UK gets Russian gas for Christmas, despite US sanctions

Russian President Vladimir Putin visits the Yamal LNG facility before launching the ship that will bring gas to British shores. [Kremlin]

The United Kingdom will take direct delivery of Russian gas for the first time this month, after fears of a winter supply crisis pushed prices up. The deal is controversial because the provider is a Russian gas project that is the subject of US sanctions against Moscow.

After Russian President Vladimir Putin opened the €22bn Yamal Liquefied Natural Gas (LNG) plant in the Arctic last week, one of the project’s first customers is set to be the UK and a consignment is currently heading the way of an import terminal on the island’s southeast coast.

Putin, who personally pushed the button to start filling the tanker, said the Yamal station is “an extremely important project that ensures the future of Russia and the future of its economy”.

Energy prices have increased in Britain over the last few days following the closure of a North Sea pipeline due to damage and an explosion at a gas terminal in Austria, which even led Italy to briefly declare a state of emergency.

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UK firm Ineos announced on Monday (11 December) that its 42-year-old Forties pipeline would have to close for two weeks after a crack was found in a section in Scotland. The closure has cut the UK off from 12% of its portion of North Sea gas.

The arrival of the specially adapted icebreaking ship will mark the first time Russian gas has arrived on British shores via sea and not by pipeline through other European countries.

Grubby deal?

But the company providing the gas, Novatek, was a target of US sanctions levied against Russian companies due to Moscow’s involvement in the 2014 annexation of Crimea. UK and EU sanctions do not directly target the LNG provider but do restrict access to financing instruments.

Novatek has managed to circumvent the penalties through some creative accounting and by turning to Chinese investors for a large loan. French energy firm Total is also a partner on the project and has dubbed Yamal LNG plant “the gas that came in from the cold”.

Importing gas directly from Russia is a decision that will raise eyebrows, given the UK’s stance on Moscow and Ukraine. UK Prime Minister Theresa May has recently accused Russia of interfering in elections and looking to “weaponise information”.

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The Financial Times quoted a source close to Russia’s energy ministry as saying the UK’s decision to back the sanctions and take delivery of the gas “looks like someone biting the hand that feeds him”.

But the deal is not secure yet. Britain rarely receives LNG shipments in winter because prices are normally much higher in Asia. That means the delivery could be redirected if prices suddenly return to previous levels before the precious cargo arrives.

The Christophe de Margerie tanker is currently making its way along the Norwegian coast and is estimated to arrive in Kent on 28 December.

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