Russia's Arctic LNG 2 Project Faces Setback Due to US Sanctions

Russia has decried U.S. sanctions targeting the country’s massive Arctic LNG 2 project, saying they are unacceptable and will undermine global energy security. 

Located in the Gydan Peninsula in the Arctic, the LNG project is considered key to Russia's efforts to boost its global LNG market share from 8% to 20% by 2030-2035. 

Russia is the world’s fourth largest LNG producer behind the United States, Qatar and Australia.

"We consider such actions unacceptable, especially in relation to such large international commercial projects as Arctic LNG 2, which affect the energy balance of many states,” Russian Foreign Ministry spokesperson Maria Zakharova told a weekly briefing. 

“The situation around Arctic LNG 2 once again confirms the destructive role for global economic security played by Washington, which speaks of the need to maintain this security but in fact, by pursuing its own selfish interests, tries to oust competitors and destroy global energy security,” the spokesperson continued.  

Foreign shareholders have suspended participation in the Arctic LNG 2 project after the Biden administration announced the new sanctions last month, effectively withdrawing from the financing of the project and for offtake contracts for the new plant. The sanctions are part of the measures implemented by the U.S. and its Western allies that seek to limit Moscow’s financial ability to wage war in Ukraine.

Although the West has adopted 10 packages of sanctions against Russia ever since it invaded Ukraine in 2022, the restrictive measures do not target Russian society, with industries such as food, agriculture, health and pharmaceuticals excluded from the measures imposed. 

However, various economic indicators suggest that the sanctions are having an impact on the Russian economy. Russia’s GDP is expected to contract by as much as 2.5% in the current year after shrinking by 2.1% in 2022. 

Meanwhile, Russia’s trade in goods and services is expected to decline significantly, with 2023 imports forecast to be higher than in 2022, while exports are forecast to drop further.

By Tom Kool for Oilprice.com 

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