Eurasia Review on Nostr: Western Sanctions On Icebreakers Stall Russia’s Arctic LNG Expansion – Analysis ...

Western Sanctions On Icebreakers Stall Russia’s Arctic LNG Expansion – Analysis
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Novatek’s Arctic LNG 2 project is facing significant delays due to Western sanctions targeting ship construction and procurement. These sanctions have successfully restricted the delivery of icebreaking LNG carriers, delaying the project's first shipments and creating uncertainty about its viability. A coordinated G7 sanctions policy focused on blocking technology transfer, access to finance, and acquiring transport and logistical capabilities could further derail the project. Russia's war economy has shown resilience to sustain an expensive conflict, but the country's pipeline gas exports to the EU have been significantly affected. Russia has turned to LNG as a strategic opportunity to export gas to non-European markets. The success of Novatek's Yamal LNG project has allowed Russia to develop the strategic Northern Sea Route, enabling a shift in natural gas exports from Europe to Asia. The Arctic LNG 2 project, located on the Gydan Peninsula, is a major natural gas initiative led by Novatek with international partners. The project is designed to export 27 bcm of LNG annually, becoming the largest LNG project in Russia. Western sanctions on the Russian energy sector, particularly those focused on limiting Novatek's growth in the LNG sector, have been effective in imposing a high cost on the commercial outlook of the Russian gas sector. The sanctions have targeted Novatek's access to Western financial markets and the acquisition of new icebreaking LNG carriers. The success of these sanctions relies on inflicting more damage on Russia than the issuer of the restrictions. The LNG industry is vulnerable to US sanctions due to the small number of service providers and the specific technology required. LNG transshipment operations must be carried out in specialized ports, and most LNG carrier owners and operators are companies that depend on their reputation for commercial success. The US can impose secondary sanctions on foreign firms that conduct business with the primary sanctioned entity, creating a broader deterrent effect. The success of the Arctic LNG 2 project relies on the construction of specialized icebreaking LNG carriers. Novatek had placed orders for 15 Arc7 LNG carriers to be built in Russia and six more in South Korea. However, sanctions have impacted the shipyards involved, preventing the delivery of the vessels. Novatek has sent skilled personnel to the Zvezda shipyard in Russia to try to complete the first two icebreakers. The future of the remaining vessels is uncertain, and alternative buyers are being sought. The stalling of construction is detrimental to Russian ambitions in the Arctic and the development of domestic capacities in LNG. A coordinated policy of sanctions on Russia's gas development in the region, focusing on blocking technology transfer, access to finance, and acquiring transport and logistical capabilities, could further derail the Arctic LNG 2 project.

#Russia #Lng #Sanctions #Arctic #Novatek

https://www.eurasiareview.com/01072024-western-sanctions-on-icebreakers-stall-russias-arctic-lng-expansion-analysis/