Russia’s attempt to reroute Arctic LNG exports through domestic waters following the European Union’s March 2025 transshipment ban has exposed a hidden vulnerability at the core of its energy strategy, Centre for Research on Energy and Clean Air (CREA) said in a note released on June 26.

The problems comes as the Kremlin says that its flagship Arctic LNG-2 project is making steady progress despite the problems caused by sanctions and the freezing of its foreign assets. 

While the Kremlin has preserved the outward structure of its Yamal LNG logistics chain, CREA argues the system is increasingly fragile and dependent on Western-owned infrastructure.

“The shift has allowed Russia to maintain the overall structure of its Yamal LNG export model  –  but only in form, not in function,” CREA said in its latest analysis. Though volumes continue to flow from the Yamal Peninsula to Europe, the logistical reconfiguration is masking deeper strain.

The point of the EU restrictions is to reduce Russia’s ability to use European ports and infrastructure in his business with Asia without restricting the imports of Russian LNG to Europe.

The EU’s ban targeted ship-to-ship (STS) and ship-to-shore-to-ship transfers in EU waters, effectively cutting Russia off from key LNG transshipment hubs such as Zeebrugge in Belgium and Montoir-de-Bretagne in France. These ports had enabled Russia to redirect cargo from its Arctic projects to premium buyers in Asia, without breaching EU sanctions directly.

In response, Moscow simply switched and consolidated all transshipment activity to its port in Murmansk. According to CREA, between January and May 2025, 100% of Russian LNG transshipments took place in Russian waters – a dramatic shift in operational geography. Yet “during the first five months of 2025, the total transshipped volumes decreased by 46% year over year,” CREA notes, as its own facilities are inferior to those in Europe.

While STS transfers dropped just 8%, this more modest decline only underscores the advantages access to the EU ports provided. Infrastructure, location and political access once enabled seamless delivery of Russian LNG to Asia. Murmansk, by contrast, suffers from logistical and climatic limitations, resulting in longer delivery routes and higher costs.

At the centre of the restructured logistics chain is Russia’s fleet of 15 Arc-7 LNG carriers – specialised icebreaking tankers without which Yamal exports would not be possible. Although 14 of these are operational, “none are solely owned by Russian companies,” CREA points out. Instead, ownership and operation are spread across entities in G7 countries, including Greece, Japan, the United Kingdom and Singapore.

Even more critically, “all Arc-7 vessels are insured by providers based in sanctioning jurisdictions,” such as the UK, Japan and the Bahamas. This arrangement, CREA says, reveals the limits of Russia’s energy autonomy: while it can dictate the route and destination of its LNG, it remains heavily reliant on Western-controlled financial, legal and technical frameworks.

Once LNG reaches Murmansk, it is transferred to conventional carriers – vessels not built for Arctic conditions – for the journey to Asia. CREA, citing Equasis maritime data, reports that 15 conventional LNG carriers were involved in transshipments at Murmansk between January and May 2025. Of these, 12 were owned by companies based in countries enforcing sanctions, with similar patterns in insurance coverage.

The result, CREA argues, is a logistics system that is operational but precarious. “The entire Arctic LNG transshipment operation – from Yamal to Asia – relies on a dual fleet, both segments of which are functionally embedded in Western-controlled financial and legal systems,” it concludes. “Without Western-owned and -insured vessels, Russia would face severe limitations in monetising Yamal’s output beyond its immediate region.”

In its effort to bypass European regulation, Russia has revealed just how entangled its export model remains with the very jurisdictions it seeks to evade.

LNG 2 making progress

Russia’s Deputy Prime Minister Alexander Novak said that the country’s flagship Arctic LNG 2 project is proceeding despite the freezing of its foreign assets and continued pressure from Western sanctions, TASS reported on June 27.

“Despite the unlawful freezing of assets, the Arctic LNG 2 project is being implemented,” Novak said. “Work continues, including the commissioning of the first production line.”

The multi-billion-dollar project, led by Russian gas producer Novatek, is central to Moscow’s ambitions to expand its share of the global liquefied natural gas (LNG) market. Located on the Gydan Peninsula in the Russian Arctic, Arctic LNG 2 is designed to produce up to 19.8mn tonnes per year (tpy) of LNG once all three trains are operational.

Western sanctions imposed following Russia’s full-scale invasion of Ukraine in 2022 have heavily targeted the project. In late 2023, the US blacklisted Arctic LNG 2 under expanded energy restrictions, and the European Union followed with similar measures in December.

Despite the withdrawal or suspension of support from international partners such as France’s TotalEnergies and Japan’s Mitsui & Co., Russia has vowed to move forward using domestic capabilities and cooperation with what it calls “friendly countries.”

Industry analysts have warned that sanctions could delay the full implementation of Arctic LNG 2 and restrict Russia’s ability to deliver LNG to key Asian markets. While Russian officials maintain that the first production line remains on schedule, the pace of development on subsequent phases has reportedly slowed amid logistical and supply chain challenges.