For Peace With Ukraine, Increase Pressure On Russian LNG Sales To Asia

Forbes

15-07-2025

Russia's resumed activity at Arctic LNG 2 represents an effort to reach Asian markets and fuel the ... More Kremlin's ongoing war effort. (Photo by Konstantin ZAVRAZHIN / SPUTNIK / AFP) (Photo by KONSTANTIN ZAVRAZHIN/SPUTNIK/AFP via Getty Images)
Telling the BBC that he is 'disappointed but not done with Vladimir Putin,' President Donald Trump has threatened 100% tariffs against Russia, including secondary tariffs against countries that help dodge sanctions on the Kremlin's energy exports., The U.S. Senate is considering a bill to give the president the ability to impose additional 'sledgehammer' measures with up to 500 percent secondary sanctions. Under pressure, Moscow is expanding its hydrocarbon exports by boosting LNG shipments to the Asian markets from Siberia's Yamal Peninsula. On June 26th, the Russian tanker Iris docked at Arctic LNG 2 terminal, a joint venture between Russia's Novatek, Chinese CNPC and CNOOC, and Mitsui and JOGMEC, marking the first departure from the sanctioned facility since October 2024.
The Iris is part of Moscow's shadow fleet, which exports Russian energy abroad, dodging Western sanctions through a convoluted web of false registries, deactivated transponders, covert offloading, waived insurance, shell games, and confusing ownership schemes.
Arctic LNG 2 raised outputs to record levels, averaging 14 million cubic meters/day in the last days of June, compared to 8.9 million cubic meters/day for most of the month. That's enough in a single day to power approximately 13,461 American households for a year.
It appears that Russia plans to exploit the Northern Sea Route to dodge sanctions. Running through the Arctic Ocean and around the northern shores of Eurasia, it is only navigable from late June/July to October/November and provides Moscow with direct access to Asia. As ice in the Arctic Ocean melts, Russia is focused on tripling LNG exports by 2030. It is up to the U.S. and the EU to tighten sanctions to help force the issue of peace negotiations with Ukraine.
The Northern Sea Route allows for Russia to export LNG to Asia, utilizing an alternative to European ... More customers to bolster its war effort.
Opportunity in Asia for Russian LNG
From August to October of 2024, eight shipments left Arctic 2 LNG and were moved to floating storage units as sales fell. According to traders, personnel affiliated with the facility have called on potential buyers in India and China, attempting to sell this fuel.
On the day the Iris docked, the JKM benchmark price for spot LNG deliveries to Northeast Asia was at $12.86/MMBtu, high for the season. Incentivized by discounts, Asian buyers have been induced to purchase Russian gas product in the past, as Western sanctions have primarily targeted firms specifically associated with shipping. This year to date, Japan and China are Russia's second and third biggest customers globally, importing 3.1 million mt and 3 million mt of gas, respectively.
JKM Prices are at a higher level this year than in 2024, likely due to tensions in the Middle East.
The biggest buyer for LNG is the EU, which has a proposed plan to phase out Russian gas and oil imports by the end of 2027. EU purchases, of course, are not supplied by the shadow fleet. While Moscow's known fossil fuel export revenue has trended down compared with 2022, in addition to Japan and China, it has several other Asian customers, including South Korea, India, Taiwan, and Singapore.
In April, China halted U.S. LNG purchases due to tariffs. According to China's Ambassador to Russia, Zhang Hanhui, Chinese buyers are looking to increase their Russian imports. Putin is pushing for Power of Siberia 2 pipeline agreements amidst these changes, as China's imports of piped Russian gas have increased since the hold on American gas.
Mitsui OSK Lines, a Japanese shipping company, has disregarded sanctions and continued business as usual. In May, the EU sanctioned three of its vessels.
Do Conflicts in the Middle East Make Russian LNG More Attractive?
Following the 12-day war between Iran and Israel, Asian buyers may increase imports of Russian LNG to derisk portfolios, decreasing reliance on Middle Eastern exports. The recent conflict caused Brent Crude oil and JKM LNG prices to jump 18% and 14% respectively for a short time.
Iran's threat to close the Strait of Hormuz spooked investors and buyers. Any closure would disrupt shipping through the Persian Gulf. Notably, Qatar exports roughly 77 million mt of LNG per year, 20% of global supply. A closure of the Strait would disproportionally affect Asian buyers, as over 80% of crude oil and LNG transported through the Strait is consumed in China, India, Japan, and South Korea.
Following President Trump's announcement of a ceasefire between Israel and Iran, European benchmark TTF gas prices fell by 14% and began stabilizing in the pre-conflict price range. In late June, analysts warned that oil prices would remain volatile for the coming weeks and OPEC+ would likely be cautious about increasing production.
As fears over regional stability linger, Russian LNG imports may be a tariff-free option to avoid critical chokepoints like the Strait of Hormuz and the Suez Canal. However, buyers must consider the moral hazard and the potential of escalating sanctions.
Can Russia Overcome Setbacks this Summer?
While Arctic LNG 2 activity suggests Russia is preparing to increase LNG sales, Moscow will have to overcome challenges to further penetrating the Asian markets. The facility's first train has remained shut with full storage tanks, while the second train produced its first LNG in May 2025. Shipments that left in late 2024 are in floating storage, as Russia has struggled to find buyers. Sanctions remain a constant problem, although Moscow has found ways to circumvent them with varying degrees of success. In March 2025, the EU's ban on transshipment of Russian LNG in its ports became effective, severely limiting options.
Overland routes are no panacea. China has the most developed gas infrastructure linked directly to Russia, buts its increasing clout with Gazprom presents the Kremlin with strategic headaches; and Beijing is unwilling to facilitate transit of piped gas to other customers in Southeast Asia. Other possible vectors south through Central Asia to India are either underdeveloped, incomplete, involve transshipment through Afghanistan or ports in Iran, which would merely increase risk.
The seasonal opening of the Northern Sea Route and tension in the Middle East create an opportunity for Russian LNG to refill the Kremlin's war chest. This makes it imperative for the United States and Europe to expand sanctions on Russian energy with a focus on transit, shipping, insurance, and middlemen in Asia.