An arbitration court in St Petersburg has paved the way for Ruskhimalliance — a joint venture between state-run gas giant Gazprom and privately held partner Rusgazdobycha — to move forward in seizing the Russian assets of Linde and its subsidiaries.

The move comes as retaliation from Baltic LNG operator Ruskhimalliance to the German industrial giant’s decision not to supply contracted equipment in response to international sanctions introduced after the Russian invasion in Ukraine.

The Baltic LNG project involves the construction of a major liquefied natural gas plant and a gas processing plant near the Baltic port of Ust-Luga, with the facility set to become a major export point for Gazprom.

A 30 December court ruling, published earlier this week, orders the freezing of Linde’s assets across Russia, including those owned by Germany’s ventures with other partners and their affiliates, together with Linde’s shareholdings in 12 Russian-registered companies.

Asset value divergence

Ruskhimalliance has estimated the market value of these assets and shareholdings at 35 billion rubles ($500 million).

However, the Russian office of Linde told the court that the combined worth of its holdings in the country, wanted by Ruskhimalliance, is over €1 billion ($1.06 billion).

The lawsuit showed that relations between Linde and Baltic LNG’s building contractor Renaissance Heavy Industries soured at the end of May last year after Linde had informed Ruskhimalliance about its inability to continue the delivery of equipment to Baltic LNG that is classified by the European Union as dual-use.

According to the European Commission, dual-use items are goods, software and technology that can be used for both civilian and military applications.

Ruskhimalliance said it sent an advance payment of almost €947 million to Linde to secure the manufacturing and the delivery of the equipment, but has failed to receive funds back from the company after the contract halt notice.

Ruskhimalliance was then unable to invoke guarantees from two European banks securing Linde’s performance under the contract, it told the court.

The Russian company added that besides the return of the advance payment, it was also asking Linde to reimburse unspecified damages for the amount of €26 million and 7.6 billion rubles.

The court encouraged Ruskhimalliance to file an international arbitration claim against Linde in Hong Kong as per their Baltic LNG contract to recover the payment but went on to acknowledge that the joint-venture company has little chance of enforcing any compensation awarded outside Russia, because of international sanctions against Russia and its corporations.

Linde has suspended business development activities and scaled back operations in Russia but it contested Ruskhimalliance’s claims that it is selling its assets in the country.

The court nonetheless upheld the Russian company’s request to freeze Linde’s assets, the filing showed.

Linde’s affiliates and ventures in Russia will be prevented from selling or disposing of their assets, but may continue “usual business activity because funds on their bank accounts” will be available to them.

Linde had not replied to an enquiry on whether the company will contest the court’s decision, by the publishing time.

Linde’s withdrawal from Baltic LNG could significantly delay or possibly jeopardise a project which started major construction activities near Ust-Luga last year.

International sanctions, prohibiting the supply of equipment and know-how to Russian LNG projects, also led to the withdrawal of European building contractors from the Arctic LNG 2 project, operated by the country’s largest independent gas producer, Novatek.

GTT late withdrawal

The latest Western company to cut ties to the Novatek-led LNG project was French engineering group Gaztransport & Technigaz (GTT).

The company said in a statement that it is finalising the terms of its exit from a contract to support the construction of concrete gravity based structures for Arctic LNG 2 trains near the Russian port of Murmansk.

GTT is also halting co-operation with Russian shipbuilder Zvezda in Russia’s far-east after Novatek contracted the yard to build 15 Arctic-class specialised LNG carriers capable of cutting through two-metre ice.

Despite withdrawals of other western contractors and the non-delivery of equipment for the three planned trains of Arctic LNG 2, Novatek is understood to have ordered Chinese yards to move forward with construction of outstanding modules for Trains 2 and 3 of the project.

But Novatek also instructed the yards to replace western-made components in the modules with available alternatives that do not fall under international sanctions, Upstream understands.

Novatek top executives, including executive board chairman Leonid Mikhelson, have repeatedly said sanctions will not slow the pace of Arctic LNG 2, with the first train is set to sail from Murmansk to its location near the shore of the Gydan Peninsula in West Siberia later this year.

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