Shell Corporation Faces €1 Billion Lawsuit in Russia
The Arbitration Court of Moscow has officially accepted a claim from the Prosecutor General's Office of the Russian Federation against Shell Corporation and its subsidiaries, demanding over €1 billion for failing to meet obligations related to the Sakhalin-2 oil and gas project. The lawsuit includes multiple Shell entities, such as Shell plc, Shell Energy Europe Limited, and Shell Sakhalin Services BV, among others. The case highlights the contentious history of the Sakhalin-2 project, which has been criticized for its production sharing agreement (PSA) that many argue exploited Russia's natural resources.
The Sakhalin-2 project, which began in the early 2000s, involved a partnership between Gazprom, Shell, and Japanese companies Mitsui and Mitsubishi. Initially, Gazprom held a 50% plus one share stake, while Shell controlled 27.5%. However, allegations of non-compliance with environmental standards and failure to fulfill contractual obligations have marred the project’s reputation. In June 2022, President Vladimir Putin signed a decree transferring operational control to Russian Sakhalin Energy LLC, effectively sidelining Shell from the project.
Despite the withdrawal of Shell, the company is now facing significant financial repercussions as the Russian government seeks restitution for perceived damages caused by the project. The Prosecutor General's Office has estimated the damages at around €1 billion, a figure that could lead to severe financial consequences for Shell, especially given their previous stake in the project. If the court rules in favor of the prosecution, Shell may find it difficult to evade responsibility, despite its attempts to liquidate some of its Russian operations.
