New U.S. Sanctions Take Aim at Russia's Arctic LNG Project Amid Ukraine Conflict

(Reuters) — The United States on Thursday imposed sweeping new measures against Moscow over the war in Ukraine, targeting Russia's future energy capabilities, sanctions evasion and a suicide drone that has been a menace to Ukrainian troops and equipment, among others, in sanctions on hundreds of people and entities.

The latest measures target a major entity involved in the development, operation and ownership of a massive project in Siberia known as Arctic-2 LNG, the State Department said in a statement. The project expected to ship chilled natural gas, known as liquefied natural gas to global markets.

Washington also targeted the KUB-BLA and Lancet suicide drones being used by the Russian military in Ukraine, designating a network it accused of procuring items in support of their production as well as the creator and designer of the drones.

The Biden administration on Thursday added a dozen Russian companies to a trade blacklist for supporting Russia's military with drones that could be used to aid in Moscow's invasion of Ukraine, the Commerce Department said in a statement.

The U.S. also cracked down on sanctions evasion in the United Arab Emirates, Turkey and China, as the Treasury Department said companies based in the countries continue to send high priority dual-use goods to Russia, including components Moscow relies on for its weapons systems.

Seven Russia-based banks and dozens of industrial firms were also hit with sanctions by the Treasury Department, including Gazpromneft Catalytic Systems LLC, which Treasury said manufactures chemical agents for advanced oil refining in Russia.

The Kremlin said on Thursday ahead of the action that it expected the West to impose ever tougher sanctions on it over the war, but that there was a growing sense that such penalties hurt Western interests while Russia's economy was adapting well.

LNG, Lancet Drone

With the sanctions on the sanctions on limited liability company Arctic LNG 2, and previous measures imposed on the project in September, the U.S. is trying to target Russia's upcoming energy production, similar to how it targeted its future deep-sea, shale and Arctic oil production after Moscow's invasion of Crimea in 2014. All of these hard-to-produce projects depend on Western technology.

The U.S., itself a large LNG producer that exports to Europe, is also trying to reduce Russia's LNG shipments to Europe, which has only banned Russian gas sent via pipeline.

Arctic-2 LNG has been expecting to start exporting soon and it is uncertain how much Russian LNG would be blocked by the new measures. The largest Russian LNG producer Novatek said in September it would start shipments from Arctic-2 LNG early next year.

The United States, European Union and other Western nations have imposed rafts of sanctions on Moscow following its invasion of Ukraine, including targeting Russian banks and President Vladimir Putin, as the partners seek to hold Russia to account for the conflict that has killed thousands and reduced cities to rubble.

"We will continue to use the tools at our disposal to raise the cost for Russia of waging this war and promote accountability for its atrocities and abuses in Ukraine," U.S. Secretary of State Antony Blinken said in a statement.

Thursday's action marks the first measures Washington has taken directly targeting the Lancet drone, an angular grey tube with two sets of four wings that has been an increasing threat on Ukraine's frontlines, according to Ukrainian solders.

Washington targeted limited liability company ZALA Aero, a Russia-based manufacturer the State Department said designs, manufactures and sells loitering munition and suicide drones to the Russian Ministry of Defense, as well as A Level Aerosystems CST, a Russia-based entity manufacturing and selling drones under the ZALA brand.

The owner of the companies, Aleksandr Zakharov, was also targeted, as were his wife, daughter and sons, and companies they own. The State Department said Zakharov is the creator and designer of the drones.

Andriy Yermak, the head of Ukrainian presidential office, welcomed the sanctions tied to the Lancet drone and said a number of the companies had been in Ukraine's report to its partners on Russian drones and their components.

"I am very pleased that ... restrictions are being tightened against companies associated with the military-industrial complex of the Russian Federation, which participate, in particular, in the development of the Lancet," Yermak said on Telegram.

Sanctions Evasion

Washington has stepped up diplomatic pressure on countries and private companies globally to ensure enforcement of the barrage of sanctions it has unleashed on Moscow.

Among those designated on Thursday were Turkish and UAE firms, including companies that sent high-priority goods to Russia and firms that have shipped aviation parts and equipment.

Three Chinese entities - two that the Treasury said have conducted hundreds of shipments of electro-optical equipment, cameras and other items, and one that has shipped radar components to Russia-based firms - were also targeted.

The State Department also imposed sanctions on multiple defense-related entities and procurement companies in the UAE.

Construction companies, Russian officials and a metals and mining company implementing a project to develop the largest titanium ore deposit in the world located in Russia were also hit with sanctions.

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