A former chief executive of the Alaska gas startup Polar Train LNG said in interviews that ran in the FT and the NYT on October 23 and 24 that Russia’s Novatek was financing and steering the venture before any U.S. Treasury approval. That allegation has sent readers looking for a plain answer to a legal question: what do Novatek sanctions actually prohibit, and what do they leave open?
Where it stands: Through October 26, regulators had announced no finding of wrongdoing against Polar LNG, Novatek or anyone tied to them. Polar LNG has said it is seeking a license from OFAC, the Treasury unit that administers sanctions, according to its statement as carried by a Bloomberg wire report.
The companies dispute the account. Polar LNG called the former CEO, Joel Riddle, a “disgruntled former employee” whom it fired for cause, and said its “Development activities are being pursued in full compliance with applicable US laws,” according to the FT’s reporting. Novatek said it signed a memorandum of understanding in April, that “requisite approvals will need to be obtained from US and Russian authorities,” and rejected any link between its participation and sanctions relief. Polar LNG’s Emirati parent, Tech Wave, said the Russian company holds no stake in it. The NYT reported no indication that envoys Steve Witkoff or Jared Kushner knew of Polar LNG’s Novatek ties.
Riddle’s allegation is set out in our main report on the Polar Train LNG dispute. This piece covers only the legal framework, using Treasury and State Department records.
Two Different Regimes: Novatek Sanctions vs. Arctic LNG 2
It is easy to assume that Novatek and its flagship Arctic project face the same rules. They do not. Business Standard, summarizing the FT, put it directly: Novatek “has been subject to certain US financing restrictions,” while the Arctic LNG 2 operator “faces blocking sanctions.”
| Entity | U.S. measure | What it bars |
|---|---|---|
| Novatek (listed as OAO Novatek) | Sectoral list, Directive 2 under E.O. 13662 (2014) | U.S. persons dealing in new Novatek debt longer than 60 days |
| Novatek subsidiaries on the list | Same Directive 2 status | Same long-term debt limit |
| LLC Arctic LNG 2 | Blocked, SDN list, E.O. 14024 (November 2023) | Nearly all dealings by U.S. persons absent a license |
What Directive 2 Actually Restricts
When the State Department designated Arctic LNG 2’s operator, its release noted that “Novatek was added to OFAC’s Sectoral Sanctions Identifications List pursuant to Directive 2 of E.O. 13662.” That is a 2014 measure from the period after Russia’s annexation of Crimea.
Directive 2 is narrow. OFAC’s guidance says that for debt issued since November 28, 2017, a covered energy company’s borrowing must mature in 60 days or less for a U.S. person to finance or trade it. Treasury defines debt broadly, covering “bonds, loans, extensions of credit, loan guarantees, letters of credit” and similar paper, according to OFAC FAQ 371.
Just as important is what the directive does not do. OFAC FAQ 370 states that Directives 1 and 2 “do not require U.S. persons to block the property or interests in property” of listed companies, and that those companies are not automatically placed on the Specially Designated Nationals list. The directive reaches U.S. persons wherever they are and transactions inside the United States.
OFAC’s current non-SDN consolidated list still shows the parent as “OAO NOVATEK” under the Ukraine-related program, subject to Directive 2, along with a string of subsidiaries marked as linked to it. The entry also carries a secondary sanctions risk notation citing two sections of Treasury’s Ukraine-/Russia-related regulations.
Why Arctic LNG 2 Is a Different Case
On November 2, 2023, the State Department said it was designating “a major entity involved in the development, operation, and ownership of” the Arctic LNG 2 project, naming Limited Liability Company Arctic LNG 2 as the operator. The legal hook was notable: State used a provision of E.O. 14024 for companies operating in Russia’s metals and mining sector.
That designation is a full block. The same release explains that U.S. persons may not engage in transactions involving a blocked party’s property or interests unless OFAC authorizes it by general or specific license, or an exemption applies. The bar expressly covers providing, or receiving, funds, goods or services. OFAC’s SDN list carries the company with a note pointing to secondary sanctions risk under Section 11 of E.O. 14024.
Ownership Runs One Way Under the 50 Percent Rule
Treasury’s 50 Percent Rule treats a company as blocked when blocked persons own half or more of it. It does not work in reverse. Novatek owns a majority of Arctic LNG 2, as partner Mitsui’s 2019 release shows, but a blocked subsidiary does not make its parent blocked.
Control is handled separately. OFAC says the rule “speaks only to ownership and not to control,” so an entity merely controlled by blocked persons is not automatically blocked, though OFAC can designate it, according to its 50 Percent Rule guidance. The same guidance warns that U.S. persons generally cannot sign contracts executed by a blocked individual even on behalf of an unblocked company.
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Those distinctions are why Business Standard’s FT summary concluded that “not every commercial transaction involving Novatek is automatically prohibited.” Whether a particular deal is allowed turns on what is being bought, from whom, and whether any blocked party has an interest in it.
Where an OFAC License Comes In
Under 31 CFR 501.801, a transaction that a sanctions program prohibits and that no general license covers can go ahead only under a specific license. Polar LNG’s statement said it had applied for one “to purchase an unfinished gravity-based structure” from Novatek. The FT, as summarized by Business Standard, described the request differently: approval to negotiate with Novatek, which had not been granted.
None of the coverage reviewed says which prohibition the application addresses, and Treasury has not commented on it. The application process and penalty ranges are covered in our explainer on the OFAC license request.
What Has and Has Not Been Established
Citing text messages, the NYT described, in Raw Story’s summary, exchanges in which Novatek’s top executives discussed moving as much as $15 million to the Abu Dhabi parent. The paper added that memos from the law firm Baker Botts, which Riddle appended when he quit, recorded that Treasury’s enforcement staff had raised “potential Russia-related sanctions concerns.” Riddle told the NYT the arrangement was unlawful. Those are his claims and the newspaper’s reporting, not a government conclusion.
Treasury’s public response, given to the FT, was: “While we do not comment on allegations of sanctions violations, we take potential violations extremely seriously.” No enforcement action, penalty notice or charge had been reported as of October 26.
Congress has also targeted the company. Raw Story, summarizing the NYT, reported that recent sanctions legislation “specifically targets Novatek,” but that President Trump temporarily waived that law’s Russia provisions the week before the reports. Our Graham Act waiver report covers what was set aside.
Frequently Asked Questions
Is Novatek fully sanctioned by the United States?
No. Novatek is on the Treasury sectoral sanctions list under Directive 2 of Executive Order 13662, which restricts U.S. persons from dealing in its new debt longer than 60 days. It is not on the SDN blocking list. Its Arctic LNG 2 operating company is blocked.
Is it illegal for an American company to do business with Novatek?
Not automatically. Directive 2 targets long-term debt and financing. Transactions involving a blocked party such as Arctic LNG 2, or property in which a blocked party has an interest, are prohibited without an OFAC license. Whether a specific deal is allowed depends on its terms.
When was Arctic LNG 2 sanctioned?
The State Department designated LLC Arctic LNG 2, the project operator, on November 2, 2023, under Executive Order 14024. The designation blocks its property in U.S. jurisdiction and bars most dealings by U.S. persons.
Has any authority found that Polar LNG or Novatek violated sanctions?
No such finding had been reported as of October 26. Polar LNG says it complies with U.S. law, Novatek denies secret control, and Treasury has declined to address the specific claims.
Sources
- Taking Additional Sweeping Measures Against Russia — U.S. Department of State (archived), November 2, 2023
- FAQ 370: What do the prohibitions in Directives 1 and 2 mean? Are they blocking actions? — Office of Foreign Assets Control, U.S. Treasury, November 28, 2017
- FAQ 371: What does OFAC interpret to be debt and equity? — Office of Foreign Assets Control, U.S. Treasury, updated February 24, 2022
- Consolidated Sanctions List (Non-SDN), entry for OAO Novatek — Office of Foreign Assets Control, U.S. Treasury, accessed October 26, 2026
- Specially Designated Nationals List, entry for Limited Liability Company Arctic LNG 2 — Office of Foreign Assets Control, U.S. Treasury, accessed October 26, 2026
- Entities Owned by Blocked Persons (50% Rule) — Office of Foreign Assets Control, U.S. Treasury, August 2014 and August 2020
- Final Investment Decision for Arctic LNG 2 Project in Russia — Mitsui & Co., September 5, 2019
- 31 CFR 501.801 – Licensing — Electronic Code of Federal Regulations, current as of October 2026
- Top executives quit $25 bn US gas project over alleged Russian control — Business Standard, October 25, 2026
- Former CEO: Russian Firm Backed Alaska Gas Venture — Newsmax via Yahoo News, October 24, 2026
- Whistleblower CEO quits over hidden Russian cash behind gas deal in Trump peace talks: NYT — Raw Story, October 24, 2026
- Alaska LNG export terminal got funding from Russia’s sanctioned Novatek before US nod – FT report — ThePrint (Bloomberg wire), October 24, 2026
This article is news reporting and analysis based on the public sources listed above, as they stood on the dates shown. Where officials, lawmakers or analysts disagree, including on whether an action is lawful, their positions are attributed to them; Donald Trump Class Action is not a court and nothing here is legal advice. Facts in a developing story can change.