Greece’s Dynagas gets EU exemption to transport Russian LNG

Brussels yields to Athens but caps LNG volume transported at 2025 levels.

What: Greek shipping line Dynagas has been given the right to continue transporting Russian LNG in a major compromise by the European Union with Athens.

Why: Brussels’ attempt to approve its 21st sanctions package against Russia was stalled for over a week, causing the EU to cave in order to enforce the other sanctions.

What Next: LNG shipping volumes will be capped at 2025 levels, and Greece has agreed to extend a price cap on Russian oil at $44.10 a barrel for one year.

Greek shipping line Dynagas has been granted authorisation by the European Union to continue transporting Russian LNG, the Financial Times reported on July 22.

Greek politicians claimed that prohibiting European shipping companies from delivering Russian LNG to third-country buyers would only result in the transfer of business to China, Japan, and other countries while not lowering Russia’s export revenues.

Athens was adamant about obtaining the exemption for Dynagas because it operates specialised ice-class LNG vessels that serve Russia’s northern Yamal LNG project.

The concession to the shipping company, which owns 27 LNG tankers, comes with the EU willing to make a compromise in order to push through its 21st sanctions package against Russia. The package had been stalled for more than a week by Athens.

Ultimately, EU lawmakers felt that getting the new sanctions imposed overweighed allowing a loophole for a European firm to continue transporting Russian LNG. The new sanctions package imposes more sanction on banks, military-industrial companies, and cryptocurrency networks.

Consequently, EU companies are now able to continue shipping Russian LNG cargoes to third countries. EU ambassadors approved the deal, which will run for 12-months and could be renewed.

Nevertheless, the bloc did impose a limit on volumes, capping it at 2025 levels. Similarly, Greece promised to extend the price cap on Russian oil for one year to $44.10 a barrel, less than half of current prices that are hovering around $95 a barrel.

The price cap extension prevents the price from rising as it was about to due to the system benchmarking the cap price to the global oil price.

The EU’s ban on imports of Russian gas is scheduled to come into effect on January 1. This was also a sticking point for Athens, which called for an exemption for any contracts agreed to before February 2022 when Russia invaded Ukraine.

The EU’s sanctions preventing short-term import contracts for Russian LNG came into force on April 25. However, despite its tough talk on limiting Russia’s profits from its fossil fuels industry, the EU continues to lack discipline.

In addition to the concession given to Dynagas, European utilities also made their largest monthly purchase of the super-chilled fuel from Russia in the final month before short-term import contracts were outlawed.

March saw the EU import about 2.45 bn cubic metres of LNG from Russia, marking a 20% rise from February and representing a 40% increase year on year, according to data compiled by advocacy group Urgewald based on Kpler ship-tracking.

In fact, European energy traders bought every cargo exported by Russia’s Arctic Yamal LNG plant operated by Novatek.

The Dynagas exemption is the latest in occurrences where the EU has failed to live up to its bravado. In May, the bloc softened enforcement of its methane emissions rules for oil and gas imports as the Iran war sparked fears over Europe’s energy security. Brussels agreed to allow member states to delay penalties for breaches of methane rules if enforcing them risks disrupting energy supplies.

Last year, the EU also discussed taking action to make it simpler for US LNG imports to meet the bloc’s methane emissions requirements, with the European Commission examining regulatory flexibilities in order to aid US LNG exporters.

Indeed, Brussels’ caving to Athens demands have drawn criticism from some EU officials who lambasted the bloc for its lack of unity and for remaining addicted to Russian LNG and its downstream value chain. In fact, imports of Russian LNG have increased since its invasion of Ukraine.

Despite its bluster, the EU continues to make itself vulnerable to external shocks. Beyond its overreliance first on Russian pipeline gas and then Russian LNG, the bloc has also found itself struggling with an overdependence on US LNG.

Now, it is also taking a hit from its inability to receive LNG supply from Qatar, which has needed to declare force majeure to European clients, such as Edison.

Equally as troubling has been Europe’s inability to cutoff its downstream business that supports Russia’s LNG sector. Beyond Dynagas, Denmark's Fayard shipyard has also come under severe criticism this month to halt servicing a fleet of ice-class tankers that ship Russian LNG.

For all its strong talk about quitting Russian fossil fuels, the exemption given to Dynagas serves as a microcosm of a bigger problem for the EU in its failure to have unity and take some pains itself to inflict a harder blow to Russia.