New US Sanctions Target Russia’s Arctic LNG 2 – “Our Objective is to Kill that Project”

By Malte Humpert, High North News - November 13, 2023

Article by High North News

Novatek’s Yamal LNG facility in the Russian Arctic. (Source: Novatek)

In a new sanctions package the US targets Russia’s Arctic LNG 2 facility with the explicit goal of shutting down the project. As part of congressional testimony, US officials said their aim is to “systematically reduce Russia’s future energy revenue.” It is unclear if or to what degree existing European and Japanese partners in the project will comply with the new sanctions.

Following the latest sanctions, the US now has blocking measures in place against Russian natural gas producer Novatek, two transshipment barges of liquefied natural gas (LNG) located near Murmansk and Kamchatka, and Arctic LNG 2, as well as several partners in Russia and abroad e.g. in the United Arab Emirates.

During congressional testimony last week Assistant Secretary for Energy Resources Geoffrey Pyatt laid out the US’ strategy to “systematically reduce Russia’s future energy revenue.”

“Just last week, for instance, we leveled new sanctions against a project in the Arctic, Arctic LNG 2, which is Novatek’s flagship LNG project, which Novatek set in motion with the aspiration of developing Russia as the largest LNG exporter in the world. Our objective is to kill that project. And we are doing that through our sanctions working with our partners in the G7 and beyond,” explained Pyatt in front of the U.S. Senate Foreign Relations Committee.

Sanctions are primarily aimed at limiting future Russian LNG production rather than affecting current supply, e.g. from the Yamal LNG plant, likely a concession to the US’ European partners, which continue to import significant amounts of LNG from this existing plant.

“This seems to be a ‘maximum interference but no direct confrontation’ strategy – instead of pushing out Western stakeholders from Arctic LNG 2, the US is seeking to derail all ancillary processes, be that the final settlement of the shipping solution or the financing of transactions themselves,” explains Viktor Katona, senior analyst at Kpler, a data and analytics firm for commodity markets.


The shipping solution Katona refers to relates to shipyards in South Korea canceling orders for a number of Arc7 LNG carriers Novatek relies on to transport its LNG through the Arctic.

Uncertainty for TotalEnergies and Mitsui

Novatek developed Arctic LNG 2 with several international partners, including France’s TotalEnergies and Japanese consortium Mitsui/JOGMEC. Both entities confirm that they are looking into how the new US sanctions will affect their ability to remain partners in the project.

Japanese officials indicated that they aim to comply with the latest round of US sanctions targeting the project, but also emphasized that they won’t sacrifice Japan’s energy supply security.

The country’s Industry Minister Yasutoshi Nishimura stated that his government “will work with the Group of Seven countries (G7) to make a comprehensive judgment and respond appropriately so as not to impair the stable energy supply to our nation.”

Nishimura added that Arctic LNG 2 “was an important project for Japan’s stable energy supply in the LNG market” especially at a time where supply and demand remained tight.

“Japanese stakeholders are almost certainly taking their volumes back home”

Speaking to the media, Mitsui stated that the company will closely monitor the impact of sanctions to observe the rights and obligations of the company under its various agreements in the partnership.

Mitsui indicated that it “will comply with laws and regulations, including sanctions taken by the international community, and will take appropriate measures in cooperation with stakeholders including the Japanese government.

France’s TotalEnergies also said it was evaluating the impact of this latest round of sanctions. “The consequences of the designation of Arctic LNG 2 as a SDN (special designated nationals) entity by the US authorities on TotalEnergies’ contractual commitments to Arctic LNG 2 are currently being assessed,”  a company spokesperson said.

Will Novatek’s partners exit?

The impact of sanctions and decisions by TotalEnergies and Mitsui will likely come into focus in the coming two months.

The US has granted a waiver valid until January 31, 2024 allowing companies to wind down their involvement with and divestment from Arctic LNG 2, right around the time the plant is expected to begin production.


“It would be very hard to put a grandfather clause to Arctic LNG 2 sanctions so that TotalEnergies and the Mitsui/JOGMEC consortium are forced to sell their respective 10 percent stakes in the project,” elaborates Katona.

Both TotalEnergies and Mitsui/JOGMEC are entitled to around 2m tons of LNG in annual production from the project. Arctic LNG 2 is supposed to begin production in late 2023 or early 2024.

“Japanese stakeholders are almost certainly taking their volumes back home,” concludes Katona.

Other voices appear more skeptical that Western and Japanese companies will openly violate US sanctions by remaining invested in the project or purchasing LNG from the facility, according to reporting by the Financial Times.

Public and political pressure may also play a role in the companies’ decision. TotalEnergies already took a $3.7bn write-off in 2022 giving up its 19.4 percent stake it held in Novatek directly.