U.S. Teases New Sanctions Targeting Russian Arctic LNG; “There will be more, I promise” Official Says

In recent comments made at a foreign press briefing as well as at the Financial Times Commodities Global Summit in Switzerland last week, U.S. assistant secretary of state for energy, Geoffrey Pyatt, laid out a pathway to additional sanctions targeting the country’s energy sector.

“We are trying to drive down Russia's oil and gas revenue as fast as we can, without destabilizing our global energy market," Pryatt explained at the summit.

“You should expect the continued steady drumbeat of U.S. and coalition enforcement actions," he continued.

Experts say as global liquefied natural gas (LNG) supplies could reach a surplus in 2025 additional actions against Russian supplies become more likely. 

Several rounds of U.S. sanctions have clearly had an effect, Pryatt stated, highlighting that Novatek has suspended production at its Arctic LNG 2 project and has yet to make any deliveries from the new facility. Novatek’s struggle to ship LNG is directly related to a shortage of ice-capable gas tankers. Half a dozen ice-class vessels are stuck at South Korea’s Hanwha shipyard as a result of U.S. sanctions.

“The sanctions are having an effect. We remain committed to this course of action. As G7 [Formerly the G8. International forum of seven industrialized countries: France, Japan, Germany, the United Kingdom, the United States, Italy and Canada. Red], we are committed to do everything we can to hit Russian LNG revenues,” he elaborated. 

The EU Parliament last week also passed legislation allowing member states to begin phasing out the import of Russian LNG.

Russia derives significant revenues from the sale of LNG. Deliveries from a thus far unsanctioned Arctic project, Yamal LNG, bring in around $12 billion per year from European buyers alone. Additional sales are made to markets in Asia.

Future projects will also be targeted

U.S. actions will also target any future LNG projects, Pryatt said. He highlighted that measures have systematically targeted projects focused on Russia’s future energy production capacity.

Novatek recently greenlit the development of its next project, Murmansk LNG.

"What I can tell you is we are very focused on ensuring that Russia is not able to develop new projects," he confirmed. 

Actions against Murmansk LNG will likely again target Novatek’s ability to ship its LNG. The global market for LNG carriers is much smaller than for oil tankers making it significantly harder to assemble a dark fleet of tankers to circumvent sanctions.  

“You are also seeing a systematic effort to go after shipping. You have seen the recent sanctions that we have leveled against Sovcomflot and a number of Sovcomflot vessels,” Pryatt stated at a recent State Department briefing. 

Following an inquiry by a representative of Russian news agency TASS about future sanctions against LNG and shipping he replied:

“There will be more, I promise you that, as we seek to tighten the sanctions regime around Russia. I am not going to preview specific sanctions actions, but what I am here to tell you is that we are committed to the forceful implementation of those sanctions measures.”

As for the question if sanctions are having an effect he pointed to official protests coming from Moscow.

“For instance, the sanctions against Novatek, against the Arctic LNG 2 project, [...] are clearly having an effect based on the complaints that have come from Moscow about those sanctions actions,” he concluded.