London — The United States announced new sanctions Thursday on ships that transport Russian gas from Moscow’s Arctic LNG 2 terminal in Russia’s Murmansk region.

The measures target the owners of two LNG tankers, the New Energy and the Mulan. The U.S. State Department said the New Energy had used “deceptive shipping practices, including shutting off its automatic identification system, to load cargo from the U.S.-sanctioned Arctic LNG 2 project.”

It comes as a new analysis shows Russia appears to be struggling to find buyers for its liquefied natural gas, or LNG, from its flagship Arctic LNG 2 project amid tightening Western sanctions, forcing Moscow to store the gas in a huge container vessel in the Arctic Sea.

The Arctic LNG 2 project was meant to produce almost 19.8 million metric tonnes of LNG every year to sell primarily to Asian markets, potentially earning billions of dollars for Novatek, the private company that runs the project, and the Kremlin. 

Instead, Russia is struggling to sell the gas, according to analyst Tom Marzec-Manser, head of gas analytics at Independent Commodity Intelligence Services. He has been using satellite and ship-tracking data to monitor LNG vessels servicing the Arctic LNG 2 facility.

“So far, we’re aware of three cargoes that have been loaded from Arctic LNG 2 … and all of them really have not gone anywhere. In recent days, what we’ve seen is that two of them have had to offload their cargo onto this huge floating storage unit that Russia’s Novatek has had moored up near Murmansk for over a year and never used — it’s also under sanctions. They’re offloading these cargoes into the storage unit because they can’t find a buyer,” Marzec-Manser told VOA.

He said that storage unit, named the Saam, will rapidly fill up if Russia can’t find buyers, creating a bottleneck and potentially forcing Novatek to halt production.

Putin’s flagship

Arctic LNG 2 was a flagship development for Russian President Vladimir Putin, who pledged that it would one day help Russia to become the world’s biggest producer of LNG.

“Production of liquefied natural gas in the Russia Arctic zone will have increased three-fold by 2030, up to 64 million tons per year. … Of course, it will contribute significantly in the development of our northern regions and in the strengthening of Russian technological sovereignty,” Putin told delegates at the Eastern Economic Forum in the Russian city of Vladivostok in September 2023.

Earlier sanctions

That goal now seems unlikely. The West, led by the United States, imposed sanctions on Novatek and businesses linked to Arctic LNG 2 following Moscow’s February 2022 full-scale invasion of Ukraine. Crucially, according to Marzec-Manser, that included the vessels intended to transport the gas.

“So, there’s a whole fleet of cargo vessels that are sitting in shipyards in Asia, which are specifically designed to flow through the Arctic seas. They’re called ‘ice-class’ vessels, and they’ve not been able to sell them to Novatek because of these sanctions,” Marzec-Manser said.

“What Novatek then did was to say, ‘Right, what we’re going to try and do is buy really old LNG vessels, which aren’t designed for the Arctic waters, but we can at least shuttle them backwards and forwards during the summer months.’ But then the U.S. has sanctioned those vessels, as well,” he told VOA.

Kremlin response

Russia is looking for ways to circumvent the sanctions. Kremlin spokesperson Dmitry Peskov told reporters in April that “attempts to squeeze Russia out of energy markets and switch to more expensive markets are continuing,” adding that Moscow “will look for ways to overcome these illegal obstacles, unfair competition and illegal actions.”

Analysts say Russia is assembling a so-called “dark fleet” of LNG vessels that are difficult to track.

“It’s a game of cat and mouse, and as we see, new vessels which are owned by unknown Middle Eastern entities entering Russian waters, it’s only then that you can properly join the dots to say, well, this is clearly being used to service some of these [LNG] projects, and it’s only then that the sanctions come in,” Marzec-Manser told VOA.

Novatek did not respond to VOA requests for comment.

Russia is still able to sell LNG and other hydrocarbon products from oil and gas fields that are not subject to Western sanctions. However, the state-owned gas giant Gazprom recorded a net loss of $6.9 billion in 2023 — its first annual loss in more than 20 years — as Moscow cut supplies to European customers following the invasion of Ukraine and the West’s imposition of sanctions.

The United States is now by far the world’s biggest supplier of LNG, with two-thirds of it exported to Europe.
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