US sanctions expanded with new Russian companies and citizens
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The next round of US sanctions affected a wide range of Russian enterprises and well-known businessmen in different segments. This time, restrictions were introduced, apparently, not only on an industry or personal basis, but also on a geographical basis – in particular, they seriously affected a variety of assets in the Arctic. The consequences look significant for the LNG projects of NOVATEK, which is still actively supplying gas to Europe and retaining foreign partners. However, in general, experts do not expect “conceptual consequences for the Russian economy.”
Gas and the Arctic
The US Treasury introduced sanctions against the contractors for the construction of liquefied gas production lines for NOVATEK projects – Arctic Energies LLC, as well as its structures JSC Energies (formerly Technip Energies Rus) and Nova Energies LLC (49% from NIPIGAZ, 51% from JSC “Energy”). Initially, Arctic Energies was a joint venture between the French Technip and NIPIGAZ, but Technip withdrew from the joint venture in 2022 (see “Kommersant” dated July 28, 2022). Veles-Stroy LLC, which acts as a major contractor, including on NOVATEK projects, also came under sanctions.
Also on the blacklist were Arctic Transshipment LLC, which manages two LNG floating storage units (FSUs) in Murmansk and Kamchatka, and the vessels themselves (“Saam UGS” and “Koryak UGS”). NOVATEK intended to use FSUs to transship LNG from ice-class tankers to conventional gas carriers and sell gas on FOB terms based on these FSUs. This concept was not only supposed to reduce the cost of gas logistics from NOVATEK’s Arctic projects, but also reduce the cost of chartering conventional tankers, since LNG buyers could pick up gas at the FOB using their own vessels.
Now selling gas FOB becomes extremely difficult, since customers will risk secondary sanctions on their tankers when interacting with NOVATEK transshipment terminals.
As a result, the company may have to reconsider the logistics scheme for gas from the Arctic LNG-2 project, which has already been largely sold on FOB terms, including to project shareholders.
The French Total (10%) has a stake in Arctic Transshipment; other foreign shareholders of Arctic LNG 2 (Chinese CNPC, CNOOC and a Japanese consortium with the participation of Mitsui) were also considering entering the project, but now transactions are unlikely. NOVATEK did not answer Kommersant.
Marine transshipment complexes play an important role in optimizing LNG supplies in both western and eastern directions, especially in connection with the delay in the construction of Arc7 ice-class gas carriers for Arctic LNG-2 (instead of the contracted 21 vessels, five are actually expected), notes the head consultation center “Gekon” Mikhail Grigoriev. In his opinion, since both FSU vessels have already been delivered to their regular places in Ura-Guba in Murmansk and Bechevinskaya Bay in Kamchatka, their placement in the zone of Russian jurisdiction will minimize the consequences of sanctions. But uncertainty remains with the port fleet of transshipment complexes: there is no information about Damen’s delivery of five tugs for Ura-Guba, as well as about the composition of the port fleet in Kamchatka and the degree of its readiness.
A significant number of mining and metallurgical enterprises, mainly located in the Arctic, were also included in the SDN list.
In particular, these are the Far Eastern and Taimyr coal assets of Roman Trotsenko, as well as Vorkutaugol, which he purchased at the end of 2021. The businessman’s Arctic projects are still at an early stage, and Vorkutaugol’s key consumer is Severstal, which itself is under US sanctions.
Sanctions were imposed against the diamond company AGD Diamonds operating in the Arkhangelsk region and its sales structure Grib Diamonds. This is the only private diamond producer in Russia, which, unlike the state-owned ALROSA, has not yet been formally subject to sanctions. However, in its report for 2022, the company reported that it was faced with refusals to supply spare parts, equipment and machinery under both new and existing contracts, with difficulties with logistics and payments.
OMK Anatoly Sedykh, one of the largest Russian manufacturers of pipes for the oil and gas industry, as well as railway wheels, was sanctioned. It mainly supplies products to the domestic market.
Logistics and transport
The sanctions have quite widely affected logistics and transport engineering. Thus, the leading Russian rolling stock manufacturer Transmashholding (TMH), as well as its co-owners Andrey Bokarev and Iskandar Makhmudov, were included in the SDN list. TMH declined to comment. In June in the company they said “Kommersant”, that they are actively engaged in import substitution, naming 1.5 thousand components, including small items from contactors to terminals and connectors: “Modifications have been created for all types of rolling stock that do not depend on supplies from unfriendly countries. This work was successfully completed at the end of 2022.”
TMH claimed that the locomotives serially supplied by Russian Railways OJSC – 2TE25KM and Ermak – consist of 99.9% Russian components. In the summer, TMH certified the fully Russian commuter electric train EP2DM, and at the end of 2022 began supplying 950 Baltiets cars with import-substituted components to the St. Petersburg metro. The new diesel locomotive 3TE28 was equipped with a domestic engine instead of a foreign one.
But sanctions may affect foreign supplies of TMH.
The company has a contract with Egypt for 1.3 thousand passenger cars worth more than €1 billion and maintenance services worth $400 million. In July, TMH signed an agreement with Rail Vikas Nigam Limited (RVNL) to create a joint venture that will supply trains to Indian railways Vande Bharat. The contract value is $6.5 billion, delivery will last for four years, and service will last for 35 years. The Argentine business TMH, which won a tender for the repair of 24 diesel locomotives and 160 cars in 2017, was transferred to a local company.
Sanctions were also imposed against Global-Trans LLC, registered in St. Petersburg. According to the Card File, its staff consists of three people. A source familiar with the situation says that the LLC has no relation to Globaltrans, which includes a major Russian railway operator. The list included a number of other Russian and foreign logistics companies, including the Finnish Siberica Oy and Luminor Oy.
Technology and telecommunications
The US government continued to expand sanctions against the Russian technology sector. Of the large companies, they included the manufacturer of computer equipment and electronics JSC Kraftway Corporation plc (Alexey Kravtsov’s Kraftway), the developer of domestic radio-electronic equipment (storage systems, switches, microprocessors) JSC Signaltek (information about the company’s owners is hidden), a large distributor of computer components and servers, as well as PC manufacturer New IT Project LLC (3Logic Group of Alexander Bashlykov), as well as NPK Photonics, specializing in the development and production of digital optical systems, Alexandra Potapova.
The SDN list also includes JSC Technopolis Moscow Special Economic Zone, controlled by the Moscow authorities. Among the residents of the SEZ are LLC NPC Makrooptika, LLC Micron Security Printing, JSC Angstrem, LLC NM-Tech, NPC Elvis. Kraftway, Signaltek, NPK Photonics, 3Logic Group and Technopolis Moscow did not respond to Kommersant’s requests.
Solar Security LLC (RTK-Solar brand), which develops and sells programs for protection against corporate leaks, credential management, etc., was also sanctioned. Now information about the owners is hidden, previously, as follows from SPARK- Interfax LLC was 100% owned by Rostelecom structures. According to Kommersant, he remains a beneficiary.
The press service of RTK-Solar emphasized that “all the solutions necessary for full operation and ensuring the safety of customers have been imported quite a long time ago, so the situation will not have a significant impact on the business.”
Forbes On September 11 he wrote that RTK-Solar will divide the business into two structures with different brands: one will promote services in the commercial market, the other among government customers.
In general, Kommersant’s interlocutors in the market are calm about the inclusion of its participants in the sanctions lists. In 2022, they explain, companies “received immunity to sanctions and learned to rebuild supply chains for foreign components.” Thus, Kraftway has already been under export restrictions from the US Department of Commerce since December 2022.
“The concept of the new sanctions is clear – continued pressure on key sectors of Russian industry,” says Delcredere Bar Association lawyer Artem Kasumyan.
However, in his opinion, “the restrictions are unlikely to have conceptual consequences for the domestic economy and will greatly change the cumulative effect of the sanctions already imposed.”
Ratmir Proskurnov, head of international practice at Uppercase Legal, notes that OFAC continues to identify individuals and companies that are related to the Russian military-industrial complex and include them in the SDN list: “Formerly purely civilian enterprises are now involved in the production of parts that are used to ensure the functioning of the military equipment, and, as a result, end up on the sanctions list.” In addition, the lawyer notes, technology companies specializing in electronics and robotics are under close scrutiny by the United States; “a number of such organizations have been sanctioned because OFAC believes that they are engaged in the production of UAVs.”
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