Gas is the cheapest of the stable energy sources needed for AI. This trade relationship is significant because the soaring energy demands of AI data centers have made securing a stable and affordable energy supply crucial for technological dominance.
“To understand how effective U.S. sanctions on Russian oil could be, look no further than the Arctic gas project central to Moscow's export ambitions.
In multiple rounds of blacklisting, the Biden administration crippled the logistics, shipping and financing ecosystem around the natural-gas facility known as Arctic LNG 2, publicly aiming to leave it "dead in the water." Yet since August, Russia has sent 11 tankers full of liquefied natural gas from the plant, ship-tracking data show.
On the receiving end: China's port of Beihai, a city famed for its picturesque beaches that once served as a key stop along the ancient Maritime Silk Road. Now, it has emerged as a crucial node in the export of sanctioned gas from the Russian Arctic.
"It benefits both the Chinese economy and the Russians," said Alexander Gabuev, who is the director of the Carnegie Russia Eurasia Center and focuses on China-Russia relations. "China no longer feels the need to be overly concerned about the U.S. reaction."
The U.S. and its allies have tried to cripple Russia's energy industry since the events in Ukraine, but Moscow has found loopholes. The Beihai gas route has become a key channel for that effort and a means to further deepen its ties with China.
The latest sanctions came last week when the Trump administration imposed new measures on Rosneft and Lukoil, Russia's two largest oil exporters. On the same day, the Iris, a tanker the length of nearly three football fields, docked at Beihai in southern China carrying LNG from the Russian gas facility.
Evading sanctions is a national priority for Russia, an especially urgent task this year. For Beijing, it is as much an opportunity to snap up discounted Russian fuel as it is a signal of defiance in its trade war with the U.S., where China's leverage over vital rare-earth exports has made it less concerned about American sanctions, some observers say.
China and Russia show little effort to disguise the trade, with tankers carrying the cargoes under sanction continuing to broadcast their positions.
Russia's oil-and-gas exports, traditionally a source of cash and geopolitical heft for the Kremlin, have declined since the country lost most of the European market. Although Moscow has been able to find new buyers for its oil, which is more easily transported by ship, replacing lost volumes of gas that used to flow through fixed gas pipelines has proved harder.
That made the $25 billion Arctic LNG 2 project essential for the Kremlin -- and a natural target for Western sanctions. LNG plants work by cooling natural gas until it becomes a liquid, which shrinks its volume and makes it easier to transport by ship. The facility is central to Russia's ambition to more than triple LNG exports in the coming years.
In December 2023, the first of three liquefaction plants, known in the industry as trains, was completed. Exports were supposed to begin in the first quarter of last year.
But then U.S. sanctions imposed on the project began to kick in. That gummed up financing and logistics for Arctic LNG 2 and stopped South Korean shipbuilders from delivering to the project. It also made it hard for Russia to build alternative vessels domestically. As a result, LNG output ground to a halt last year, leaving the facility mostly recirculating already produced gas.
That is where Beihai comes in. The Beihai LNG Terminal opened for business in April 2016 and has been continuously expanded since. It provides a steady supply of gas to China's southern provinces including Yunnan, Guizhou, Hunan, Guangdong and Fujian.
The Arctic LNG 2 gas is attractive for China because it comes at a discounted rate to other LNG in the region. But to buy it without risking secondary U.S. sanctions, China has made the port of Beihai its de facto entry point -- no other LNG carrier has docked at Beihai since the terminal started accepting gas from Russia.
Challenges remain for Arctic LNG 2. Russia still needs more tankers, and new vessels are unlikely to be delivered soon. Orders for key high-efficiency turbines were canceled under sanctions and the Chinese replacements are less powerful, cutting the export capacity of the facility, said Robert Songer, LNG markets analyst at data provider ICIS. Other buyers, meanwhile, are wary of the legal and logistical risks of buying gas from the project, he said.
Not so for Beijing -- a reality that doesn't bode well for the effectiveness of the latest oil sanctions on Russia, said Ronald Smith, founding partner of Texas-based Emerging Markets Oil and Gas Consulting Partners.” [1]
1. World News: Russia's Arctic Gas Finds Chinese Loophole Amid Sanctions. The U.S. and allies aimed to hobble Russia's energy industry, but Moscow has found workarounds. Kantchev, Georgi; Feng, Rebecca. Wall Street Journal, Eastern edition; New York, N.Y.. 27 Oct 2025: A6.
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