Yesterday, the administration of US President Joe Biden imposed the broadest package of sanctions to date targeting Russian oil and gas revenues, in an attempt to give Kiev and the incoming administration of Donald Trump a pressure card to reach a peace agreement in Ukraine.
Britain, in turn, announced similar sanctions on the Russian oil sector.
The Russian oil company Gazprom Neft downplayed the impact of the new sanctions imposed on it by the United States on Friday.
Gazprom Neft, which Britain also imposed sanctions on, said it would continue to operate and maintain its continuity despite the sanctions, which it described as “unjustified, illegal, and in violation of the principles of free competition.”
The company added, in a statement, “Gazprom Neft has been always preparing for various negative possibilities of sanctions over the past two years. The company has already been subject to unilateral foreign sanctions since 2022, so many of these restrictions have already been taken into account in operations.”
For its part, Ingostrach, which was also targeted by the sanctions, reported that it is operating normally and fulfilling all its obligations towards customers.
She said, “This decision, which comes in the final days of the US administration, undermines maritime safety, environmental protection, and the stability of global shipping traffic, by targeting an insurance company with a good reputation and good capital.”
“Our removal from the market creates a void that will inevitably be filled by insurance companies that do not have the ability or desire to ensure compliance or pay claims,” she added.
What is the nature of the penalties?
The US Treasury said it imposed sanctions on:
- Russia’s Gazprom and Surgutneftegaz are two of the largest oil producers in Russia.
- 183 tankers are used to ship Russian oil, many of them part of the so-called shadow fleet of older tankers operated by non-Western companies.
- A large number of oil traders and oil field service providers.
- Officials in the Russian energy sector.
- Two Russian companies operating in the field of marine insurance are Ingostrakh and Alphastrakhovany Group.
The Treasury also removed a provision that exempted intermediaries in energy payments from sanctions imposed on Russian banks.
The sanctions aim to reduce the oil revenues that Russia uses to finance the war that broke out in February 2022.
US Treasury Secretary Janet Yellen said in a statement, “The United States is taking comprehensive measures against the main source of Russian revenues to finance its war…”
“With today’s actions, we are increasing the risk of exposure to sanctions related to Russian oil trade, including shipping and financial facilities to support Russian oil exports,” she added.
A US official said that the sanctions would cost Russia billions of dollars per month.
“There is no step in the production and distribution chain that was not affected, and this gives us greater confidence that evading (sanctions) will be more costly for Russia,” the official said.
One of the officials also said, “We expect that our direct targeting of the energy sector will increase these pressures on the Russian economy, which have already pushed inflation to nearly 10%, and will reinforce the bleak economic outlook for 2025 and beyond,” Reuters reported.
For his part, Ukrainian President Volodymyr Zelensky said, in a post on the X platform, that the measures announced today “will deal a strong blow” to Moscow.
He added, “The more Russia’s oil revenues decrease… the closer peace will be restored.”
White House senior economic and security adviser Dalip Singh said in a statement that the measures “are the most significant sanctions yet on the Russian energy sector, which is the largest source of revenue in (President Vladimir) Putin’s war.”
The impact of sanctions on the global oil market
For its part, sources in the Russian oil trade and the Indian refining sector said that the sanctions will cause a major disruption to Russian oil exports to its main buyers, India and China.
Oil prices jumped almost 3%, on Friday, to their highest levels in 3 months, amid alert among traders for supply disruptions due to the large US sanctions package targeting Russia’s oil and gas revenues.
Brent crude futures increased $2.84, or 3.7%, to $79.76 per barrel upon settlement, after exceeding $80 per barrel for the first time since the seventh of last October.
US West Texas Intermediate crude futures also rose $2.65, or 3.6%, to $76.57, which is also the highest level in 3 months.
Analysts from JP Morgan said in a note on Friday: “We expect a significant year-on-year increase in global oil demand by 1.6 million barrels per day in the first quarter of 2025, supported primarily… by demand for heating fuel, kerosene and liquefied petroleum gas.” “.
Assistant Secretary for Energy Resources at the US State Department, Jeffrey Payatt, said that there are new quantities of oil expected to be produced this year from the United States, Guyana, Canada and Brazil, and possibly also from the Middle East, which will replace any Russian supplies.
Bayat told Reuters, “We see that we are no longer affected by the scarcity of supply in global markets the way we were affected when we revealed the price ceiling mechanism.”
The step announced yesterday comes after sanctions imposed by the United States last November on banks including Gazprombank, the largest vehicle linking Russia to the global energy sector, and sanctions earlier last year on dozens of tankers carrying Russian oil.
The Biden administration believes that the November sanctions contributed to pushing the Russian ruble to its lowest levels since the start of the Russian-Ukrainian war.
