Russia's Arctic LNG 2 is seeking $1 billion from a South Korean company due to sanctions

The Russian project “Arctic LNG 2,” which is subject to sanctions and operated by Novatek, has filed a lawsuit against the South Korean shipbuilding company Hanwha Ocean. The Russian side is seeking approximately $1.02 billion in compensation due to the cancellation of a contract to build gas carriers.

The lawsuit, seeking 1.37 trillion South Korean won, was filed with the Singapore International Arbitration Center. Hanwha Ocean was previously contracted to build six Arc7-class icebreaking LNG carriers for the project.

Three vessels were intended for Russia’s Sovcomflot, and three more for Japan’s Mitsui O.S.K. Lines. However, the construction of the tankers for Sovcomflot was subsequently canceled.

Hanwha Ocean explained that it did not want to risk facing sanctions imposed by Western countries against Russia due to its aggression against Ukraine. Now, “Arctic LNG 2” is seeking compensation through arbitration for the termination of the contract.

The sanctions have also significantly complicated the Russian project itself. “Arctic LNG 2” is designed to produce approximately 19.8 million metric tons of liquefied natural gas per year, but Western restrictions have created serious problems for its implementation.

Novatek, which owns 60% of the project, began production at the facility in December 2023. The first deliveries to end customers did not take place until August 2024—at which time China purchased the LNG.

Source: Reuters

Earlier, Ukraine’s Foreign Ministry called for tougher sanctions following Russia’s attack on a tanker near Romania.

The EU will impose sanctions against Belarusian oil refineries for supplying gasoline to Russia.