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Arrival of Putin's ally squeezed Shell out of Baltic LNG project - sources

12 April 2019 14:36 (UTC +04:00)

Royal Dutch Shell pulled out of a project to build a Russian liquefied natural gas plant partly because Gazprom suddenly added another partner with links to an ally of President Vladimir Putin, according to five sources, ONA reports citing Reuters.

After three years work on the Baltic Coast project, Shell discovered that Gazprom was bringing in a company linked to Arkady Rotenberg, who is on a U.S. sanctions blacklist.

The sudden change in the line-up of partners was one of the key factors contributing to Shell’s Wednesday announcement that it was pulling out of the project, according to three sources close to Shell and two other sources familiar with the project.

Asked to comment on the reasons for withdrawing, a Shell spokesman said it had nothing to add to a previous statement that said its exit followed Gazprom’s announcement last month of its final concept for the project. Gazprom spokesman Sergei Kupriyanov said the company was not commenting.

According to the two sources close to Shell, Gazprom did not consult with Shell about bringing in the firm, which is called RusGazDobycha, but instead presented it with the plan as a fait accompli.

With RusGazDobycha’s arrival also came changes to the configuration of the project itself, which Shell did not feel comfortable with, all of the sources said.

It became untenable for Shell to stay in the project “and that was clear from the moment that Gazprom announced it was going to build the plant together with RusGazDobycha,” said one of the sources familiar with the project.

One of the problems for Shell was that Rotenberg, a long-standing friend of Putin and his former judo training partner, was under sanctions and that created sanctions risks for Shell too, according to one of the sources close to Shell and the second source familiar with the project.

For Shell, partnering with a Rotenberg-linked firm was tantamount to “digging yourself your own sanctions grave,” said that source.

But the other sources said the primary issue for Shell was the change in the configuration of the LNG project.

A representative of Arkady Rotenberg, asked about the Baltic LNG project, said Rotenberg “has no interests in this business.”

The brothers were both added to the U.S. Treasury Department’s sanctions blacklist in March 2014.