German authorities have found a way to terminate the Yamal LNG contract.

The EU's decision to ban energy supplies from Russia and the 19th sanctions package give SEFE the opportunity to declare force majeure and not fulfill the terms of the contract.BLOOMBERG wrote that the termination of the deal threatens the company with multi-billion dollar losses.

The German Ministry of Economic Affairs and Energy stated that SEFE, a Gazprom subsidiary prior to its nationalization by the German government, may terminate its deal to import gas from the Yamal LNG project, citing force majeure. This was stated in a clarification published on the German federal government's website.

The corresponding legal clause, allowing European companies to avoid fulfilling their contractual obligations, is included in the 19th package of EU sanctions against Russia, as well as in the RePowerEU directive, according to which the union wants to completely eliminate dependence on Russian fuel.

The European Commission unveiled the 19th sanctions package against Russia in September. It provides for a complete ban on the import of liquefied natural gas under short-term contracts from April 25, 2026, and under long-term contracts from January 1, 2027. Furthermore, the purchase, import, or transfer, directly or indirectly, of LNG produced in or exported from Russia is prohibited.

Effective March 31, 2022, Gazprom terminated its participation in Gazprom Germania (formerly SEFE) and all its assets: Gazprom Marketing & Trading, Gazprom NGV Europe, Wingas, Astora, Vemex, and others. German authorities first placed the company under external management and then nationalized it.

Last February, the Russian government extended SEFE's permit to supply 2.9 million tons of liquefied natural gas from Yamal LNG annually. The contract runs until the end of 2040. Bloomberg reported that contract termination could cost SEFE $11.6 billion. In October, the company stated it would assess the impact of the latest sanctions package on its supply terms, but has not yet taken any action, the agency notes.

Russian authorities consider Western sanctions illegal and demand their lifting.

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