The United States and the United Kingdom announced additional sanctions against Russia’s oil and liquefied gas sector last Friday, described by senior US officials as the “most significant” imposed on the Russian energy sector since the start of the war in Ukraine.
The goal of these measures is to cut off revenues that finance the “Kremlin war machine” and could cost the Russian economy billions of dollars a month, a US official explained in a press call. Although Joe Biden’s Government has adopted these sanctions, they could be revoked by Donald Trump when he assumes the Presidency on January 20.
Specifically, the United States, in coordination with the United Kingdom, sanctioned two of Russia’s largest oil producers and exporters: Gazprom Neft, the country’s third largest oil company, and Surgutneftegas, another prominent company in the energy sector.
According to the British Government, these companies together produce more than one million barrels a day, valued at around $23 billion annually at current prices, an amount that exceeds Jamaica’s GDP. Washington and London consider that the profits of these companies serve to finance the war in Ukraine.
In addition, the United States sanctioned more than two dozen subsidiaries of Gazprom Neft and Surgutneftegas, as well as 183 Russian oil-carrying ships that, according to US officials, are part of a “shadow” fleet to sell Russian crude oil by circumventing the Western sanctions.
Russia has spent the last three years buying old tankers around the world to transport its oil, according to the media. which warns that “the loss of these transportation capacities will increase logistics costs and reduce profit margins for Russian oil companies.”
Additionally, sanctioned ships are often denied entry to ports fearing secondary sanctions. For example, Chinese ports such as Qingdao, Rizhao and Yantai have already refused to accept sanctioned vessels. Similarly, representatives of Indian refineries have stated that they will not work with oil tankers included on the US sanctions list.
In this new scenario, Russian companies will need to find buyers willing to work with the “shadow” fleet and deal with sanctioned entities, which threatens to trigger Putin’s big problem in the war.
200 entities and individuals allegedly linked to the Russian energy sector
The United States also hit 200 entities and individuals allegedly linked to the Russian energy sector with sanctions, including 80 related to the production and export of liquefied natural gas (LNG).
Other sanctions target those seeking to expand Russia’s oil production capacity, those involved in Novatek’s Arctic LNG 2 project and senior officials at Rosatom, the Russian state nuclear energy conglomerate, the Treasury Department detailed in a statement.
In a call with journalists, US officials detailed the reason behind these sanctions, which are in addition to those imposed by Washington and its allies after the Russian invasion of Ukraine.
Specifically, in March 2022, a month after the start of the war, the United States banned the import of Russian oil, liquefied natural gas, and coal. The European Union also restricted these purchases, dealing a severe blow to Moscow for its dependence on the European market.
However, Washington then decided not to impose broader sanctions due to tension in global oil markets, which could have caused a rise in crude prices, a US official explained.
To mitigate that impact, in December 2022, the United States, along with the G7 and Australia, adopted a cap of $60 per barrel on maritime exports of Russian oil, allowing purchases only below that limit.
Now, with greater global supply thanks to increased production in other countries, Washington has decided to move forward with sanctions aimed at Russian energy giants, the aforementioned official added.
