Why Zug would be “co-responsible for the war in Ukraine”

In 2024, Europe imported more Russian liquefied natural gas than ever before, despite growing EU efforts to reduce imports. And Switzerland is an important distribution site.

Gregory Remez / ch media

The branch doesn’t look like much, although it is located in a prominent location in downtown Zug. The headquarters of a certain Novatek Gas & Power GmbH is located directly opposite the Coop Citynext to a bookstore. Passers-by probably won’t notice anything. At first glance, the name of the company doesn’t mean anything.

A giant of the sector

Novatek is, however, a giant in its sector. The company is Russia’s second largest gas exporterbehind Gazprom. But unlike the Russian giant, which was still the official sponsor of UEFA before the war against Ukraine and which adorned the jerseys of many European football clubs, Novatek is little known.

In Switzerland, Novatek has been active since 2005 with various subsidiaries. In 2012, they were united within Novatek Gas & Power GmbH, with the aim of bringing the main export product of the parent company to European customers: liquefied natural gas or Liquefied Natural Gas (LNG).

Since the invasion of Ukraine in 2022, LNG has increasingly established itself as an alternative to traditional gas pipelines. And thus makes Novatek an alternative source of income for Russia’s war economy, while Western powers try to turn off the tap on Gazprom.

The Zougoise branch of Gazprom in liquidation

Since February 2022, the United States and the EU have imposed sanctions not only on Gazprom’s parent company in Moscow, but also on its international companies and its main managers.

This did not remain without consequences. While Gazprom was still Russia’s largest company in 2022, it was no longer even on the list the following year. Forbes of the country’s top 100 companies and posted losses for the first time since 1999. Even increased exports to China and the Middle East could not compensate for the collapse of the European market, once the largest.

In Switzerland too, the group is in bad shape. The company operating the Nord Stream 2 gas pipeline in the Baltic Sea, domiciled in Zug and majority-owned by Gazprom, is largely unable to act following the sanctions and is on the verge of bankruptcy. Due to the geopolitical significance of the case, the final suspension of the composition was extended once again last week by a court in Zug until May 9, 2025, as part of an extraordinary procedure. Currently, the outcome remains uncertain.

At sister company Nord Stream 1, activity is also less intense than before and layoffs have taken place due to falling revenues. In addition, the Swiss subsidiary of the Gazprom group, located near the Zug government building, which most recently operated under the name Sefe Suisse, has been in liquidation since October 2024.

New historic record

At Novatek, on the Federal Square, however, business is going well. According to commodity analysts, European LNG imports from Russia reached a new historic record last year. This is despite growing EU efforts to reduce Russian gas imports.

Selon le Center for Research on Energy and Clean Air (Crea) finlandais, the EU imported Russian LNG worth 7.3 billion euros last year; the volume increased by 14% compared to the previous year to reach 17.5 million tonnes. Belgium and Spain have recently imported more Russian LNG than before the start of the war, and France has become the main buyer of LNG from Russia, according to Crea.

Russian liquefied natural gas thus replaces an increasingly large share of sanctioned pipeline gas. Recently, Russia has even overtaken Qatar as the second largest LNG supplier in Europebehind the United States. This is mainly because Russian liquefied natural gas was comparatively cheaper in spot markets (a market in which the exchange of a commodity takes place at the time of conclusion of the contract).

Novatek is equipping itself accordingly for the new future of gas. This is how the Arctic LNG 2 project, worth several billion dollars, is emerging on the Gydan peninsula, in western Siberia, and is expected to deliver an additional 20 million tonnes of gas liquefied per year worldwide from 2026. The French group Total Energies is participating in the project with 10%, which shows one thing above all: Novatek can count on Europe for its future plans expansion.

A ship unloads Russian liquefied natural gas at the port of Bilbao in Spain.archivBild: keystone

It was only in December that the group was invited to an international LNG industry meeting in Berlin and was able to advertise its product there – which drew criticism from the German organizers. However, it was not the parent company of the gas giant that was represented, but its Singaporean subsidiary Novatek Gas & Power Asia, which also has a branch in Zug without a physical address.

Zug “co-responsible for the war in Ukraine”

The Swiss subsidiary Novatek Gas & Power GmbH, which employs just over ten people in Zug, will continue to ensure part of LNG sales in Europe. The subsidiary is headed by Sergey Gzhelyak, a Russian citizen who previously worked as a representative for the Azerbaijani oil and gas group Socar.

The head of Novatek’s Moscow parent company is Russian oligarch Leonid Mikhelson who, under EU sanctions provisions, is close to Vladimir Putin without itself appearing on a sanctions list.

Leonid Mikhelson.Image: keystone

In the United States, in addition to Gazprom, the Novatek group and its flagship Arctic LNG 2 project were also sanctioned. In the EU, on the other hand, Novatek has so far been able to escape sanction – which could be linked, among other things, to the participation of the French company Total Energies in Arctic LNG 2. Even if the EU started the year latest to sanction cargo ships carrying Russian LNG, it only plans to become independent of gas imports from Russia in 2027.

Until then, the “gas ruble” continues to circulate, including in the canton of Zug. There, the alternative green party criticizes in particular the canton’s inaction in the face of opaque Russian companies, believing that it carries a “co-responsibility in the war in Ukraine”.

Zug’s finance director Heinz Tännler recently responded to the SRF that such companies cannot simply be expelled from the canton. He states:

Novatek could not be reached for comment.

(Translated and adapted by Chiara Lecca)

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