Yamal LNG: an economic project under political pressure. Note no. 17/2016

Yamal LNG has been discussed since the mid-2000's. It used to be a French-Russian project in nature, since Total and Novatek were the majority shareholders. In 2014, in response to the annexation of Crimea and the crisis in eastern Ukraine, Western countries imposed an array of commercial and sectorial sanctions targeting Russia's financial services and energy sectors, as well as defence and related materials. This paper explores the following questions: how do sanctions impact American-European and European-Russian relations? What responses does U.S. law extra-territoriality incite from European countries with strong economic ties with Russia? Are European energy companies doing business in the Russian energy field suffering under sanctions? Last but not least, how dependent is Russia on Western support to carry out its energy projects both from a technological and financial perspective and what will be the Russian response to this challenge? From the Russian perspective, Yamal LNG is not just an economic stake, it has also become a political issue. As a result of the sanctions the project was put out of the traditional international project finance market and has faced challenges concerning the supply of key equipment. The more negotiations have dragged on with European Financial Institutions, the more the Russians have turned to alternative options in Asia. (authors)