provisions were to come into effect in future, so that restrictions on the import of Russian gas were lifted, European buyers who have declared FM under their contracts with Russian suppliers and sourced alternative supplies of LNG may find that their Russia based contracts kick back in, potentially leaving them with take or pay obligations under two sets of contracts. Again, it will depend on the wording of each individual FM clause and whether there are any terms regarding prolonged FM events.

We anticipate that we may also see disputes arising out of claims for frustration. Frustration is rarely claimed and hard to achieve because it requires a party to show the following:

• An event has occurred which was unforeseen when the parties entered into the contract.
• The event affects an obligation at the heart of the contract that has now become illegal or impossible to perform, or performance would be radically different.
• The inability to perform is through no fault of either party.

HFW Comment

Whether the sanctions remain in place and the proposed regulation comes into effect or not, traders importing LNG into Europe face a challenging period. Careful management of any FM claim to ensure compliance with the FM provisions in their contracts will be key. HFW has extensive experience advising on such provisions.

Footnotes:

1. Council agrees its position on rules to phase out Russian gas imports under REPowerEU – Consilium
2. Council and Parliament strike a deal on rules to phase out Russian gas imports for an energy secure and independent Europe – Consilium
3. Where does the EU’s gas come from? – Consilium
4. The-EU-Proposal-To-Ban-Russian-Gas-Imports-roadblock-more-than-roadmap-NG-199.pdf