Washington, D.C. — The Arctic LNG 2 project, located on the Gydan Peninsula next to the Yamal Peninsula in the Russian Arctic, aims to exploit the high north region’s vast natural gas reserves with an annual production capacity of 19.8 million tons of liquefied natural gas (LNG) destined for Europe and Asia.
Arctic ecosystem
Additionally, the project’s location in the fragile Arctic ecosystem has sparked environmental concerns, including potential impacts on local wildlife, the risk of oil spills, and the broader implications of increased industrial activity in the Arctic. In response, the U.S. is intensifying its efforts to counter Russia’s latest energy ambitions.
(OFAC)
On 1 May, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) added several companies and vessels to the Specially Designated Nationals list (SDN), furthering the crackdown on Russia’s economic activities and energy exports.
Novatek
These measures specifically target the Arctic LNG 2 project, a key LNG development led by Novatek, Russia’s largest independent natural gas producer. Many of the sanctioned companies and vessels are crucial to the project’s development, particularly Russia’s ability for bulk carrier operations.
The Arctic LNG 2 project involves the construction of gravity-based structures (GBS) for the LNG trains, upstream gas production facilities, LNG storage, and shipping terminals, all designed to withstand Arctic conditions.
Harsh Arctic conditions.
The northern fleet vessels needed to facilitate this project from the multiple shipping companies are generally ice-class due to the harsh Arctic conditions.
The Arctic LNG 2 project is vital for Russia’s strategy to enhance its LNG production capacity and establish itself as a leading global LNG supplier.
International sanctions
Using the Northern Sea Route for LNG transport significantly reduces shipping times and the need of transshipment points leading to Europe and key Asian markets, particularly China, thereby boosting the efficiency and competitiveness of Russian LNG.
The project has been hampered by international sanctions by the west aimed at deterrence and restricting Russia’s access to the financing and technology needed for Arctic energy development.
This round of U.S. sanctions have targeted nearly 200 entities and individuals, including those linked to the Arctic LNG 2 project.
Additionally, the U.S. Department of State has imposed sanctions on over 80 entities and individuals involved in sanctions evasion, Russia’s chemical and biological weapons programs, and its defense industrial base.
Global LNG market
The U.S. sanctions are targeting not just LNG carriers, but the companies and vessels, supporting Russia’s Arctic LNG 2 project. The western sanctions were created to disrupt the broader infrastructure facilitating Russia’s energy exports.
By sanctioning these entities, the aim is to hinder the development and operational capabilities of the entire project, which is a critical component of Russia’s strategy to boost its global LNG market presence.
This comprehensive approach aims to exert maximum economic pressure, limiting Russia’s access to essential resources, technologies, and financing needed for the project’s success.
SDN List
Companies and Vessels Added to the SDN List Pursuant to OFAC’s 1 May, 2024, actions:
EKO Shipping Limited Liability Company (a.k.a. ECO SHIPPING LLC RUS; a.k.a. LLC ECO SHIPPING)
- Role: Based in Arkhangelsk, Russia, EKO Shipping is involved in transporting LNG and related equipment for the Arctic LNG 2 project.
- Sanctions: Sanctioned under Executive Order 14024 by the U.S. Department of the Treasury.
Transstroy Limited Liability Company
- Role: Also based in Arkhangelsk, Transstroy provides construction and logistical support for the Arctic LNG 2 project.
- Sanctions: Faces secondary sanctions risk for supporting Russia’s military-industrial base.
CFU Shipping Co Limited
- Role: Based in Hong Kong, CFU Shipping is linked to the Arctic LNG 2 project through the transportation of heavy machinery and components.
- Sanctions: Subject to international scrutiny and potential sanctions due to its association with sanctioned Russian entities.
Red Box Energy Services PTE LTD
- Role: This Singapore-based firm specializes in transporting large and heavy equipment to the Arctic LNG 2 site.
- Sanctions: Involvement in the project links it to sanctioned activities, attracting regulatory attention and potential sanctions.
