About 40 top executives working in the Russian energy sector have died since the war in Ukraine began.
Vladimir Nekrasov, a prominent figure in Russia’s energy sector who has been critical of Putin, has been involved in a tragic accident. About 40 top executives working in the Russian energy sector have died since the war in Ukraine began. Coincidentally, all of them have expressed skepticism about Moscow’s energy strategy, its funding sources and its ability to funnel financial resources to the Kremlin’s military operations.
Before the recent revelations by Le Monde and Der Spiegel, it was thought that behind these deaths was… Vladimir Putin’s desire to purge the opposition and blackmail Russian oligarchs to provide more funds for the war in Ukraine . While initial suspicions may still hold true, revelations that several French and German companies were working with the Russian state in an “Arctic shift” for energy exports may point to another reason. Many of these energy industry executives stood to lose from Russia’s new energy strategy: exports from the hard-to-control Arctic to avoid the fallout from Western sanctions. And they themselves may have resisted this transition.
Following the sanctions imposed by the European Union on April 8, 2022 targeting the energy sector, exports to Russia of products and technologies used in natural gas liquefaction were banned. Any technical, financial or logistical assistance was also expressly prohibited, and companies were given a month to comply with the sanctions. Western energy companies were accused by Le Monde and Der Spiegel of minimizing their financial losses in the mainstays of Russian gas production by shifting their activities to other sectors of the Russian energy sector, before withdrawing from the Russian market.
Despite mostly complying and bringing a large number of components to Russia before the deadline, Western companies may have procured machinery and equipment for Arctic infrastructure projects after the sanctions took effect from August to October 2022.
How were Western companies able to support Russia’s Arctic LNG 2 project despite sanctions? The French Ministry of Economy, responsible for the imposition of sanctions in France, explains that their application “depends on each case”. The supervision and enforcement of sanctions cannot be fully monitored, and furthermore while sanctions apply at the level of European legislation, there are nevertheless differences in their application from state to state.
By claiming that the equipment sent for the Arctic LNG 2 project was not vital, or that the aid was for infrastructure and not energy exports, the energy companies in question concealed their true action.
Arctic LNG 2 is Russia’s largest natural gas export project. It is located on the Gyda Peninsula in northern Siberia, a location previously inaccessible due to Arctic ice (another example of climate change). It aims to liquefy all natural gas from the Siberian fields and plans to export 20 million tonnes of LNG per year – equivalent to around 45 billion cubic meters per year.
With the construction of the new export terminal in the Arctic Circle, Russia is trying to take advantage of the less stringent sanctions regime on infrastructure, construction and transport to increase energy exports. Imports of dual-use technologies are often associated with military technology and electrical engineering, but can just as easily be transferred to the energy sector.
Essentially, Russia is trying to loosen the sanctions imposed on it because of the war in Ukraine. Even her victory on the battlefield depends on this venture. By dispersing LNG exports, and with the help of clever legal, regulatory and accounting tricks, Russia will increase its revenues to finance its war efforts. By 2030, Russia is expected to export a total of 100 million metric tons of liquefied natural gas and lead the global LNG market. Arctic LNG 2 is a fundamental project to realize this strategic vision of the Russians.
Russia’s reaction to the sanctions is not surprising – it is the expected behavior of any sanctioned entity, regardless of motive or scale. What is really worrying is the blind rush of some Western companies to continue working with Russia. Short-term profits may make a few executives rich, but the end result will be the undermining of their companies and the political disadvantage of the West.
Although many European states have stopped importing Russian gas through pipelines, some have not stopped buying Russian LNG. In 2022, Belgium, France, the Netherlands and Spain even increased their annual imports of Russian LNG by a third compared to 2021. The European Union is avoiding further sanctions on LNG as unanimity is required from all EU member states, a difficult goal because of Hungary and – now – Slovakia. Fear of retaliation and the electorate give Russia the opportunity to continue with LNG development.
Western sanctions are having a negative impact on Russia, but Moscow’s shift to LNG is not being treated lightly. To neutralize Russia’s greatest geopolitical tool, energy prices must fall, and the West must explore every option to achieve this. US LNG exports need support from the Biden administration to beat Russian competition. Strategic LNG partners such as Qatar and Australia need investment to supply not only Europe, but also energy-hungry emerging markets such as India.
LNG is a powerful bridge fuel that can reduce the West’s energy dependence on hostile foreign powers. However, we must ensure that the bridge is built on a safe and secure foundation and leads to a worthy destination.
Source: forbes.com//Ariel Cohen
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