Brussels explores legal loopholes to exit Russian gas contracts without penalties

The European Commission is examining legal avenues to enable EU companies to exit long-term gas contracts with Russia without incurring costly penalties, officials familiar with the matter stated.

As the bloc continues its push to end reliance on Russian fossil fuels by 2027, Brussels is studying the potential application of force majeure clauses to void contractual obligations, Caliber.Az reports via foreign media.

“If the whole idea is not paying Russia, then [paying compensation] would undermine the whole purpose,” one EU official stated, highlighting the underlying tension between contractual obligations and geopolitical objectives.

The move underscores the EU’s ongoing struggle to deprive the Kremlin of energy revenues amid the war in Ukraine. While Russia’s share of the bloc’s pipeline gas has dropped to 11 per cent from nearly 40 per cent in 2022, imports of Russian liquefied natural gas (LNG) have surged by around 60 per cent in the past three years.

The Commission’s legal review forms part of a delayed energy road map, initially due in March, which outlines strategies to eliminate Russian fossil fuel imports. The delay stems partly from concerns that proposed legislation would be blocked by Hungary and Slovakia, which are heavily reliant on Russian piped gas. Hungary, in particular, has voiced strong opposition to gas sanctions, which require unanimous approval from all 27 EU member states.

“It’s a mess,” one EU diplomat said. “How does the US fit in all this? How do we diversify?”

Further complicating matters is the revival of discussions over the Nord Stream pipeline and energy trade negotiations with the US amid President Donald Trump’s tariff regime. The EU is working to frame a broader transatlantic energy deal to reduce exposure to Russian energy and respond to Trump’s aggressive trade stance.

Despite granting member states powers to prevent Russian and Belarusian operators from accessing LNG port infrastructure, EU ministers argue that these tools fall short of enabling companies to break contracts. “Using the war in Ukraine to call force majeure may not be legally sufficient,” another EU official said.

A Bruegel think tank paper recently advocated for imposing tariffs rather than a full ban, noting, “An effective common tool on Russian gas imports is urgently needed — as otherwise Russia might again use (the prospect of) selective gas supplies to fuel profound discord among member states.”

By Vafa Guliyeva