With a decree seizing complete control of the Sakhalin-2 gas and oil project in Russia’s far east, President Vladimir Putin has increased the stakes in an economic conflict with the West and its allies, potentially forcing out Shell and Japanese investors.
The decree, issued on Thursday, establishes a new company to assume all rights and liabilities of Sakhalin Energy Investment Co, a joint venture between Shell and two Japanese trading corporations, Mitsui and Mitsubishi.
The five-page decree, issued in response to Western sanctions imposed on Moscow for its invasion of Ukraine, indicates that the Kremlin will now decide whether the foreign partners will be allowed to stay.
Gazprom already owns a 50 percent plus one share stake in Sakhalin-2, which produces about 4% of the world’s liquefied natural gas (LNG).
The decision has the potential to upset an already tense LNG market, while Moscow has stated that it sees no reason for Sakhalin-2 deliveries to be halted. Japan imports 10% of its LNG from Russia each year, primarily through long-term contracts with Sakhalin-2. The decision also increases the dangers for Western corporations that remain in Russia.
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