President Putin seized control of a major gas project in Russia's far east, a move that could force foreign investors to abandon the project, shocking already jittery energy markets and worrying other multinationals as the Kremlin starts to make good on its threat to punish companies leaving Russia over its invasion.


The control of the Sakhalin-2 gas project was changed by Putin.

Sputnik/AFP via Getty Images

Putin signed a decree on Thursday giving the rights to the Sakhalin-2 natural gas project to a new Russian company in order to protect Russia's national interests.

Russian gas giant Gazprom held a controlling stake of 50% plus one share in the project along with British energy giant Shell and Japanese companies.

The decree gives other investors one month to decide if they want to remain as shareholders in the new company, though they must prove their ownership rights and the Kremlin will have final say.

The decree warned that those leaving may not be fully compensated as the government will hold funds and deduct damages.

The project accounts for a large portion of Japan's energy imports.

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Companies that leave Russia in protest of Moscow's invasion of Ukraine will be retaliated against by Putin. This is the first time that the Kremlin has seized and nationalized a company after taking assets. The choice of Sakhalin-2 seems both symbolic and strategic, weaponizing the global energy sector at a time when prices are surging and forcing Tokyo to pick between punishing Russia and domestic need. Russian sanctions against prominent Americans, including the family of President Joe Biden and Senate Minority LeaderMitch McConnell, were retaliated against by the Group of Seven leaders. G-7 leaders are trying to negotiate a price cap on Russian oil, which they hope will be able to cut off one of Putin's most important revenue streams while also addressing soaring energy prices caused by the war.

What To Watch For

The fall in the shares of the two Japanese companies was out of line with other market movements. Shell shares weren't moved.

The energy sector is bracing for the impact of Putin's invasion of Ukraine.

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