TOKYO: President Vladimir Putin has raised the stakes in an economic war using the West and its allies with a decree that seizes full control over the Sakhalin-2 fuel and oil project in Russia’s asia, a move that could force out Shell and Japanese traders.
The particular decree, signed upon Thursday (Jun 30), creates a new firm to take over all legal rights and obligations associated with Sakhalin Energy Investment, in which Shell and two Japanese trading companies Mitsui and Mitsubishi hold just under 50 per cent.
The five-page decree, which follows Western sanctions imposed upon Moscow over its invasion of Ukraine, indicates the Kremlin will now decide if the foreign partners can stay.
State-run Gazprom already includes a 50 per cent plus one share stake in Sakhalin-2, which accounts for about 4 per cent of the world’s liquefied natural gas (LNG) manufacturing.
The proceed threatens to unsettle an already limited LNG market plus raises the risks facing Western companies still in Russia.
“Russia’s decree efficiently expropriates foreign buy-ins in the Sakhalin Power Investment Company, marking a further escalation in ongoing tensions, ” said Lucy Cullen, a principal analyst from consultancy Wood Mackenzie.
A lot of Western firms have already packed up, while some have said they will quit, but Putin’s move adds problems to an already complicated process for those looking for the exit. Moscow has been preparing a law, expected to move soon, to allow their state to seize resources of Western firms which decide to move.
Shell, that has already written off the value of all the Russian assets, made clear months ago it intended to quit Sakhalin-2 and has been in talks with potential buyers. This said on Friday it was assessing the Russian decree.
Sources have said Shell believed there was a risk Russian federation would nationalise foreign-held assets, while Putin has repeatedly mentioned Moscow would retaliate against the United States and its particular allies for freezing Russian assets as well as other sanctions.
Sakhalin-2, in which Shell includes a 27. 5 percent minus one discuss stake, is one of the planet’s largest LNG tasks with output of 12 million tonnes. Its cargoes mainly head to Japan, Southern Korea, China, Indian and other Asian countries.
Japan’s Mitsui has a 12. 5 % stake in Sakhalin-2 and Mitsubishi retains 10 per cent.
Read more on: https://www.channelnewsasia.com/world/russia-seizes-control-sakhalin-gas-project-raises-stakes-west-2784761