Russia’s Arctic LNG 2 project is rapidly transforming from a sanctioned stalemate into a strategic lifeline for China’s energy security. Despite years of delays, Western sanctions, and logistical hurdles, the venture has begun delivering liquefied natural gas to Chinese terminals via the Northern Sea Route—marking a pivotal shift in global energy flows.
Arctic LNG 2, Russia’s flagship liquefied natural gas development on the Gydan Peninsula (the West Siberian Coast in the Kara Sea), was designed to produce nearly 20 million tons of LNG annually (provided all three planned processing units are in operation), primarily for export to Asian markets. The project is operated by the Russian publicly traded private company Novatek (60% ownership) with international partners (TotalEnergies (France), CNPC (China), CNOOC (China) and a Japanese consortium (Mitsui + JOGMEC), holding 10% each). The construction of the project has suffered multiple delays, with the first production line Train 1 (out of 3 planned) completed only in 2024, following an almost three-year-long delay. Train 2 was launched this September (despite difficulties in construction after the EU/US banned the export of technology and equipment), seeing its first ever loading on September 22. The original estimated cost was around $25 billion for all three units.
The venture has been a key target of U.S. and EU sanctions as the Russia-Ukraine conflict unraveled in February 2022, with Western governments seeking to block Moscow from financing its war through energy exports. The restrictions left early cargoes stranded and the commercial launch stalled for more than a year. However, in a notable shift, China began receiving shipments in late August 2025 and these flows quickly gathered pace, with six cargoes having discharged by late September.
China began importing LNG from Russia’s sanctioned Arctic LNG 2 project on August 28, when the Arctic Mulan LNG carrier discharged 35 kt at Beihai after an STS transfer from the Christophe de Margerie in Kamchatka. The delivery came days before a meeting between Presidents Vladimir Putin and Xi Jinping on the sidelines of the Shanghai Cooperation Organization (SCO) summit.
In September, five more cargoes of 75 kt each arrived: Voskhod (Sept 6), Zarya (Sept 9), Iris (Sept 16), and Buran (Sept 20), followed by another Arctic Mulan smaller load (35 kt, Sept 22). Several tankers — including the Iris, Voskhod, and Zarya — had already loaded at Gydan in June and July but remained idle until Beijing gave the green light to sail. In total, 370 kt reached Beihai within a month. Meanwhile, the La Perouse (75 kt) departed Gydan on August 27 and by late September was still off southern Africa en route to China. On September 22, the Christophe de Margerie began loading at Arctic LNG 2’s new Train 2, signaling continued expansion despite sanctions.
Total imports to China from the Arctic LNG 2 project have already surpassed 370 kt of LNG since late August, and China is set to receive at least 150 kt more in the near future. This marks Beijing's swift transition from not importing any Arctic LNG 2 to becoming its main (and only) outlet.
Motivation. The sudden move by China to finally purchase sanctioned Russian LNG is mostly driven by its rapidly aggravating relations with the United States. In 2025, the two nations have been entrenched in a deepening trade war: Washington has reimposed sweeping tariffs on Chinese goods (up to 125%, cutting them to 10% in an awkward trade truce), while Beijing retaliated by raising tariffs on U.S. LNG imports (to 15%), effectively shutting them out of its market. This confrontation has eroded any incentive for China to comply with U.S. sanctions.
At the same time, China has calculated that U.S. policy toward sanction enforcement is inconsistent. While Washington loudly warns of ‘significant sanctions risk’, enforcement against China has been muted, with critics inside the U.S. itself accusing the Trump administration of giving Beijing a ‘free pass’.
Besides, the economics are compelling: with most Western buyers out of the market, Russian LNG comes at a discount, offering Beijing long-term supplies on favorable terms. On top of this, Novatek (the project’s operator) has taken on the task of transporting LNG to the Beihai terminal using its own sanctioned tankers, shouldering the freight, insurance, and sanctions risks itself.
Additional incentives lie in China’s own stake: state companies CNPC and CNOOC together hold 20% of Arctic LNG 2, giving Beijing a direct interest in seeing the project succeed. The recent new impetus given to Chinese-Russian energy ties reinforces this trend. After years of hesitation, Russia and China finally signed a legally binding agreement to build the long-delayed Power of Siberia 2 pipeline in early September, a project that had been mulled for nearly a decade.
Risks. By importing LNG from Russia’s sanctioned Arctic LNG 2 project, PipeChina exposes itself to serious sanctions risks. The most pressing threat comes from U.S. secondary sanctions, which could cut the company off from dollar transactions, restrict access to global financial markets, or bar it from sourcing American technology. Meanwhile, the European dimension is irrelevant. After TotalEnergies, a 10% stakeholder, declared force majeure following the war (despite keeping its shareholding), Europe effectively disengaged from the project. European banks and insurers no longer service Arctic LNG 2, the shipping route bypasses European waters, and the sole end buyer is in Asia — meaning EU sanctions carry little practical weight.
PipeChina’s main buffer is that Novatek handles shipping with its own fleet, sparing Chinese firms from arranging vessels, insurance, or dollar-based trade finance. This reduces direct exposure to Western service providers, but risks remain. If PipeChina were explicitly named in sanctions advisories, it could face long-term difficulties in global finance or technology procurement. That risk is reflected in its measured approach: it has dedicated only the Beihai terminal to receive Arctic LNG 2 cargoes, signaling that while it values this new trade partnership, it prefers to ring-fence potential fallout so that any potential sanctions would be confined to a single terminal.
Route. The Northern Sea Route (NSR) is the Arctic shipping corridor that runs along Russia’s northern coast from the Barents Sea to the Bering Strait. For Arctic LNG 2, it is its export lifeline: ice-class LNG tankers load gas at Gydan and then sail east along the NSR to Asia, or take the longer Cape route around Europe and Africa. Compared to the traditional Suez Canal route, the NSR can cut the voyage to Asian markets by nearly 45-50%, reducing sailing time from about 35-40 days to just 20–25 days in summer months. This efficiency makes Arctic LNG exports competitive despite sanctions and logistical hurdles.
For China, the NSR is both a strategic opportunity and a calculated risk. The Arctic route brings Russian LNG closer to Chinese terminals like Beihai, strengthening Beijing’s energy security and diversifying supply routes away from chokepoints such as the Strait of Malacca. China has long promoted the ‘Polar Silk Road’ concept, and accepting Arctic LNG 2 cargoes via the NSR aligns with its broader strategy of integrating Arctic shipping into its Belt and Road Initiative.
Crucially, because the NSR runs entirely through Russian territorial waters, vessels do not have to cross other states’ borders before reaching the Pacific, eliminating potential exposure to foreign port restrictions or naval chokepoints. The difference is clear in practice: the Buran’s direct voyage from Arctic LNG 2 to Beihai via the NSR took just 24 days, while the La Perouse, which departed Gydan on August 27 and is taking the longer route around the Cape of Good Hope coast, will take almost a month more. On the other hand, the NSR depends heavily on seasonal navigability and the availability of Russia’s icebreaking fleet. However, in case the gas carriers are Arc7 Arctic class vessels, i.e. they are capable of navigating through ice-covered sea waters all-year round, there’s virtually no limitations in how much LNG could Novatek deliver to China.
Tankers. Novatek’s ability to deliver LNG year-round from its Arctic LNG 2 project depends on a fleet of ARC7 ice-class LNG carriers, specially designed to operate through the NSR in harsh ice conditions. Novatek and its project partners have ordered 15 Arc7 ice-class LNG tankers (at the Zvezda shipyard) specifically for the Arctic LNG 2 project. At present, only a handful of these vessels are operational or nearly ready.
The Aleksey Kosygin (with an estimated capacity of around 73,000 tonnes of LNG) is Russia’s first domestically built Arc7 ice-class LNG carrier, designed specifically to operate year-round along the Northern Sea Route. The vessel is currently undergoing sea trials and is expected to join Novatek’s dedicated Arctic LNG 2 fleet by the end of 2025. Its entry into service would mark an important milestone for Russia’s shipbuilding sector, which has struggled to replace foreign-built Arc7 carriers after Western sanctions cut off access to South Korean shipyards and key European technology.
The Sergei Witte is the second LNG carrier built at Russia’s Zvezda shipyard and intended for Novatek’s Arctic LNG 2 project, with a gross tonnage of about 75 kt. It has already been moved under its own power within the shipyard’s harbor, suggesting that construction is in advanced stages. While it is not yet clear when the ship will be fully ready to operate, it is possible that it will join Novatek’s list of available tankers in 2026 as part of the Arctic LNG 2 fleet. If commissioned, it would become the second domestically produced Russian Arc7 ice-class LNG carrier, after Aleksey Kosygin.
At present, the only Arc7-class vessel operating for Arctic LNG 2 is the Christophe de Margerie, built in 2016 at Daewoo Shipbuilding in South Korea and originally dedicated to the Yamal LNG project. With China emerging as the sole buyer of Arctic LNG 2 cargoes in August 2025, Novatek reassigned the Christophe de Margerie to support these deliveries until new Arc7 tankers under construction at Russia’s Zvezda shipyard are completed. Once the Aleksey Kosygin enters service — alongside the future Zvezda-built fleet — Novatek will be better positioned to overcome its current shipping bottleneck and sustain year-round exports from the Gydan Peninsula.
In the absence of other Arc7s, Novatek has relied on a group of sanctioned vessels — including the Buran, Zarya, Voskhod, and Iris. These are ice-strengthened or ice-reinforced (Arc4) vessels, meaning they can handle some ice conditions but are not capable of independent, year-round navigation in the Arctic. Their operations are effectively limited to the navigation season of the Northern Sea Route, typically from April to October, when ice conditions are less severe. Outside this window, they cannot guarantee safe passage without icebreaker assistance, making them a stopgap solution until more Arc7 vessels are delivered.
Outlook. With the second train now online, Arctic LNG 2’s nameplate capacity has expanded significantly. Each unit is designed to produce around 6.6 million mtpa, meaning two trains bring the plant’s theoretical capacity to about 13.2 Mtpa. The start of Train 2 removes a production bottleneck and allows more LNG to be offered to Chinese buyers, provided that shipping and sales logistics can keep pace. According to Kpler data, the Arc7 ice-class carrier Christophe de Margerie has already berthed at Train 2, confirming that the infrastructure is ready for liquefaction and loading.
The shipping side, however, remains the project’s Achilles’ heel. The shortage of Arc7 ice-class carriers is the single biggest constraint holding back year-round exports, limiting flows eastward even as production capacity grows. In September, China imported about 325 kt of liquefied gas from Arctic LNG 2, helped by the fact that three vessels had been loaded as early as June and July but only allowed to sail later. With the current fleet — including only one operational Arc7 — Novatek can realistically manage around three cargoes a month, or roughly 1 million tonnes delivered to China between late August and the end of 2025. Maintaining this pace in 2026 would suggest an annual export volume of about 2.5 million tonnes.
Fleet additions could improve this picture. The Aleksey Kosygin (Russia’s first domestically built Arc7) is undergoing trial voyages near the Russian Far East and could join the Arctic LNG 2 fleet next year. With a capacity of about 75 kt tonnes per voyage, it could contribute an extra 0.5 mtpa. The Sergei Witte, another Arc7 under construction at the Zvezda shipyard, has already moved under its own power within the yard’s harbor — a sign of advanced readiness. If it enters service in 2026, it too could add about 0.5 mtpa.
Even with both new Arc7s, the fleet’s total annual capacity would rise only to 3–3.5 million tonnes, well below the output potential of Train 1 alone at 6.6 Mtpa. This imbalance means Novatek has little immediate incentive to fully utilize Train 2. In practice, each additional 75 kt-class tanker contributes about 0.5 mtpa in delivery capacity, implying that six to seven more Arc7s would need to enter service before the second train’s output could be consistently absorbed by the market.
By Natalia Katona for Oilprice.com