ROME — Russia’s invasion of Ukraine has prompted Italy to put on hold its share of financing for the $21 billion Arctic LNG 2 project led by privately-owned Russian gas producer Novatek, two sources close to the matter told Reuters on Tuesday.
Western allies have taken unprecedented steps to isolate Russia’s economy and financial system following the assault on Ukraine, which Moscow calls a “special operation.”
The energy sector has so far been spared, but sanctions targeting the industry remain on the table, White House press secretary Jen Psaki said on Monday.
The potential for more sanctions has prompted Italy to rethink its loan to the natural gas plant, which sources have put at 500 million euros ($561 million).
Italian state lender Cassa Depositi e Prestiti and the Russian arm of Italy’s biggest bank Intesa Sanpaolo had agreed in recent weeks to help finance Novatek’s project.
The loan was set to be guaranteed by SACE, Italy’s export credit agency, which has already insured nearly 5 billion euros worth of projects and investments relating to Russia.
Speaking on condition of anonymity given the sensitivity of the matter, the sources said the loan had not been disbursed and CDP and Intesa would now sit tight given the situation – joining a raft of companies curbing ties with Russia.
Talks over the fate of the loan are ongoing among Intesa, CDP, SACE and the Treasury, one of the sources said.
For now, the agreement remains in place, a third source close to the matter said.
All interested parties declined to comment.
Italy, which last week announced measures to boost domestic gas production to around 5 billion cubic meters per year from the current 3.2 billion, is looking to diversify its gas supplies to reduce dependence on Russia.
Before the Ukraine conflict, Arctic LNG 2 was expected to be launched in 2023 and reach full production capacity of almost 20 million tonnes of liquefied natural gas a year in 2026.
Novatek announced in November loan agreements with foreign and Russian banks worth 9.5 billion euros, securing the external financing needed for the project.
The shareholders of Arctic LNG 2 are Novatek (60 percent), TotalEnergies (10 percent), China’s CNPC (10 percent) and CNOOC (10 percent), as well as Japan Arctic LNG (10 percent), a consortium of Mitsui & Co, Ltd. and JOGMEC.
Representatives from the European Parliament last year expressed concern about potential support from EU member states for Arctic LNG 2 which, they said, was not compatible with climate targets.
Additional reporting by Valentina Za and Stephen Jewkes in Milan.