US Sanctions Block LNG Carriers for Russian Arctic Project

A new round of U.S. sanctions is targeting shipowning entities of LNG carriers under construction at South Korean shipyard Hanwha Ocean. The ice-class Arc7 vessels are intended for Novatek’s flagship LNG project in the Russian Arctic. The blocking measures further complicate Novatek’s pathway to operate the carriers for deliveries from its Arctic LNG 2 facility.

The US Treasury Department’s Office of Foreign Assets Control (Ofac) included Elixon Shipping, Azoria Shipping, and Glorina Shipping – all based out of Cyprus – in sanctions announced on Friday.

The special-purpose shipowning entities are behind three LNG carriers originally ordered by Russian operator Sovcomflot, which was also sanctioned on Friday. That initial contract was canceled by Hanwha in 2022 following Western sanctions, though it completed all three vessels. It reportedly faces arbitration vis-à-vis the contract cancellation.

An additional three Arc7 carriers for the project are under construction at Hanwha for Japanese Mitsui O.S.K. Lines, Ltd., with the first vessel having completed sea trials.

The new US sanctions make no reference to these vessels. But MOL’s CEO recently discussed the company’s difficulties in either placing the vessels into service or selling them in light of the expanding sanction regime surrounding Novatek and its Arctic LNG 2 project.

The latest sanctions will likely further complicate Novatek’s ability to secure the shipping capacity it requires to transport LNG produced at the project.

An episode involving one of the ex-Sovcomflot vessels, Pyotr Kapitsa, in January and February highlights the complex nature of navigating the sanctions environment. As reported by gCaptain the vessel recorded an apparent change of registered owner to a UAE-based entity linked to Novatek before it was reversed just weeks later under unknown circumstances.

Ship registration records of Pyotr Kapitsa showing previous owners Elixon Shipping and the apparent transfer to New Transshipment FZE and back to Hanwha Ocean. (Source: Equasis) — Ship registration records of Pyotr Kapitsa showing previous owners Elixon Shipping and the apparent transfer to New Transshipment FZE and to Hanwha Ocean. (Source: Equasis)

The reported switch in ownership and subsequent reversal came just nine days ahead of the new US blocking measures, which now sanction the vessel’s previous owner Elixon Shipping Co Ltd.

Malte Humpert is a Senior Fellow and Founder of The Arctic Institute. His research focuses on Arctic geopolitics, Northern Sea Route shipping and shipping scenarios, and China’s political and economic interests in the region.