Energy & Tech
The Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, amended General Licence INT/2025/5635700 on 1 October 2026, extending the Sakhalin-2 oil and gas project exemption under the licence until 31 December 2026. The licence was originally issued on 10 January 2025 under regulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 and permits the continuation of business operations with a designated relevant subsidiary to the extent those operations relate to specified Exempt Projects. The October 2026 amendment confirmed that the Sakhalin-2 exemption, which permits the supply or delivery by ship of Russian oil originating in or consigned from the Sakhalin-2 Project to Japan, runs until 31 December 2026. The Oil Price Cap: Exempt Projects and Countries General Licence INT/2022/2470156 was also amended on the same date with equivalent effect. Use of each licence remains subject to its respective conditions and record-keeping requirements. Since its original issue, the licence has been amended multiple times to add further Exempt Projects and extend the scope of 'Relevant Subsidiary' to include entities owned or controlled by PJSC Lukoil Oil Company, PJSC Rosneft Oil Company, and PJSC Transneft following their UK designation. Previous amendments added the Caspian Pipeline Consortium, TengizChevroil, Shah Deniz, South Caucasus Pipeline, Azerbaijan Gas Supply Company, Karachaganak, the Zohr project, and most recently the Kurdistan Export Pipeline to the list of Exempt Projects.
Why this matters
The Sakhalin-2 exemption is a live illustration of the tension between UK Russia sanctions policy and energy security commitments to allied countries. Japan is a major LNG (liquefied natural gas) importer and Sakhalin-2 is a significant supplier, meaning the exemption reflects a deliberate UK policy choice to avoid disrupting a key energy supply chain for an allied G7 nation. Each quarterly extension resets the legal baseline for parties involved in that supply chain and requires them to verify their ongoing compliance with the amended licence conditions. The growing list of designated entities brought within the 'Relevant Subsidiary' definition signals that the UK sanctions perimeter is tightening even as exemptions are renewed, which creates ongoing compliance complexity.
On the Ground
This amendment generates compliance and sanctions law work for firms advising commodity traders, shipping companies, financial institutions, and insurers who are involved in the Sakhalin-2 supply chain and need to confirm they are operating within the updated licence conditions. Record-keeping and reporting obligations under the licence require ongoing legal audit work. A trainee on this matter would assist with updating sanctions screening memos to reflect the new licence expiry date, cross-checking the amended list of Exempt Projects against client transaction flows, and coordinating with compliance teams on documentary evidence required to satisfy record-keeping obligations under the Russia (Sanctions) (EU Exit) Regulations 2019.
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