The Moscow Times: EU firms supply equipment for the Novatek project worth 580 euros to Russia’s Arctic LNG 2 Project Despite Sanctions

After the Russian invasion of Ukraine, European companies continued to supply equipment to the Russian Arctic LNG 2 project, supplying it with their products worth hundreds of millions of euros, despite it being under Western sanctions.  The Moscow Times’ Russian service and the Arctida NGO reported in a joint investigation.

When completed, Novatek’s Arctic LNG 2 project will extract and produce LNG on the Gyda Peninsula in the Arctic at an estimated annual production capacity of 19.8 million tons.

Its construction began in 2019 with French, Chinese and Japanese investors. In 2023, its construction cost was estimated at about $25 billion.

Novatek has a 60% stake in the project, while France’s TotalEnergies, China’s CNPC and CNOOC, and a consortium of Japan’s Mitsui and JOGMEC all have 10% stakes each.

Novatek’s largest shareholders are Leonid Mikhelson and Gennady Timchenko, whom Putin has called a “friend.” Other Novatek shareholders include Gazprom and France’s Total. 

According to Russian customs data, from the moment the European Union introduced a ban on the supply of any equipment for the production of liquefied gas in May 2022 and until the end of January 2024, Arctic LNG 2 received products worth 580 million euros from European companies. About half of this amount came in 2022. In 2023, equipment worth over 220 million euros was imported into Russia, and in January 2024 – 24 million euros.

The largest suppliers of Arctic LNG 2 were companies from Italy (112 million euros), France (31.6 million euros), Germany (25 million euros), the Netherlands (12.8 million euros) and Spain (8 million euros).

The main supplier of equipment for Arctic LNG 2 in 2023 was the Italian Nuovo Pignone SRL, which produces equipment for the energy industry. She sent products worth 41 million euros to Russia. Among the French companies, the largest supplier was Optaperiph, which supplied six million euros worth of thermal insulation products, valves and other equipment to the Russian Federation. The German conglomerate Siemens, which announced its withdrawal from the Russian market shortly after the start of the full-scale invasion of Russian troops in Ukraine, supplied more than 4.8 million euros of its products to Arctic LNG 2 in 2023.

The investigation clarifies that European equipment for Arctic LNG 2 is imported to the Russian Federation mainly through China, since at least five Chinese companies are involved in the construction of the project modules. However, some equipment comes directly from the EU. For example, 11% of Italian shipments in 2023 came directly from Italy.

As oil and gas market expert Mikhail Krutikhin explained, it is quite difficult for manufacturers to track the end customer if supplies go through intermediaries. “But it often happens that the supplier knows who his end consumer is, so collusion at some level, perhaps with someone from the management, cannot be completely ruled out,” the expert added.

Arctida director Ilya Shumanov notes that some of the equipment supplied for Arctic LNG 2 is “quite specific.” “We therefore believe that managers of European suppliers should have understood which projects it could be used in,” he concluded.

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