US Working with Allies Over Sanctions on Russian Arctic LNG Project

The Biden administration is working closely with partner countries over sanctions on a Russian liquefied natural gas project in the Arctic as a January deadline looms on a wind down of transactions with the plant, a State Department spokesperson said on Wednesday.

The U.S. imposed sanctions last week on the Arctic LNG-2 project in Russia as part of wide-ranging measures to punish Moscow for the war in Ukraine. The Office of Foreign Assets Control, part of the Treasury Department, also issued a general license that authorizes the wind down of transactions involving Arctic LNG-2, through Jan. 31, 2024.

Novatek, Russia's largest LNG producer, has a 60% stake, and plans to start production by the end of this year.

Arctic LNG-2 would be Russia's third large-scale LNG project and is designed to help Russia achieve a goal of gaining 20% of the global LNG market by 2035, up from around 8% currently.

The sanctions are aimed at avoiding a boost to LNG prices, the State Department spokesperson said.

"We do not have a strategic interest in reducing the global supply of energy, which would raise energy prices around the world and pad Putin's profits," said the State Department spokesperson, referring to Russian President Vladimir Putin.

The U.S. was the world's largest LNG exporter in the first six months of this year, according to the Energy Information Administration.

"Through all of our sanctions designations we maintain close coordination with our partners on sanctions issues, and we will continue to do so," the spokesperson added.

In 2021 the Treasury Department issued a sanctions review that said when possible the U.S. would coordinate with allies and engage with industry and other stakeholders while crafting sanctions.

The sanctions and wind down have drawn the attention of France's TotalEnergies and Japan Arctic LNG - a consortium of Mitsui & Co 8031.T and JOGMEC. They each hold a 10% stake in the project and are wary about the impact of the measures.

It was unclear whether the French and Japanese companies need additional licenses or waivers from the U.S. government to stay with the project.

Japan's Industry Minister Yasutoshi Nishimura said on Tuesday that some impact to his country's LNG businesses would be unavoidable. Japan will work with G7 countries to ensure a stable energy supply to Japan, he said.

TotalEnergies said last week it was assessing the impact of the sanctions on the project, in which it has a total interest of 21.5% via its holding in Novatek.

(Reuters - Reporting by Timothy Gardner, editing by Deepa Babington)