A huge accumulation of gas in the Arctic has become the cotton test that reveals how much the new US sanctions are putting the Russian ghost gas fleet on the ropes. This new parallel fleet (different from the oil fleet) began to ramp up a few months ago, but for now its success is more than questionable. Gas begins to build up (Moscow is unable to sell it), while the ships transporting it are making strange movements due to the impossibility of delivering this merchandise to its destination.
THE Office of Foreign Assets Control (OFAC) The US Treasury Department announced a few days ago new measures aimed at “choking” Russia’s revenues and thus limiting its war budget. This latest decision cannot be considered a “checkmate”, but the truth is that the United States has already sanctioned nearly 400 entities and individuals as well as a long list of ships that put Moscow on the ropes.
Punishment of Putin’s “jewel”
The measures include new measures to sanction entities and assets deemed to support the development of the project. Arctic LNG 2Putin’s “jewel” because of the president’s interest in developing this infrastructure that promised to be an important “escape route” for exporting his gas. This blow comes on top of the US sanctions of November 2023 that already targeted the Arctic LNG 2 project and its associated infrastructure.
Arctic LNG 2 was designed as an emblematic project for the Kremlin: Its total planned production was to account for one-fifth of Russia’s annual LNG production target (100 million tonnes of liquefied gas) by 2030, which would be more than three times the volume the country currently exports.
“Russia has been building a small fleet of conventional LNG carriers since the beginning of this year, focusing on older units on the second-hand market. The vessels do not have ice-class specifications, but can load directly in ice-free waters during the summer months from July to October,” Fraser Carson, senior analyst for global liquefied natural gas (LNG) research at Wood Mackenzie, said in a report.
Moscow “gate has long viewed the Arctic as a crucial source of revenuenational pride and strategic importance. The Russian military has continued to establish a massive presence in the Arctic, even during its war in Ukraine, which now includes the Northern Fleet, nuclear submarines, radar stations, airfields and missile installations,” David Babikian and Julia Nesheiwat, strategists with the Atlantic Council, an Atlanticist think tank specializing in international affairs, put into context.
The list of ships
OFAC’s count on August 23 indicates seven methane tankers (Asya Energy, Everest Energy, Pioneer, North Way, North Sky, North Mountain and North Air) already three entities (White Fox Ship Management FZCO, Ocean Speedstar Solutions OPC Private Limited and Novatek China Holdings, registered in Dubai, India and China respectively).
Analysts confirm that LNG shipments have continued and will continue, but the tightening of the US siege is bearing fruit. Evidence that the ghost gas fleet is seriously limited is being detected by satellite. Russia is being forced to start storing gas from one of Vladimir Putin’s most important projects in the Arctic. As explained by Financial TimeThis is a clear sign that Western sanctions deter buyersAccording to vessel tracking data and satellite imagery, three vessels have shipped liquefied natural gas from the U.S.-sanctioned Arctic LNG 2 since it began loading operations last month.
One of the ships, the Everest Energyappears to have unloaded into Saam FSU, a floating storage unit anchored in a bay in the Murmansk region of northern Russia. It has since been forced to return to the direction that takes it back to Arctic LNG 2. The move “underscores the challenges Russia faces in finding buyers for its sanctioned gas,” according to analysts at Kpler, one of the world’s leading data and analytics platforms.
The use of Everest Energy This already reveals Moscow’s desperation to secure its gas supplies. The ship is not ready to sail the Arctic route, according to shipping media. However, Russia’s first attempts to deliver various sanctioned Arctic LNG 2 cargoes to its customers via traditional shipping routes have been thwarted by US sanctions. More than five weeks after the Pioneer aircraft carrier picked up the first cargo from Russian energy giant Novatek’s flagship project, several ships remain stuck in the Mediterranean and the Arctic, without service or profit.
According to the data he had access to elEconomista.esThe Everest Energy LNG carrier is currently in the Barents Sea. Moreover, this ship is sailing under the flag of Palau, a small country in Oceania with 18,000 inhabitants… a usual suspect of collaboration with the Russian ghost fleet.
Additionally, two other shipments also remained in Russian or European waters and were not delivered to a buyer. Cloud-penetrating radar images taken by the European Space Agency’s Sentinel-1 satellites show a large ship the size of the Everest Energy approaching the Saam FSU, although cloud cover prevented many clear photographs of the ships.
The direct effect of sanctions
Before these sanctions, the deliberate falsification of position data of a ship to disguise its true location (AIS Spoofing) and other ploys such as cargo commingling could have given buyers enough leeway to claim that deliveries aboard the ships did not contain sanctioned LNG. But by sanctioning these companies, any deliveries aboard these ships would be a clear violation of U.S. sanctions, says Wood Mackenzie’s Carson.
The analyst focuses on the case of Novatek. The imposition of sanctions on its China-based entity will hurt its marketing efforts, particularly to Asian customers who were reluctant to accept secondary U.S. sanctions. “A notable example is the Chinese company Wison New Energies, which supported the construction of modules for Arctic LNG 2. It recently announced that it would cease operations in the future and suspend all ongoing work on Russian projects. Other Chinese companies may follow. Wison and we consider doing business with sanctioned entities to be too high a risk for the company,” Carson says.
“Russia’s economic dependence on the export of its vast energy and mineral resources has led to a enhanced cooperation with Chinaan imperfect relationship based on mutual need. Chinese state energy companies have invested billions of dollars over the past five years in Russian oil, gas and mining projects in the Arctic,” the Atlantic Council analysts say. However, they continue, the “big impact” that NATO sanctions have had on Russian business expansion in the Arctic has been noted, and they cite as an example Novatek’s suspension of Arctic LNG 2 production in the spring due to the sanctions themselves and the shortage of ice-class gas.
All this leaves very few options for the indicated vessels. “The transfer of LNG from ship to ship (ship to shipSTS) in open waters to an unauthorized LNG carrier, combined with the deliberate falsification of a vessel’s position data to conceal its true location, could be used to further conceal the true origin of a cargo. But liquefied natural gas STS is a highly technical operation requiring calm ocean conditions. Problems can arise if STS is conducted in less than optimal weather conditions. The decision on when and where to conduct STS is usually made by a ship’s crew, but riskier operations could be attempted to hide the fact that it is an Arctic LNG 2 operation,” Wood Mackenzie’s Carson continues.
However, the expert concludes, The zeal for sanctions also carries risks: “An unfortunate consequence of placing ships on the sanctions list is the increased risk and threat to the safety of crews. This is partly due to the illicit activities mentioned above, but also because LNG carriers will not be regulated in the same way as the rest of the fleet. Regular maintenance is likely to be ignored, resulting in poorly maintained and aging vessels. It is also unclear how the vessels will be insured or how third parties will enforce their claims against the owners in the event of an accident. “Sanctioned vessels have been operating in oil markets for years, although this is a first for the LNG shipping sector.”
