European companies bypassed sanctions against Russia

In 2022-2023, German, Italian, and French companies supplied equipment worth 580 million euros for the Arctic LNG-2 project.
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Throughout the two years of the war, European companies continued to supply equipment to the Arctic LNG 2 project, one of the largest shareholders of which is billionaire Gennady Timchenko, The Moscow Times found out in a joint investigation with the NGO Arctida. In total, from the introduction of sanctions in May 2022 to the end of January 2024, Arctic LNG 2 received European equipment worth 580 million euros.

The European Union has banned the supply of any equipment for the production of liquefied gas since May 2022, and at the end of 2023 the United States imposed direct sanctions against the Arctic LNG 2 project. But only in January 2024, spare parts and equipment worth 24 million euros were imported from the European Union countries for Arctic LNG 2 to Russia, according to Russian customs statistics, which The Moscow Times had access to. In 2023, equipment worth over 220 million euros was imported. The largest suppliers are 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).

Arctic LNG 2 is a project of Novatek PJSC for the extraction and production of liquefied gas on the Gydan Peninsula in the Arctic zone. It began to be built in 2019 together with French, Chinese and Japanese investors. 60% of the project belongs to Novatek, another 10% is owned by the French TotalEnergies, the Chinese CNPC and CNOOC, as well as the consortium of the Japanese Mitsui and JOGMEC. The largest shareholders of Novatek are Leonid Mikhelson (24.76%) and Gennady Timchenko (23.49%), whom Vladimir Putin himself called his “friend” in 2014 after imposing sanctions against a group of Russian billionaires due to the annexation of Crimea. Novatek shareholders also include Gazprom (9.9%) and the French Total (19.4%).

The capacity of Arctic LNG 2 is estimated at 19.8 million tons of LNG per year. For comparison: in 2023, Russia produced 32.3 million tons of liquefied gas. The cost of the project changed several times, as a result, in 2023, the estimated cost of construction of Arctic LNG 2 was about $25 billion.

At the end of 2023, foreign shareholders of Arctic LNG 2, due to US sanctions, declared force majeure on their obligations to finance the project and purchase LNG from it. The French Total announced that it had “frozen” its stake in Novatek.

In October 2022, Novatek Chairman of the Board Leonid Mikhelson said that all the necessary equipment for Arctic LNG 2 was supplied before the start of the war, but Le Monde and Spiegel wrote that French and German companies continued to supply equipment for Arctic LNG 2 » until mid-2023, fulfilling contracts concluded before the imposition of sanctions. According to the Financial Times, the project is close to launch and will begin sending LNG for export as early as 2024. In February 2024, Reuters reported that Novatek was opening a division in China that would look for buyers for LNG in Asia.

Arctic LNG 2 was created using technologies from the German company Linde GMBH; during 2022, it supplied equipment worth over 58 million euros. Most declarations indicate that the company supplies “plant equipment for the production, storage and shipment of liquefied gas and stable condensate on gravity-type bases.”

Oil and gas market expert Mikhail Krutikhin believes that Arctic LNG 2 was not immediately able to overcome its dependence on Linde technologies. “The project was originally created using Linde technologies, it is designed for them and cannot do without them. Yes, in Russia they taught how to copy some German technologies and even patented them, changing the details a little, but the project is still dependent on high-tech imported equipment and consultations with the manufacturer,” says Krutikhin.

​​​The main supplier of equipment for Arctic LNG 2 in 2023 was the Italian Nuovo Pignone SRL (BH), which produces equipment for the energy industry. She sent products worth 41 million euros to Russia.

The leader among French suppliers is Optaperiph; it supplied thermal insulation products, valves and other equipment worth 6 million euros.

The German Siemens supplied goods worth over 4.8 million euros to Arctic LNG 2 in 2023. Siemens stopped supplying equipment to Russian Railways immediately after the start of the war - in March 2022. In May 2022, the company announced the termination of its activities in Russia, and in February 2024 it began liquidating its Russian subsidiary. However, supplies to Arctic LNG 2 continued throughout the war, with the company supplying valves, washers, nuts, radiators and ferrous metal products. The last time Siemens Arctic LNG 2 equipment was received was on September 28, 2023.

The Spanish technology company Ampo supplied products worth more than 2 million euros to Arctic LNG 2.

European equipment for Arctic LNG 2 is imported mainly through China, since at least five Chinese companies are involved in the construction of modules for the project: Bomesc Offshore Engineering, Cosco Shipping Heavy Industry, Penglai Jutal Offshore Engineering, Wison Offshore Engineering and Qingdao McDermott Wuchuan. But some equipment comes directly from the EU: for example, 11% of Italian supplies in 2023 came directly from Italy.

“If deliveries go through intermediaries, then they are quite difficult to track, although European legislation obliges this to be done. 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,” Krutikhin explains how mass violations of the sanctions regime became possible.

“Sanctions require businesses to monitor the supply chain of goods, but in practice such violations are rarely punished. However, some of the equipment supplied to Arctic LNG 2 is quite specific, so we believe that managers of European suppliers should have understood in which projects it could be used,” says Arctida director Ilya Shumanov.

The Moscow Times sent inquiries to all the companies mentioned, but received no replies.

According to Bloomberg estimates, during the war the fortune of Novatek's main shareholder Leonid Mikhelson decreased from $29.2 billion to $24.4 billion. Gennady Timchenko became poor from 19.4 to 13.2 billion dollars. At the same time, billionaires do not spare money to create a private army that is fighting in Ukraine, Important Stories found out: volunteers are recruited from among employees, and they are financed by Novatek through a private foundation.