Western nations view Russian LNG as a vulnerable point for sanctions

The European Union is negotiating a ban on Russian liquefied natural gas exports in its latest sanctions package, bolstering U.S. actions to restrict Russia’s fossil fuel revenue, slow construction of new LNG terminals, and upend its ability to export the chilled gas to buyers overseas.

The crackdown on Russian LNG comes as Western leaders search for a way to more aggressively restrict Russia’s energy revenues, which provide funding for its war in Ukraine. In the more than two years since Russia’s invasion, the West has passed dozens of sanctions packages and bans on Russian oil and gas, including a G7 effort to cap prices for Russian crude oil.

Despite this, Russia has continued to see large profits from its energy exports due in part to higher global demand for oil and gas and its ability to evade the oil price cap.

In April, Russian oil and gas revenue climbed to $126 billion, more than doubling the earnings from the same period last year, underscoring the frustration and sense of urgency for Western leaders to act.

As a result, the West is now looking to the country’s burgeoning LNG export sector as an opportunity to enact pain. Leaders hope to block Russia from its goal of capturing one-fifth of the global LNG market within the next decade.

The draft sanctions being considered by EU leaders would prohibit member states from participating in the “transshipment” of Russian LNG, or the process by which the chilled natural gas is imported at key EU ports, moved to a different vessel, and then reexported to buyers in Asia and India.

Russia’s current shipping model for LNG routes many of its shipments to Asian buyers through ports in the EU countries of Spain, Belgium, and France, according to data compiled by the Centre for Research on Energy and Clean Air.

If the sanctions are passed, Russia would be forced to send its supplies to Asia via the Arctic, a lengthy, costlier journey.

Meanwhile, its plans to expand LNG terminals there have also been stalled as the result of a monthslong U.S. effort to block Russia’s ability to expand or bring online planned LNG export facilities.

The United States has slapped heavy sanctions on such projects, with a focus on Russia’s $25 billion planned Arctic LNG 2 facility in the Gydan Peninsula.

“These designations have already hampered the project’s ability to export energy and resulted in significant increases in the project’s construction costs,” the State Department said in a statement last week.

While the exact level of coordination on U.S. and EU sanctions efforts is unclear, outside observers see a shared ambition in blunting Moscow’s rising ambitions in the LNG sector.

In October, Russia outlined its plan to triple LNG exports by 2030, up from 33 million tons in 2023 to 110 million tons in 2030, estimating it would add at least $35 billion in annual revenue.

The U.S. actions and proposed EU sanctions seek to “make it harder for Russia to develop a coherent strategy to cope, particularly in the case of LNG,” Paul Saunders, the president of the Center for the National Interest, told the Washington Examiner.

Russia’s ambitions have also given Western leaders reason to act on slowing Moscow’s ability to procure ice-class tanker ships, which are needed to send LNG through the Arctic.

Unlike crude oil tankers, these ships are highly specialized and much more limited in number, making them easier to track and regulate. They were also included in the U.S.’s latest tranche of Russian sanctions announced earlier this month.

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“The number of ships globally that are equipped to carry LNG is small,” Saunders said. “The number that can carry LNG through the Arctic is even smaller.”

The Biden administration did not respond to the Washington Examiner’s request for comment on the sanctions efforts.