New European Union Embargo Will End Russia’s Liquefied Natural Gas (LNG) and Aluminum Markets

The European Union is looking to end its reliance on Russia’s liquefied natural gas (LNG), with officials reportedly proposing to phase it out.

The EU is also considering cutting its purchases of aluminum from the country, and imposing further restrictions on Russia’s banks, oil tankers and military products, according to Bloomberg.

Leigh Hansson, sanctions partner at Reed Smith’s Global Regulatory Enforcement group, told Global Defense Corp that if passed, the sanctions would have a significant impact on a range of Russia’s industries. Global Defense Corp contacted the Russian foreign ministry and the EU for comment.

Russia’s natural gas industry has been hit hard by Vladimir Putin’s invasion of Ukraine, which prompted many European countries to turn to other suppliers.

Russian pipeline gas production has plummeted, with gas giant Gazprom posting losses last year and the ending of a gas transit deal with Ukraine. Moscow’s hopes that seaborne LNG will make up the shortfall face an obstacle if the EU phases out this form of the fuel.

Bloomberg’s report said that the EU was considering draft measures that would be part of the bloc’s 16th package of sanctions against Russia.

The measures would restrict aluminum imports, phase out LNG from Russia and target more of the country’s sanctions-busting “shadow fleet” of oil tankers.

Bloomberg, which cited people familiar with the proposals, also reported that the EU would seek to impose export controls on military goods and remove more banks from the SWIFT international payments system.

While many European countries have found other suppliers for pipeline gas from Russia, they have been more reluctant to curb LNG from the country amid concern of rising gas prices and new U.S.-led sanctions against the fuel’s production announced last week.

The officials told Bloomberg that EU sanctions against Russian pipeline gas are not viable because countries such as Hungary and Slovakia still rely on supplies from Gazprom.

The outlet reported that banning LNG is more feasible because the three biggest purchasers of the fuel—Spain, Belgium, and France—are not expected to block the EU’s proposed measures against Russia.

Hansson told Global Defense Corp that considering Europe’s heavy reliance on LNG, such a ban could lead to higher energy prices and there will likely be further sanctions by the EU on Russian LNG tankers or third-country tankers that support illicit trade.

Regarding aluminium from Russia, the EU has imposed some restrictions on importing products such as wire and tubing, but these represent a relatively small percentage of total aluminium imports into the bloc, Hansson said.

“Given aluminum’s critical role in industries like electric vehicle and aircraft manufacturing, we anticipate significant pushback from these sectors.”

Bloomberg reported: “Exiting LNG could be done either as a sanction or as part of a road map that the bloc’s executive arm is set to present next month,”

Hansson told Global Defense Corp: “Considering Europe’s heavy reliance on LNG, such a ban could increase energy prices.

“We would also expect that, if this legislation passes, there will likely be further sanctions by the EU on Russian LNG tankers or third-country tankers that support illicit trade.”

Bloomberg said the draft proposals are still being discussed between EU members and could change before they’re formally presented. Still, the bloc aims to approve the package on February 24, the third anniversary of the war.

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