Putin Finds Loophole to Keep Selling Russian Gas

Russia's revenues of pipeline gas may have slumped due to Vladimir Putin's invasion of Ukraine but Moscow is finding other ways to sell liquified natural gas (LNG), according to reports.

Russia is replicating a strategy to use a so-called "shadow fleet" of vessels to circumvent sanctions on oil, relying on vessels to transport LNG as well, Bloomberg has reported, citing global shipping database Equasis.

It comes as a Ukrainian MP called for Europe to impose a complete ban on Russian LNG, as well as oil, metals, and pipeline gas, saying that sanctions the bloc announced against exports funding Putin's war machine do not go far enough.

In its 14th round of sanctions against Moscow, the EU targeted Russia's (LNG) sector for the first time on June 24, forbidding ports being used for transshipment of the fuel to third markets outside the bloc.

Oleksiy Goncharenko, a member of the Ukrainian delegation to the Parliamentary Assembly of the Council of Europe (PACE), which is separate to the EU, told Newsweek European sanctions "look like Swiss cheese, there are so many holes in them."

EU sanctions stop short of a ban on LNG imports, which have risen since the start of the war and Europe still buys Russian gas. Meanwhile, trans-shipments via EU ports to Asia are only one tenth of total Russian LNG exports, Reuters reported.

"We see that Russian LNG is now coming to Europe again in big quantities," Goncharenko said. "I'm concerned about this because that's what gives Russia the possibility to continue this war against my country and the whole civilized world."

Shadow fleet

A shadow fleet is Russia's answer to a G7-imposed $60-a-barrel price cap on seaborne oil. It works around the sanctions via vessels whose ownership is reorganized to obscure their links to Moscow. The tankers tend to be older and have prompted concerns from European leaders that they pose an environmental risk.

It now seems that Moscow is using the same strategy to transport LNG by sea, according to Bloomberg. It reported on June 27 that over the last three months, a company in Dubai has acquired at least eight vessels, four of which Russia had reportedly allowed to cross Russian Arctic waters this summer.

"It is very possible because like they have the technology," said Goncharenko. "It worked with oil why shouldn't they do this with gas?"

Unlike a shadow fleet for oil, transporting LNG requires more technical know-how which Bloomberg said made them easier to track because they are only a tenth of the world's 7,500 oil tankers.

Three of the vessels list their insurers as "unknown" Bloomberg said, citing the International Maritime Organization database, a common tactic for tankers carrying Russian crude oil to skirt the G7 price cap, although the news outlet noted that it has not connected these vessels to major Russian entities directly.

EU sanctions

The latest EU sanctions on Russia's gas come as it pushes for a greater share of the global LNG market to make up for diminishing pipeline flows to Europe.

Over the war, gas giant Gazprom had restricted gas flows to Europe to pressure Kyiv's allies but the continent found alternative natural gas sources.

Searching for new markets for the resource and with a deal with China via the Siberia 2 pipeline stalled, Gazprom has cut production to historic lows, posting its first annual loss in quarter of a century in May.

The EU sanctions announced last month forbid new investments and services to complete LNG projects under construction in Russia, specifically targeting Novatek's Arctic LNG 2 and Murmansk LNG projects.

However, Europe still faces difficulty in weaning itself off Russian gas. The Financial Times reported that in May, Europe's gas imports from Russia from both pipeline and LNG supplies surpassed the U.S. for the first time in almost two years.

Goncharenko said that Brussels must be tougher in tackling Russia's exports of gas as well as oil and metallurgy. "All the sanctions against Russia, including military measures from the West, are always to some degree incomplete," he said. "They hurt Russia but they don't finish it off."

Newsweek has contacted the European Union and Russia's energy ministry for comment.