Dangerous Russian gas: why Arctic LNG 2 has become the main target of the US sanctions

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented on the current state and prospects of Russian LNG exports to Forbes.

Alexey Belogoryev names two reasons for targeted sanctions against Arctic LNG 2. The first is that there is now a noticeable shortage of supply in the global LNG market, and this is especially felt in Europe.

"LNG shipments to the European Union and the United Kingdom in January — October 2024 fell by 23 million tons, or 24% year—on-year," Belogoryev notes. — And the entire increase in global shipments during this period, excluding re-exports from importing countries, amounted to only 2.6 million tons. Thus, if the EU and the UK continued to import LNG in 2024 in the volumes of 2023, then 5.5% of global demand would remain unsatisfied. It is only thanks to a sharp decrease in Europe's needs that the global LNG market is somehow balanced. Under these conditions, depriving the market of "old" Russian plants would mean creating a physical and rather acute gas shortage, at least in Europe."

The second reason, according to Belogoryev, is related to the interests of importing countries, as well as European and Japanese companies with long-term contracts with Russia, which the United States still has to reckon with.

"The Japanese government has consistently opposed any sanctions against Sakhalin-2, and this position is unlikely to change," he says. "In Europe, attitudes towards Russian LNG vary and are generally worse, but neither France, nor Belgium, nor the Netherlands, nor Spain show any real willingness to abandon it, although very radical calls are sometimes heard at the political level, especially from Spanish politicians."

It is difficult in this case to deny the effectiveness of sanctions, the expert states. He identifies four main problems faced by new Russian LNG plants: severing ties between Russian industry and shipbuilding with Western technology companies, refusal to fulfill Russian orders by South Korean shipyards, blocking the execution of long-term contracts due to direct American sanctions and blocking the activities of a fleet of gas carriers — both conditionally "shadow" and quite ordinary.

The Arctic LNG 2 project is generally able to cope with sanctions, although it is not very clear how long it will take, Belogoryev believes.

"Any sanctions can be overcome if there is an interested global demand for end products, sufficient flexibility and market diversification," he says. — Unfortunately, LNG is losing out to Russian oil, petroleum products and coal in both. Therefore, it will be very difficult to repeat the story of their success with circumvention of sanctions and a rapid turn to the global South. But the West has not yet resorted to its most powerful weapon — the embargo on supplies to the European Union, which accounts for about 50% of all Russian LNG supplies."