New Western Sanctions and the Impact on Gas Investment Decisions

The EU Council’s Committee of Permanent Representatives (COREPER) agreed on new restrictive measures against three central sectors of the Russian economy on Tuesday, with some immediate consequences with regards to ties between Russian entities and Western companies.

France’s Total stopped buying shares in Novatek in the aftermath of the downing of the Malaysian airliner, explaining that the accident is likely to come with significant uncertainties. 

The U-turn is coherent with a general bearish trend on several Stock Exchanges in Europe. The US joined the European Union in imposing sanctions on Russia and these two decisions resulted in a fall of UK stocks. 

But that is not all - national governments also hypothesized possible backlashes on European economies. The European Union and the United States announced sanctions targeting Russian energy, banking and defence sector. 

“The agreed measures affect only a very small part of the trade between Finland and Russia, so the overall impact on Finland will not be severe. However, the effect on different businesses will vary. With stagnating economic activity in Russia, the Finnish economy may also suffer indirect negative effects,” Finnish Prime Minister Alexander Stubb commented on Tuesday, referring to the sanctions against Russia as “unavoidable.”

Despite this evidence, it is still too early to say whether the sanctions will have a deep impact on the relationship between the West and Russia. 

"We have not stopped operations on the Yamal project at this stage. We agreed with our partners to take stock of the situation at the end of August,” Total’s Chief Financial Officer Patrick de La Chevardiere said during a presentation of the company's second-quarter results.

Projects in the Yamal Peninsula are likely to be the litmus test of the relations between Moscow, Brussels and Washington, given the participation of central players like ExxonMobil, ConocoPhillips, Royal Dutch Shell, Repsol YPF, Petro-Canada and Total.