Vladimir Putin has ordered the transfer of all rights to the Sakhalin-2 natural gas project to a Russian entity in a move that could force foreign investors including Shell, Mitsubishi and Mitsui to walk away from the project.
The Russian president’s decree said western sanctions had created “the threat of an environmental and technological emergency” at Sakhalin-2, forcing Moscow to act “to defend its national interests”.
Putin’s decision marks the first time the Kremlin has nationalised a company since hundreds of multinationals announced plans to withdraw from the country following Russia’s invasion of Ukraine. Moscow has repeatedly threatened such action if companies neglected their legal obligations in Russia or failed to pay their workers.
The war in Ukraine and Russian cuts to Europe’s gas supply have spooked markets, prompting accusations Moscow is using its huge energy resources as a weapon and sending energy prices sky-high.
The decree gives existing investors one month to decide whether or not to remain stakeholders in the new entity. They must provide documentation proving their ownership, though Russia’s Gazprom will automatically retain its stake of 50 per cent plus one share. Gazprom did not return a request for comment.
Stakeholders that opt out of the project might not be fully compensated. Russia will hold an audit to determine damages and will charge Sakhalin-2’s shareholders for them if any are found, the decree said.
Russia’s cabinet will manage the project until the appointment of a chief executive from local management.
The 28-year-old Sakhalin-2 project was developed by Gazprom along with oil major Shell, which holds a 27-5 per cent stake, and Japanese trading houses
Mitsui and Mitsubishi, with respective stakes of 12.5 percent and 10 percent.
Shell said on Friday it had “always acted in the best interests of Sakhalin-2 and in accordance with all applicable legal requirements”, and was assessing the implications of the decree. The company said in March that it would abandon the venture, putting pressure on the Japanese stakeholders.