The European Union’s ambitious climate goals have set it on a transformative path to sustainability, with policies like the Corporate Sustainability Due Diligence Directive (CS3D) leading the charge. But as these policies take effect, they risk unsettling the continent’s energy security. Qatar, one of Europe’s critical suppliers of liquefied natural gas (LNG), has warned that the burdens imposed by the CS3D could prompt a halt in its exports to the bloc. The timing could not be worse: Europe is already grappling with rising energy prices, a cold winter and the fallout from geopolitical disruptions such as the Ukraine war.
Qatar’s Role in Europe’s LNG Market
For over a decade, Qatar has been a reliable supplier of LNG to Europe, helping stabilize energy markets during volatile periods. In 2023, Qatar exported 15.5 billion cubic meters (bcm) of LNG to the EU, accounting for 5.3% of the bloc’s market shares. While this share is modest compared to Norway’s 30.3%, or the United States’ 19.4%, Qatar’s contribution remains significant, particularly as the EU diversifies away from Russian gas.
The decline in Europe’s Russian gas imports has been precipitous, falling from over 40% of the EU’s total prior to the invasion of Ukraine to just less than 15% by mid-2023. The expiration of the Ukraine-Russia transit agreement at the beginning of 2025 cemented this shift in the EU’s energy mix, as Russian state-owned energy giant Gazprom ceased pipeline exports to Europe through Ukraine. This development amplifies Europe’s sudden reliance on alternative suppliers like Qatar, even as regulatory pressures make the relationship more complex.
Some countries like Italy, France and Belgium still rely on Qatari LNG to meet their energy needs. Italy imported 6.8 bcm from Qatar in 2023, while France and Belgium imported 2.3 bcm and 4.3 bcm, respectively. This decline reflects both reduced demand due to higher energy prices and the bloc’s efforts to diversify away from Russian gas. Losing Qatar as a supplier would exacerbate these challenges, increasing reliance on other exporters like the United States and Australia, which may not fully compensate for the shortfall.
Europe’s transition to renewable energy has introduced structural vulnerabilities in its energy strategy. LNG remains a vital bridge fuel, providing a lower-carbon alternative to coal and oil while renewable capacity scales. However, the EU’s ambitious climate policies risk alienating suppliers like Qatar.
The CS3D Point of Contention
The CS3D is a cornerstone of the EU’s green agenda, designed to enforce strict environmental and human rights compliance across global supply chains. Companies operating within the EU must conduct extensive due diligence to identify and mitigate adverse impacts, with penalties of up to 5% of their global revenue for non-compliance. The directive will also affect foreign entities with substantial operations within the EU—specifically those generating an annual net turnover exceeding $466 million in the region. As a result, it is estimated that around 5,500 EU-based companies and at least 1,000 non-EU companies will be impacted by this legislation.
In response to the CS3D, the Qatar Investment Authority (QIA), which manages an estimated $510 billion in assets, has expressed concerns about the potential implications of the directive. QIA, a sovereign wealth fund, currently has significant investments across various sectors in Europe, including stakes in Heathrow Airport, Innovafeed, and Porta Nuova in Milan. In Germany alone, Qatari investments are valued at approximately $25.8 billion in 2022, with stakes in major companies like Volkswagen Group.
Furthermore, QatarEnergy CEO Saad bin Sherida Al-Kaabi, who also serves as the country’s energy minister, described the CS3D as unworkable for a company of its scale. Managing a supply chain that spans hundreds of thousands of suppliers, the Gulf country’s state-run petroleum firm would face immense logistical and financial burdens to comply with the directive. Al-Kaabi’s warning that Qatar may halt LNG shipments to Europe if penalties are imposed signals the seriousness of these concerns.
Europe’s LNG Spending and Market Shifts
The CS3D is not the only factor complicating Europe’s LNG trade. Geopolitical dynamics, including the war in Ukraine and its impact on Russian gas supplies, have forced Europe to diversify its energy sources rapidly. In the first half of 2024, EU spending on LNG imports decreased by 41% year-on-year, amounting to $21.7 billion, according to estimates by the Institute for Energy Economics and Financial Analysis (IEEFA). This decline reflects both a drop in overall gas prices and reduced demand as Europe navigates its energy transition.
Of this spending, $10.9 billion was allocated to LNG imports from the United States, which accounted for 48% of Europe’s total LNG imports during this period. Russia, despite geopolitical tensions, supplied 16% of LNG imports, followed by Algeria and Qatar, each contributing 10%. Nigeria and Norway rounded out the top suppliers, each accounting for 4% of imports.
While Qatar’s share may seem small compared to the United States, its role is critical in providing steady and scalable LNG supplies. The fact that Qatar matched Algeria’s share of Europe’s LNG imports underscores its strategic importance, given how important the North African supplier has been to Europe for years. At the same time, the decreased spending on Qatari LNG highlights growing competition in Europe’s LNG market and the need for Qatar to carefully navigate the EU’s evolving regulatory landscape.
Economic and Political Stakes
The stakes are not just economic but also geopolitical. Qatar’s North Field Expansion Project—set to increase LNG production capacity from 77 million tonnes to 126 million tonnes annually by 2027—positions it as a global leader in LNG production. This expansion could boost Qatar’s contracted LNG exports to Europe from 18.7 million tonnes in 2023 to an estimated 28 million tonnes in 2026. However, these opportunities could be compromised if EU regulations become overly restrictive.
Qatar, meanwhile, has been diversifying its export markets. In the first half of 2024, 25% of its LNG went to China, followed by India (17%) and Pakistan (11%). This pivot toward Asia reflects both logistical advantages and growing demand. Asian markets offer faster delivery times, lower shipping costs and fewer regulatory hurdles compared to Europe, making them increasingly attractive.
For some in Europe, this trend portends badly for their energy security. Countries like Italy and France depend on Qatari imports and would face significant challenges in diversifying their supply further. Meanwhile, rising energy prices and market volatility could erode public confidence in the EU’s energy policies, complicating its climate agenda.
Toward a Pragmatic Solution
To prevent a breakdown in EU-Qatar energy relations, both sides should adopt a pragmatic approach. For the EU, tailoring the CS3D to focus penalties on revenue generated within the bloc rather than global earnings could address Qatar’s concerns while preserving the directive’s objectives. Phased implementation and exemptions for critical energy suppliers could further mitigate risks.
For Qatar, engaging proactively with EU regulators and investing in supply chain transparency technologies, such as blockchain, could demonstrate its commitment to compliance. Balancing its growing presence in Asia with strategic partnerships in Europe will also be essential for sustaining its leadership in the global LNG market.
As Europe accelerates its green transition, it must ensure that regulatory measures do not undermine its energy security. For Qatar, navigating these challenges while maintaining its market presence in Europe and Asia will define its role in the global LNG trade.
The stakes are high, not just for the EU and Qatar but for the global energy market. A failure to find common ground could disrupt Europe’s energy transition, leaving the bloc vulnerable to supply shortages and price shocks. Conversely, a cooperative approach could ensure a sustainable and secure energy future for both sides, setting a precedent for balancing climate goals with energy needs in an increasingly interconnected world.
