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Putin's LNG Diversion Plan Hits Major Obstacles

Bloomberg Markets •
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Russian President Vladimir Putin's proposal to immediately divert liquefied natural gas supplies from Europe to Asia faces significant hurdles, according to energy analysts. The suggestion came as European gas prices spiked following Middle East supply disruptions, creating a moment of vulnerability for the continent. European countries still purchase Russian LNG cargoes, though the European Union plans a gradual ban by 2027.

Several factors complicate Putin's plan, including long-term contracts and logistical challenges. Supply from projects like Yamal LNG, which provides nearly 18% of EU LNG imports, is tied to contracts with legal penalties for breach. Energy lawyer Agnieszka Ason noted that commercial decisions to prioritize other markets don't qualify for force majeure exemptions. The Arctic-based Yamal plant primarily serves European terminals, requiring a 12,500-nautical-mile journey to Asian ports compared to 1,600-1,800 miles to Europe.

Redirecting Yamal's exports would require up to 60 conventional LNG tankers, far more than the 17 currently in operation. Russia's Novatek PJSC, which owns 50.1% of Yamal LNG, and other stakeholders declined to comment on the proposal. Deputy Prime Minister Alexander Novak suggested some European-bound cargoes could shift to Asian markets, but provided no specific timetable for implementation.