All of these obstacles can be dealt with. “There are always problems,” Burt says, “but money talks.” More daunting, however, is the project’s new majority owner, Gazprom, which has been trying to flex its muscle since it acquired a controlling stake last year. Gazprom is, as one ex-member of the U.S. embassy in Moscow puts it, “almost feudal,” its upper ranks riddled, like so many of Russia’s state-run companies, with ex-Soviet managers and the beneficiaries of nepotism. “Most people don’t think that Gazprom has the technical or managerial skills to manage these projects,” the former embassy official says.

Quality control is a big problem. “We’re trying to build this to Western standards,” Burt tells me, but “the Russians don’t have any of these standards—or any standards, really. You can see, every day, pipelines blowing up in Russia. There are whole areas of Russia contaminated from leakage. They have all the regulations. They’re just not using them. We had a guy from Gazprom come in. He said to me, ‘If we were doing this, it would be done by now. The problem is you’re trying to do it legally.’ ”

Still, Russia did not hesitate to invoke regulations to muscle its way into Sakhalin II. Environmental groups had been on Sakhalin Energy’s case since it began operating in the late 1990s, but the Russian government mostly ignored them. Then in 2006, after negotiations to give Gazprom a minority stake in Sakhalin II fell apart, Russian authorities began citing Sakhalin Energy for alleged violations. One example: Excessive logging of the pipeline corridor and poor terracing of its perimeter were creating severe erosion problems all along the pipeline route. And international environmental groups, the World Wildlife Fund among them, complained bitterly that Sakhalin Energy’s construction activities in Aniva Bay, including an undersea pipeline, had disrupted fish and whale populations. Using such charges as leverage, Russian authorities revoked permits and demanded work stoppages. According to a Sakhalin Energy employee, Yuzhno-Sakhalinsk police set up shop outside the company’s headquarters and checked work visas. Shell was threatened with a $50 billion lawsuit.

It was from the Kremlin, everyone suspects, that an offer came: Sell majority control of Sakhalin II to Gazprom and the trouble will cease. So that’s exactly what Shell did. It handed over half its shares to Gazprom, which also acquired half the shares of Shell’s Japanese partners, Mitsubishi and Mitsui & Co., giving Gazprom 50 percent of Sakhalin Energy plus one share. (No one can accuse Putin of being overly greedy in this case.) Gazprom agreed to pay $7.45 billion for its stake. As part of the deal, Shell reportedly agreed to pay millions in cost overruns and will face new taxes. “I would be surprised if Shell got any cash out of Sakhalin II,” says one U.S. analyst working in Russia.

For Shell’s part, a spokesperson says, “This is an acceptable deal for us. We have a major stake in the world’s largest oil and gas export project, with Gazprom as a strong partner.” As for the environmental accusations, the spokesperson adds, “Sakhalin Energy has always stated that all environmental impacts are short-term and reversible.”

Shell’s problems, however, haven’t totally evaporated. As part of its contract, the oil giant agreed to pay for infrastructure projects and social programs on Sakhalin. According to Sakhalin Energy, Shell spent more than $390 million building and paving roads and putting in an airstrip (improvements that benefit Sakhalin Energy as much as they do Sakhalin Island). But the permanent housing Shell promised to residents of Korsakov who live near the plant hasn’t been completed, fueling further resentment among locals, many of whom were previously upset about environmental issues. The Shell spokesperson contends that Sakhalin Energy has stimulated the local economy and “provided benefits to the local community in terms of direct and indirect employment, local taxes and revenues, and social development programs.”