Despite Western sanctions targeting Russia’s energy sector, the country’s LNG exports have increased since 2022. A new Ukrainian petition now calls on officials in Europe and the US to expand sanctions targeting Novatek’s Yamal LNG and Arctic LNG 2 projects.
In an official letter sent to Norway’s Minister of Foreign Affairs, the US’ Secretaries of the Treasury and State, the UK’s Secretary of State, and the EU’s Vice-president of the European Commission, Ukraine is calling for additional sanctions targeting Russia’s liquefied natural gas (LNG) projects in the Arctic.
Ukrainian officials suggest blocking measures to impede the completion of Arctic LNG 2 and to limit the export of LNG from the existing Yamal LNG project. Proposed measures include sanctions against heavy lift companies transporting LNG modules from China to Russia and operators of fifteen Arc7 LNG carriers.
They also call for measures to stop western companies from providing P&I insurance for vessels carrying Russian LNG.
The document highlights how earnings from Russian petroleum exports continue to represent a significant source of income for the country’s government.
“To finance its war of aggression, the Kremlin has become ever more reliant on exports of fossil fuels for budget income. Oil and gas companies today constitute the most significant taxpayers in Russia, playing a pivotal role in shaping the balance of payments and stabilizing the national currency,” the document details.
Russian LNG exports were not covered by international sanctions and restrictive measures
According to Ukrainian officials Russia has collected more than $600bn in profits from fossil fuel exports since the beginning of the full-scale invasion nearly two years ago.
A key part of current and future profits is Russia’s rapid expansion of Arctic fields. By 2030 the country aims to export 100m tons of LNG, up from 35m tons in 2023.
“Russian LNG exports were not covered by international sanctions and restrictive measures, in 2022 and 2023 the [the country] reaped a surge in associated revenues, supplying record volumes and aiming for further rapid expansion,” Ukrainian officials state in their letter.
Russian LNG exports to Europe reached record-levels in 2023, especially to France, Spain and Belgium.
Effective but need to be expanded
Ukraine highlights that the blocking action taken by the US in November 2023 targeting Arctic LNG 2 has proven effective with international companies exiting from the project following force majeure declarations.
While Novatek now faces uncertainty on who will buy product from Arctic LNG 2 and logistical bottlenecks related to transporting the LNG, additional sanctions are needed to further impede the project, the letter explains.
European companies, namely shipping operators and marine insurance companies, continue to aid Novatek in delivering its product to markets.
“Out of 15 operational ice-class LNG tankers that are currently enabling exports from Yamal LNG, 11 are insured in the United Kingdom and 3 in Norway. EU-registered companies operate as managers of 9 of these vessels, while UK-registered ship managers cover another 5 vessels,” Ukrainian officials highlight.
According to public shipping records, Norwegian Assuranceforeningen Skuld, an international marine insurance company based in Oslo, provides protection and indemnity insurance to three Arc7 LNG tankers, Yakov Gakkel, Vladimir Voronin and Georgiy Ushakov.
Targeting the Arc7 fleet
Specifically, Ukraine urges officials in the US, Europe, Norway and the UK to introduce blocking measures against the operators of the existing fleet of 15 Arc7 tankers that transport LNG from the Russian Arctic to Europe and Asia.
In order to limit Novatek’s ability to expand Arctic LNG 2 and construct future LNG projects, the letter also calls for “sanctions against owners of vessels engaged in transporting components for construction of Arctic LNG 2 and/or other Russian infrastructure in the Arctic.”
Here the document specifically references recent reporting by HNN, which highlights the transport of prefabricated modules from China to Russia by a Dutch-Singaporean company Red Box, possibly in violation of existing sanctions.
The transport of the liquefaction technology contained in the modules has been blocked under EU rules since the 5th sanction package in April 2022.