Exclusive:ScotWind firms accused of ‘funding Vladimir Putin’s war chest’ with Russian fossil fuel assets

Multinational companies who struck lucrative agreements to develop vast offshore wind farms as part of Scotland’s landmark renewable energy venture have been accused of “outrageous hypocrisy” and complicity in Ukraine’s suffering by maintaining extensive business ties with major Russian fossil fuel projects.

Several developers involved in the flagship ScotWind initiative continue to hold stakes in Russian firms that have been subjected to sanctions by the UK and US governments, with one maintaining a significant shareholding in a Siberian facility that supplies the vast majority of Europe’s imports of Russian liquefied natural gas (LNG).

More than two years after Vladimir Putin’s invasion of Ukraine, three firms that are part of ScotWind consortiums – TotalEnergies, Engie, and Marubeni – have yet to divest their Russian interests, despite western efforts to isolate Moscow and stem the vast oil and gas revenues used by the world's third largest oil producer to help bankroll its war with Ukraine.

Crown Estate Scotland, the public corporation that oversaw the offshore leasing round, said it had received written and binding commitments from all developers involved that they would adhere to the UK’s sanctions regime, and that it was unable to deal with any developer or project partner who is sanctioned. However, it said it had no powers to require developers to dispose of Russian interests where there is “no breach” of the sanctions regimes. There is no suggestion that any of the three companies are breaching sanctions.

Svitlana Romanko, an environmental lawyer and founder and director of Razom We Stand, a Ukrainian campaign group that calls for a total and permanent embargo on Russian fossil fuels, told The Scotsman the Russian assets held by the ScotWind developers were “directly contributing to the continuing destruction in Ukraine”.

She has called on the Scottish and UK governments to implement stricter Russian divestment policies, including mandating the full withdrawal from Russian assets by companies involved in national renewable energy projects such as ScotWind.

UK government described one sanctioned project as ‘key link’ in Putin’s plans

Several offshore wind developers involved in the ScotWind initiative hold significant Russian assets. Picture: PA

A host of energy firms have pulled out of Russia or sold their assets in the country since Russia launched its invasion in February 2022, including major players involved in ScotWind projects, such as BP and Shell. However, not every firm has joined the corporate exodus.

TotalEnergies, part of the consortium behind the West of Orkney wind farm, one of the most advanced ScotWind projects, condemned Russia’s military aggression in the weeks after its invasion of Ukraine, and committed to not providing capital for new projects in the country. It has deconsolidated a large part of its activities in Russia from its accounts and strategy, but it still has significant financial ties with Russian oil and gas.

It has a 10 per cent stake in Arctic LNG 2, a major project in the Russian Arctic designed to transport tens of millions of tonnes of liquified natural gas to customers in the Atlantic basin and Asia. The Russian company overseeing the Arctic LNG 2 initiative was placed under direct sanctions by US authorities in November last year. The UK government followed suit in February, imposing sanctions on both Arctic LNG 2 and its director, Oleg Vyacheslavovich Karpushin, describing the firm as “one of the key links in [Vladimir] Putin’s plan to make Russia a major LNG player”.

Since the sanctions came into force, TotalEnergies initiated a force majeure process on the Arctic LNG project in accordance with existing contracts, and said it was no longer involved in its governance arrangements. It added it would comply with applicable sanctions regimes, with no offtake of LNG by TotalEnergies planned for 2024. But it continues to hold its 10 per cent stake in Arctic LNG 2. That holding is no longer accounted for using the equity method in the company’s latest accounts, but is instead recorded under ‘other investments’.

The French oil and gas giant, TotalEnergies, is one of several firms with Russian fossil fuel interests. Picture: Astrid Vellguth/AFP/Getty

TotalEnergies also has a 20.02 per cent direct interest in the Russian firm that owns the Yamal LNG gas liquefaction plant in north-western Siberia, a key source of LNG for European markets. It also holds a 19.4 per cent stake in another sanctioned Russian firm, Novatek - Russia’s largest producer of LNG, which is also involved in the Arctic LNG 2 initiative. It no longer equity accounts for its shareholding in Novatek or books reserves for its interest in the firm, and has withdrawn its representatives from Novatek’s board.

In its most recent annual report filed with the US Securities and Exchange Commission, the company has said it “cannot sell” its holding in Novatek given the shareholders’ agreements in effect, and that it is “forbidden” for the firm to sell any asset to one of Novatek’s main shareholders, who is under sanctions.

In a statement, the firm told The Scotsman: “In accordance with the European Union's decisions to maintain at this stage Russian gas supplies, TotalEnergies continues to supply Europe with liquefied natural gas from the Yamal LNG plant within the framework of long-term contracts that it must honour as long as Europe's governments consider that Russian gas is necessary. TotalEnergies cannot unilaterally terminate the long-term contract. If we decided not to take the volumes of gas, we would still be obliged to pay for it.”

Another French multinational firm, Engie, is also pressing ahead with ScotWind work while maintaining its Russian business ties. Together with EDP Renewables, it is part of a joint venture known as Ocean Winds, which has built the 950MW Moray East offshore windfarm, and has struck a deal under Scotwind to develop two sites east of Shetland. The 2.3GW development is expected to be operational in the early 2030s.

Svitlana Romanko, an environmental lawyer and founder and director of Razom We Stand, a Ukrainian campaign group which calls for a total and permanent embargo on Russian fossil fuels, had condemned the ScotWind developers with Russian assets. Picture: Razom We Stand

In the aftermath of the invasion of Ukraine, it too condemned Russia’s actions, and expressed support for those affected, while stating it would “continue to prioritise the security of energy supply to its clients”. Today, however, Engie is still one of five major companies, including the Russian state-owned gas group Gazprom, that are part-owners in Nord Stream, the firm behind the multi-billion pound pipeline infrastructure project designed to transport Russian gas to Europe. Several executives at both Gazprom and Nord Stream are under UK sanctions.

In a statement, Engie said the value of its 9 per cent equity stake in Nord Stream 1 was reviewed and reduced by €300m [£256m] in 2023, and that a credit loss of €1bn [£850m] for its loan and accrued interests regarding Nord Stream 2 was recognised the same year. The company also said it “does not engage in any industrial activity in Russia”, with “no investment projects underway on Russian territory”. It added it stopped buying or selling gas from Russia in August 2022, and that it was “false” to claim it had assets in Russia.

A third ScotWind company, Japan’s Marubeni, is part of a joint venture alongside SSE Renewables and Copenhagen Infrastructure Partners to develop the Ossian wind farm off the Angus coast. It spans one of the largest lease areas offered by Crown Estate Scotland as part of the ScotWind leasing round. Once completed, it will be one of the largest floating wind farms in the world, with a potential capacity of up to 3.6GW.

Like many other firms, Marubeni also issued a statement in the wake of Russia’s invasion of Ukraine, noting it was “deeply concerned” about the situation and “terribly saddened” that innocent civilians were being threatened and forced to endure “extreme anxiety”. Two years on, Marubeni is part of a consortium known as Sakhalin Oil and Gas Development Co (SODEC) that owns a 30 per cent stake in Russia’s Sakhalin-1 oil and gas project in the Okhotsk sea. The venture, viewed as a key way of securing Japan’s energy security, was previously led by Exxon Mobil, but the US energy company exited in response to Russia's invasion of Ukraine. As recently as February, a news release issued by Marubeni referenced SODECO, and its Yuzhno-Sakhalinsk liaison office. The firm’s website states there is “no new business” at the office and that it is “negotiating to divest from existing transactions”. It adds it “follows the applicable international sanctions policy/guidance” and will “abide with further applicable actions”.

During the Eastern Economic Forum in Vladivostok in September 2021, meanwhile, Marubeni announced it and MOL – a Japanese shipping firm – had signed a memorandum of understanding with the Russian government and other partners for a joint study to build and operate a methanol carrier, used to transport natural gas from the Amur region. The status of that development and Marubeni’s involvement in it is unclear. The firm did not respond to enquiries from The Scotsman.

Developers accused of enabling Russia’s ‘destruction of Ukraine’

Engie is one of several firms with a stake in Russia's controversial Nord Stream gas pipeline project. Picture: Eric Piermont/AFP/Getty

There has already been disquiet surrounding the involvement of private companies in ScotWind, predominantly over the way they will enjoy the lion’s share of profits. According to an analysis by Common Weal, the energy produced by the project’s developments could result in the private companies involved sharing collective annual pre-tax profits of between £3.5bn and £5.5bn. It has described the decision to auction off the seabed rights as “arguably the greatest economic failure of the last decade”.

However, the ongoing Russian ties of several of the developers has intensified criticism of the way the ScotWind rights were handled. Ms Romanko said: “The involvement of TotalEnergies, Engie and Marubeni in dirty Russian fossil fuel projects while championing renewable energy in Scotland is an outrageous hypocrisy. These companies are effectively funding Putin's war chest, enabling his destruction of Ukraine and contributing to the death of thousands of innocent Ukrainians.

“It's unacceptable that they promote themselves as climate-friendly and responsible energy companies while working with Russian fossil fuels, which directly support the Kremlin’s ongoing war machine. This deceptive behaviour undermines the UK’s empty-sounding promises to stand against Russian tyranny and transition to sustainable energy.”

Louis Wilson, head of fossil fuel investigations at the environmental and human rights organisation Global Witness, said: “Signing contracts with companies that are knee-deep in Russian fossil fuels that help fund the war is incompatible with support for Ukraine. TotalEnergies is one of the largest buyers of Russian gas globally. They’ve played a key role in bringing Putin’s LNG to market, which is a crucial lifeline for Russia’s wartime economy.”

Mr Wilson said the issue also brought back into the focus the lack of meaningful action against Russian oil and gas by the UK government, adding: “The UK government’s policy on Russian fossil fuels has always been to talk tough while turning a blind eye.”

In March 2022, Crown Estate Scotland issued a statement in which it said it was committed to taking all appropriate action “not to support trade and investment activity with Russia”. It said it had carried out an initial check of the 17 ScotWind developers which did not uncover any Russian ownership or registration. Later that spring, it requested a “formal, written assurance” from each developer in the form of a signed ‘statement of commitment’, confirming neither they nor their group company or project partners were subject to the UK sanctions regime, and that no group companies or members of their supply chain were subject to any sanctions regime in the UK or around the world. It also asked companies to confirm they did not have arrangements with any persons who were subject to any sanctions regime.

Any developer not able to provide a signed statement of commitment would not have been able to proceed in the ScotWind process. All developers supplied a signed statement. When a further three developers secured option agreements after the initial clearing process, the same process was followed.

Crown Estate Scotland says any wrongdoing will be taken ‘very seriously’

As part of the statement of commitment, Crown Estate Scotland also said it had asked for details of “any Russian or Belarussian interests and steps that are being taken to divest of those interests”. However, it has no say over whether those interests should be divested. “We do not have any powers to require developers to dispose of Russian interests where there is no breach of the sanctions regimes, and our focus has been on securing assurance of ongoing compliance,” a spokesman explained.

The statement of commitment also made clear that Crown Estate Scotland was unable to deal with any developer or project partner who is subject to sanctions, whether it be a company or a natural person. However, it is unclear whether any conditions were specified for developers with stakes in sanctioned firms. Crown Estate Scotland said “any verifiable evidence” of a breach of developers’ commitments will be reviewed and investigated, with any wrongdoing “taken very seriously”. Developers involved in the ScotWind project will have to provide an updated statement of commitment before moving from an option agreement into a lease.

Crown Estate Scotland’s spokesman added: “The 20 ScotWind projects have the potential to generate thousands of new jobs, attract billions of pounds of investment, and provide almost 30GW of clean, green electricity. Crown Estate Scotland has sought and secured written and binding commitments from all developers that they will, at all times, adhere to the UK’s sanctions regime with regards to Russia and Belarus.

“We will use all appropriate levers if any breaches occur and are committed to taking all appropriate action to prevent Scottish seabed being used by anyone breaching, or subject to, sanctions. We continue to work closely with the UK and Scottish governments in what remains an evolving situation.”

A spokesman for the Scottish Government said: “The Scottish Government stands in solidarity with the Ukrainian government and its people. We all have a moral duty to try to stop Putin’s aggression through economic action. Working with our economic agencies, we will use all available powers to limit trade and investment activity with Russia.”