Russian gas continues to flow to Europe, despite sanctions

In 2024, Europe imported more Russian liquefied natural gas than ever before - despite increased efforts by the EU to reduce gas imports from Russia. And in the middle of it all: Switzerland as an important distribution location.

The office is inconspicuous, even though it is in a prominent location in Zug city centre. Directly opposite Coop City, next to the Balmer bookstore, is the headquarters of Novatek Gas & Power GmbH. Passers-by are unlikely to notice the small company sign, and the company name probably doesn't ring a bell either.

But Novatek is a giant in its sector. After Gazprom, the company is the second largest gas exporter in Russia, but, unlike Gazprom, which was an official UEFA sponsor before the war in Ukraine and whose name adorned the shirts of numerous European football clubs, Novatek is hardly known to the local public.

Various subsidiaries of Novatek have been active in Switzerland since 2005. These were merged into Novatek Gas & Power GmbH in 2012, with the aim of bringing the parent company's main export product to European customers.

Liquefied Natural Gas, or LNG for short
Following the invasion of Ukraine by Russian troops in February 2022, LNG has increasingly established itself as an alternative to the traditional pipeline gas business. This has made Novatek an alternative source of income for Russia's war economy, while Western powers are trying to turn off the Gazprom tap.

Zug-based Gazprom subsidiary is in liquidation
From February 2022, the US and the EU have not only imposed sanctions on Gazprom's parent company in Moscow, but also on its international companies and key executives.
This was not without consequences: while Gazprom was still Russia's largest company in 2022, it was no longer on the “Forbes” list of the country's top 100 in the following year, and posted a loss for the first time since 1999. Even the increase in exports to China and the Middle East has not yet been able to compensate for the collapse of what was once the most important European market.

The company is also struggling in Switzerland. The Zug-based operator of the Nord Stream 2 Baltic Sea pipeline, which is majority-owned by Gazprom, is largely unable to act as a result of the sanctions, and is facing bankruptcy. Due to the geopolitical implications of the case, the definitive debt-restructuring moratorium was extended once again last week, until the 9th May 2025, by a Zug court in an extraordinary procedure.

Prime location: Novatek Gas & Power GmbH headquarters on the Bundesplatz in Zug Photo: Stefan Kaiser
A ship unloads Russian liquefied natural gas in the port of Bilbao in Spain Photo: Vincent West Vladimir Putin receives Leonid Mikhelson at his Novo-Ogaryovo residence Photo: Alexei Druzhinin / EPA

The sister company Nord Stream 1 is also less busy than before, and has had to make redundancies due to its declining revenues. The Swiss branch of the Gazprom Group, which is located near the Zug government building (Regierungsgebäude), and which last traded under the name Sefe Switzerland, has been in liquidation since October 2024.

Liquid gas has replaced the sanctioned pipeline gas
By contrast, business is going well at Novatek on the Bundesplatz in Zug. According to commodity analysts, European LNG imports from Russia reached a new all-time high last year. This is despite increased efforts by the EU to reduce imports of Russian gas.

According to the Finnish Centre for Research on Energy and Clean Air (Crea), the EU imported Russian LNG worth € 7.3 billion last year; the volume thereby increased by 14% to 17.5 million tons compared to the previous year. Belgium and Spain recently imported more Russian LNG than before the start of the war, and France has become Russia's most important LNG buyer, according to Crea.

Russian liquefied natural gas is thereby replacing an increasingly large proportion of the sanctioned pipeline gas, and Russia recently overtook Qatar as Europe's second-largest LNG supplier, behind the USA. This is mainly because Russian liquefied natural gas was comparatively cheaper on the spot markets.

Novatek is accordingly preparing for the new gas future. The billion-euro Arctic LNG 2 project, for example, is currently under construction on the Gyda peninsula in western Siberia, and will supply an additional 20 million tons of liquefied gas to the world every year from 2026. The French company Total Energies has a 10% stake in the project, which illustrates one thing above all: Novatek can count on Europe for its future expansion plans.

In December, the company was actually invited to an international LNG industry meeting in Berlin, where it was able to promote its product - which earned criticism for the German organisers. It was not the gas giant's parent company that was represented, however, but its Singapore subsidiary Novatek Gas & Power Asia, which also has a branch office in Zug without a physical address.

Zug's finance director has reacted to criticism
The Swiss subsidiary Novatek Gas & Power GmbH, which employs just over ten people in Zug, will continue to handle some of the European LNG sales in the future. It is managed by Sergey Gzhelyak, a Russian national who previously worked as a representative for Socar, the Azerbaijani oil and gas group, among others.

The head of the Novatek parent company in Moscow is the Russian oligarch Leonid Mikhelson, who, according to EU sanctions regulations, is a close confidant of Vladimir Putin, without actually being on a sanctions list himself.

In addition to Gazprom, the USA has now also placed sanctions on the Novatek Group and its flagship project Arctic LNG 2. In the EU, on the other hand, Novatek has so far managed to avoid sanctions - which is likely due, in part, to the involvement of French company Total Energies in Arctic LNG 2. Even though the EU began sanctioning cargo ships carrying Russian LNG last year, it is not planning to become independent of gas imports from Russia until 2027.

Until then, the gas rouble will continue to roll, including in Zug. The Green Alternative party (ALG) in Zug, among others, has criticised the canton for being ‘partly responsible for the war in Ukraine’ with its passivity towards non-transparent Russian companies.

Zug's Director of Finance, Heinz Tännler, recently replied to the Swiss SRF television company, saying that such companies could not simply be driven out of the canton. ‘If they comply with the law, and if they comply with the constitution, then they have the right to have a domicile here.’

The Novatek company itself could not be reached for comment.