Executive Summary:
- Novatek—the largest independent producer of natural gas in Russia—illustrates how large Russian businesses have had to show political and material support for the Kremlin’s war against Ukraine to maintain operations in Russia, as well as the international costs of aligning with the Kremlin.
- Private Russian companies operating in spheres of strategic interest to the Kremlin have never been fully independent. Prior to Russia’s full-scale invasion of Ukraine in 2022, however, they retained the option to at least outwardly distance themselves from politics to preserve their reputations with Western partners.
- Since the beginning of the full-scale invasion of Ukraine, big Russian businesses have been effectively required to support the war. Novatek was paying bonuses for Russian military recruits by 2023 after initially calling the war “tragic” in March 2022.
- The Kremlin requiring public displays of support from businesses despite the harm this does to the Russian economy through international sanctions demonstrates that Russian President Vladimir Putin values ostensible loyalty over revenue.
Since February 2022, the Kremlin has demanded active rhetorical and material support for its war against Ukraine from ostensibly private businesses. Private companies in areas of strategic importance to the government have never been fully independent during Russian President Vladimir Putin’s leadership. The Kremlin, however, tried to avoid direct control of these enterprises, instead relying on more informal methods of cooperation.
ROSNANO—Russia’s state-owned venture capital and development corporation for high-tech products—has exercised a degree of control over some companies that purchase Western technology with potential military applications through financing since its founding in 2007. In June 2022, ROSNANO suspended plans to divest “from among a number of assets that are critically important to the country, as they support infrastructure and build a technological foundation for Russian industry” (ROSNANO, June 9, 2022). Among the “critically important assets” named were private enterprises that manufactured dual-use technology and cooperated with U.S. firms (Russian News Agency, November 10, 2017). Such firms were likely obliged, at a minimum, to share foreign technology with the government.
Strategically important companies retained some independence before the Kremlin’s full-scale invasion of Ukraine and claimed to be apolitical and free. After, however, demonstrating loyalty to Putin and openly supporting the war have become the standard condition for a company’s survival in the Russian market and for receiving state support.
Novatek stands as a stark example of this trend. It is the largest independent producer of natural gas in Russia and one of the world’s leading companies in proven hydrocarbon reserves. According to Forbes.ru, Novatek accounts for 12 percent of Russian gas extraction and ranks third globally among publicly traded companies by proven natural-gas reserves (Forbes.ru, accessed November 2).
In March 2022, Novatek, along with Lukoil, issued a cautious statement against the war, calling the situation “tragic” and expressing hope for a quick diplomatic solution. The company emphasized that it would continue to fulfill its international obligations because it was important for the world’s energy security (Pravilamag.ru, March 2022). The companies soon had to change their position.
Many Western partners and even co-founders stopped working with Novatek because of sanctions on Russia. The French firm TotalEnergies, which tried to maintain its business in Russia for months after the Kremlin’s full-scale invasion of Ukraine, decided to recall its two members of the Novatek board in December 2022 (Nafto Runok, December 9, 2022). Following the imposition of U.S. sanctions in November 2023 on Novatek’s major liquefied natural gas (LNG) project, Arctic LNG 2, foreign shareholders—including companies from France, the People’s Republic of China, and Japan—suspended their participation and withdrew from their financing obligations (Kommersant, December 25, 2023). In September 2024, Novatek suspended active work on its prospective Murmansk LNG and Obsky LNG projects amid mounting Western sanctions (NV.UA, September 23, 2024).
After Western investors exited, Novatek found itself in dire need of financial support, which it quickly received from the Russian government in exchange for active support for its war against Ukraine. In 2023, independent journalists revealed that Novatek, alongside other companies, had recruited employees and security personnel for the war through affiliated security firms and a charitable foundation called “Courage” (Muzhestvo, Мужество), which it established in September 2022. Novatek recruiters promised at least an additional 200,000 rubles ($2,449) to those who signed a contract with the Ministry of Defense, with payments made through the Courage foundation. In the first three months following its creation, the Courage foundation was funded almost entirely by Novatek (Vazhnye Istorii, August 1, 2023). The company increased its shipments of LNG to Europe over 2022, which became a major source of foreign-currency revenue for the Russian economy (Kommersant, January 16, 2023).
The Russian government rewarded Novatek’s commitment to the Kremlin’s war against Ukraine. At Novatek’s request, it agreed to set the mineral extraction tax on gas used to produce ammonia and hydrogen in the Arctic to zero (RBC, April 24, 2023). This tax exemption, combined with the ability to supply gas to Europe and higher production, drove revenue growth for Novatek in 2024, when Novatek’s net profit exceeded the previous year’s figures by 7 percent (Vedomosti, February 12, 2025).
Novatek’s leadership has become even more closely aligned with Putin’s family since the full-scale invasion of Ukraine. Billionaires Leonid Mikhelson and Gennady Timchenko, a friend of Putin, were the primary owners of Novatek before the war, and are both under sanctions. In the spring of 2024, Putin’s family’s involvement with the company became more direct. Evgeny Nagorny, the 35-year-old husband of Putin’s eldest daughter, has taken on the role of overseeing the construction of a gas pipeline in the Murmansk oblast—a project organized by Novatek—and Putin himself has highlighted the importance of establishing a “major LNG production hub” in that region (Nastoiashee Vremia, May 15, 2024).
Participation in recruiting people for Moscow’s war against Ukraine inevitably affected the company’s international reputation and ultimately shrank its revenues. German publication Zeit picked up independent Russian media’s investigations into Novatek’s payment of bonuses for contract soldiers in August 2023 and pointed out that European purchases of Russian LNG help Putin wage war and that the money ends up in the hands of Russian soldiers (Zeit, August 10, 2023). Amid this publicity, the European Union introduced a complete ban on importing LNG from Russia in its 19th sanctions package (European Council, October 20, 2025).
As of December 2024, Novatek was reportedly working with lobbyists to lift U.S. sanctions from November 2023 on Arctic LNG 2 (Ukrinform, December 14, 2024). Despite the sanctions, Arctic LNG 2 resumed LNG exports in summer 2025 after suspending production and shipments in October 2024 (Maritime Executive, October 10, 2025). Novatek also reportedly participated in financing the U.S. company Polar LNG (New York Times, October 23).
Recent European sanctions show that it will be more difficult for the company to financially support Putin and his war while also conducting international business. The more actively Novatek becomes involved in supporting the war against Ukraine and receiving concessions from the Russian budget, the more its opportunities in the West are narrowed.
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