This Friday (10), the Biden government targeted Russia’s energy sector, including its oil industry, with some of its most severe sanctions to date. The aim is to cut off funding for Moscow’s war against Ukraine.
The sweeping changes, taken just over a week before President Joe Biden leaves office, come as President-elect Donald Trump says he is preparing to meet with Russian President Vladimir Putin. They also have the potential to weaken investors in the energy markets.
Senior US administration officials have said they want to leave Kiev – and the new Trump administration – in a favorable position for potential negotiations.
These officials expressed hope that the next administration would maintain and enforce the sanctions, despite previous skepticism from some Trump officials about the effectiveness of such measures.
The new sanctions against “the Kremlin’s largest and most important source of revenue” hit hundreds of targets, including two of Russia’s largest oil companies: Public Joint Stock Company Gazprom Neft and Surgutneftegas.
The sanctions also target nearly 200 oil-carrying ships, many of which are accused of being part of the so-called “shadow fleet” working to evade sanctions, as well as oil traders and energy officials. They also target the production and export of liquefied natural gas (LNG) from Russia.
“We expect our actions to cost Russia more than billions of dollars a month,” said a senior administration official.
The sanctions, introduced in coordination with the United Kingdom, are part of the administration’s broader approach to bolstering Kiev. The Biden administration announced last Thursday (9) its final tranche of military aid for Ukraine, valued at around US$500 million.
The Pentagon said Friday that there will be “just under $4 billion” in Presidential Drawdown Authority funding that will be transferred to the Trump administration to fund aid to Ukraine.
“These sanctions, in addition to the actions we have taken in recent weeks, help put Ukraine in a position where they have the ability to work with the new government to try to find a just peace,” a second senior administration official said.
On Thursday, Trump reiterated his desire to end the war in Ukraine: “President Putin wants to get together — he even said that publicly — and we have to end this war. This is a bloody mess,” he is the American president.
The administration’s first senior official acknowledged that it is “entirely up to” the Trump team “to determine whether, when and on what terms they can lift any sanctions that we have in place.”
Furthermore, the strength of sanctions will largely depend on their implementation, with one official reflecting that “we have to match each evasion to a countermeasure, and that will require political will.”
“Russia will make every effort to circumvent these sanctions. It’s inevitable,” said the officer.
“But evasion is not without costs. Russia has had a constant need to adapt and reorient its supply chains. This creates inefficiency. It creates uncertainty. Creates complexity. So our sanctions are like kilos of sand in the gears of Russia’s war machine,” they said.
Today’s measures do not have secondary sanctions against specific countries, officials said. China and India were the main importers of Russian oil during the war in Ukraine.
Officials argued they waited until the administration’s final days to impose the sanctions, in part because of the state of the global oil market and the potential impact on the U.S. economy.
Russia’s invasion of Ukraine in early 2022 has raised fears of major supply disruptions to one of the world’s top producers.
Oil prices reached $130 a barrel in March 2022, contributing to the inflationary crisis in the US economy and driving gasoline prices to historic highs.
“For much of this war, global supplies were tight and at risk of not meeting demand,” the first senior administration official explained, noting that this would likely increase revenues for Russia “while increasing prices at the gas pumps.” for families in the United States and around the world.”
Now, the official said, both oil markets and the U.S. economy “are in a fundamentally better position.”
The United States is producing more oil than any nation in world history, forcing OPEC to reduce supplies. Oil prices have been relatively subdued, in part because of record U.S. production.
Still, oil prices rose sharply on Friday morning even before the official sanctions announcement, with some traders blaming rumors of sanctions.
O. Brent crude oil, the global benchmark, advanced 3.7% to around US$80 a barrel.
CNN’s Michael Conte and Oren Liebermann contributed to this report.
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