The United States on Thursday announced new sanctions on ships carrying Russian gas from Moscow's Arctic LNG 2 terminal in Russia's Murmansk region.
The measures are aimed against the owners of two LNG tankers, New Energy And MulanThe US State Department said that New Energy used “fraudulent shipping practices, including disabling the Automatic Identification System, to load cargo from the US-sanctioned Arctic LNG 2 project.”
It comes after a new analysis showed Russia appears to be struggling to find buyers for its liquefied natural gas (LNG) from its flagship Arctic LNG 2 project amid tightening Western sanctions that are forcing Moscow to store the gas in a huge container ship in the Arctic Ocean.
The Arctic LNG 2 project would have produced nearly 19.8 million tons of LNG per year for sale primarily to Asian markets, potentially generating billions of dollars for Novatek, the private company running the project, and the Kremlin.
Instead, Russia is struggling to sell gas, says analyst Tom Marcek-Manser, head of gas analytics at Independent Commodity Intelligence Services, which uses satellite and ship data to monitor LNG vessels serving the Arctic LNG 2 facility.
“We know of three cargoes that have been loaded from Arctic LNG 2 so far… and all of them have not actually gone anywhere. We've seen in the last few days that two of them have had to unload their cargo onto this huge floating storage facility that Russia's Novatek has had moored off Murmansk for over a year and never used — it's also under sanctions. They're unloading these cargoes into the facility because they can't find a buyer,” Marcek-Manser told VOA.
He said the storage facility, called Samiwill quickly fill up if Russia cannot find buyers, creating a bottleneck and potentially forcing Novatek to halt production.
Putin's flagship
Arctic LNG 2 has become the flagship development of Russian President Vladimir Putin, who has promised that it will one day help Russia become the world's largest LNG producer.
“The production of liquefied natural gas in the Russian Arctic zone will increase threefold by 2030, to 64 million tons per year. … Of course, this will make a significant contribution to the development of our northern regions and strengthening Russia’s technological sovereignty,” Putin told delegates at the Eastern Economic Forum in Vladivostok in September 2023.
Previous sanctions
That goal now seems unlikely. The West, led by the US, imposed sanctions on Novatek and entities linked to Arctic LNG 2 after Moscow’s full-scale invasion of Ukraine in February 2022. Crucially, according to Marzec-Manser, this concerned vessels designed to transport gas.
“So, there's a whole fleet of cargo ships in shipyards in Asia that are specifically designed to sail in the Arctic seas. They're called 'ice-class' ships, and because of these sanctions, they haven't been able to sell them to Novatek,” Marcek-Manser said.
“Novatek then said, ‘OK, we’ll try to buy very old LNG ships that are not designed for Arctic waters, but at least we can ship them back and forth in the summer months.’ But then the U.S. imposed sanctions on those ships, too,” he told VOA.
The Kremlin's response
Russia is seeking ways to circumvent sanctions. Kremlin spokesman Dmitry Peskov told reporters in April that “attempts to push Russia out of energy markets and move to more expensive markets continue,” adding that Moscow “will seek ways to overcome these illegal obstacles, unfair competition and illegal actions.”
Analysts say Russia is building a so-called “dark fleet” of gas carriers that are difficult to track.
“It’s a game of cat and mouse, and as we see new vessels belonging to unknown Middle Eastern entities entering Russian waters, only then can we properly connect the dots and say that this is clearly being used to service some of these [LNG] projects, and only then will sanctions come into force,” Marcek-Manser told Voice of America.
Novatek did not respond to VOA's request for comment.
Russia can still sell LNG and other hydrocarbon products from oil and gas fields not subject to Western sanctions. But state-owned gas giant Gazprom posted a net loss of $6.9 billion in 2023 — its first annual loss in more than 20 years — as Moscow cut supplies to European customers after the invasion of Ukraine and Western sanctions.
The United States is currently the world's largest supplier of LNG, with two-thirds of it exported to Europe.