US President Joe Biden’s administration imposed its broadest package of sanctions so far targeting Russia’s oil and gas revenues yesterday, in an effort to give Kyiv and Donald Trump’s incoming team leverage to reach a deal for peace in Ukraine.
The move is meant to cut Russia’s revenues for continuing the war that has killed or wounded tens of thousands and reduced cities to rubble since Moscow invaded Ukraine in February, 2022.
Ukrainian President Volodymyr Zelenskiy said in a post on X that the measures announced yesterday will “deliver a significant blow” to Moscow. “The less revenue Russia earns from oil ... the sooner peace will be restored,” Zelenskiy added.
Daleep Singh, a top White House economic and national security adviser, said in a statement that the measures were the “most significant sanctions yet on Russia’s energy sector, by far the largest source of revenue for (President Vladimir) Putin’s war”.
The US Treasury imposed sanctions on Gazprom Neft and Surgutneftegas, which explore for, produce and sell oil as well as 183 vessels that have shipped Russian oil, many of which are in the so-called shadow fleet of aging tankers operated by non-Western companies. The sanctions also include networks that trade the petroleum.
Many of those tankers have been used to ship oil to India and China as a price cap imposed by the Group of Seven countries in 2022 has shifted trade in Russian oil from Europe to Asia. Some tankers have shipped both Russian and Iranian oil.
The Treasury also rescinded a provision that had exempted the intermediation of energy payments from sanctions on Russian banks.
The sanctions should cost Russia billions of dollars per month if sufficiently enforced, another US official told reporters in a call.
“There is not a step in the production and distribution chain that’s untouched and that gives us greater confidence that evasion is going to be even more costly for Russia,” the official said.
Gazprom Neft said the sanctions were unjustified and illegitimate and it will continue to operate.
The measures allow a wind-down period until March 12 for sanctioned entities to finish energy transactions.
Still, sources in Russian oil trade and Indian refining said the sanctions will cause severe disruption of Russian oil exports to its major buyers India and China.
Global oil prices jumped more than 3 per cent ahead of the Treasury announcement, with Brent crude nearing $80 a barrel, as a document mapping out the sanctions circulated among traders in Europe and Asia.
Geoffrey Pyatt, the US assistant secretary for energy resources at the State Department, said there were new volumes of oil expected to come online this year from the United States, Guyana, Canada and Brazil and possibly out of the Middle East will fill in for any lost Russian supply.
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